The housing crisis, a ticking bomb

[MrsVidic]

Hi, I work in the housing sector and to be quite Frank I'm worried that the lack of affordable housing is just the tip of the ice berg in the crisis. I work in supported housing and our referrals have gone through the roof! What is going to happen? The denand is so much higher than the supply?

The local authority should build houses of reasonable, but not luxurious quality and charge a rental that is fair, but makes enough profit to maintain that house and eventually pay to build another. Preference should be given to applications from the poorer end of the market and no option to buy should exist.

In the long term if handled correctly it could be a source of income for the authority.

Eventually it would help bring down the prices of the houses for sale too.

These could be called 'council houses'.

We were promised some months ago a reassessment of existing social housing allocation. Encouraging singles and couples in 3-bed properties to downsize, for example, and offering social housing on fixed term leases rather than for life. I think, if the situation is as critical as you describe, those kinds of measures will have to be brought forward.

Affordability in the private sector may yet happen because house prices are falling, buyers are scarce and there could be some bargains to be had. And private landlords may be forced to revise rents downwards if HB payments don't cover the asking price any more.

Lots of landlords are selling up and therefore their tenants have to move on before the property can be put on the Market creating lots more empty properties

There are lots of properties here on the Market for sale and to let . There is a definite feeling like there was in 2007 that landlords are jumping ship as if rates rise and prices fall buy to let will be pointless to them.

onagar

your post contains the one sentence that was the downfall of that very plan.

Eventually it would help bring down the prices for houses for sale too

Planning laws need to be relaxed so that the price of land is reduced and more houses are built eg on green belts.

Also hb should be payable on mortgages so even the poorest can build capital.

HB on mortgages wouldn't work. Tax payers can't subsidise private individuals to buy assets. Tax relief was abolished on mortgage payments for that reason.

I have heard that you can wait 20 years for a council house in London.

Governments in general? well I am hold enough to remember Harold Macmillan boasting about building
(I think it was) 300,000 houses in a year.

Yet many government later we are still not on top of things in respect of council housing.

Its too complex for me...But I must make it clear Macmillan did not literally build the houses. (Just did a bit of pointing and plastering) cheers

The bomb's already exploded.

mrsvidic - I work in housing too and share your concerns. Supported housing has been particularly badly affected and I can't see much new supported housing being built in the next 4 years

I also can't see how the new "affordable" rent model at 80% of market rents will stack up...but that's a whole other debate...

Grant Shapps never did come back to finish off his live webchat, did he? Can't think why...

Property prices are still quite high! What the bank of England should do is to raise interest rates help curve the property market, bring it down to a more civilised level. It is ridiculous to think that a lot of people have been working and saving for a long time for them to afford their first home but still unable to buy a property simply becasue the houses are too expensive. Savings have such a low return with the current interest rates and people are getting nowhere. Now with the rate of inlfation soaring, oil prices on the rise, increase on VAT, adding more financial burden to everybody. The so called economists, think tanks and policy makers are simply doing a terrible job!!! Can please someone step in and do something about it!!!

More houses need to be built - the problem we have is that everybody with any power over this has a vested interest in keeping house prices high.

Those of us lucky enough to have bought houses before the prices got out of hand need to accept that they have become overvalued and we can't expect to cash that in for our retirement. House prices need to go down.

There is something government can do, but this lot won't do it: bring back rent control. The reason the housing benefit bill has grown so much is that Thatcher abolished the fair rent system.

We need to build at much higher density in cities. We have one of the highest national population densities but insist on low densities in our cities. Compare London to Paris or NYC. Low density urban housing simply encourage urban sprawl, impacts on agricultural land and increases commuting distances while doing nothing to improve the housing situation.

i don't think that 'just building more houses' is the answer. you could build over the whole of the south and i bet there would still be people asking for more housing.

i think things should be done to encourage people to locate to areas where the population density is currently lower. and build some housing there if required. that way its not all concentrated in the south with the corresponding pressure on the infrastructure.

i also think that ways of encouraging people to live in the size of property their require should be used, eg why do single people get a council tax discount, especially those living in large houses?

unfortunately there will be many many people financially crippled if house prices reduce to levels many of you are talking about.

i bought my house (which is tiny) and far too small for my family for £115000 in 2007 immediatly before the market crashed unfortunately i'm already stuck as i'm in negative equity already.

i did not buy above my means i bought what i could afford at the time, which was tiny and 6 miles from the nearest town, and as a first time buyer me and DH didn't have a huge deposit (5%) if the prices drop any more what do you suggest for the thousands (i'm guessing) of families in my situation?

Interesting information on the housing crisis and building new homes.

england.shelter.org.uk/campaigns/housing_issues/building_more_homes

Just thought I'd share this for those that want to know more.

"unfortunately there will be many many people financially crippled if house prices reduce to levels many of you are talking about."

I have to correct you. You're not 'crippled' if house-prices fall. You can't sell and cover your debt in a negative equity situation, admittedly, but you have accommodation and you can keep up the payments. You are in a better position to people who are homeless.

I bought a house in 1990 just before prices crashed that time around. It's not a new thing. Five years of stagnation later prices started to rise again, and there's no reason why that wouldn't happen this time because the housing stock is still relatively short. Unless you have some urgent need to move house or you can't afford to pay the mortgage any more, it's really not a disaster.

The thing is...what is affordable housing?

The market is fluid and prices go up as demand does. It comes down when times are hard. Ergo the prices are what people can afford....therefore by its very definition its affordable!

Now ok i accept that in many parts of the country there will be people who cannot afford to buy a house but seeking to push prices down to make houses "affordable" is a terrible idea.

Firstly affordable to whom? The single guy on minimum wage? A dual income family? Who defines affordable?

Secondly if you push prices down, market confidence goes down. People stop spending and thus you end up with another recession!

What we need is more stable prices. The best case scenario is for the next few years for the market to be flat so incomes can catch up with prices.

There is another crisis brewing in the Housing Association sector.

While things were booming many Housing Associations sold some of their stock to developers every few years to fund the shortfall between the rents they were bringing in and the maintenence costs plus interest payments on loans they had taken out to fund the portfolio of properties.

Now there is a pubic spending squeeze and house prices are falling many Housing Associations are desperately short of cash and some will go bankrupt. They will be taken over by private companies and inevitably rents will rise to market levels.

It always annoys me when I see discussions about waiting lists for council houses. Well yes. If I was stood in the street giving away gold bars I'm sure a queue would form quite quickly. If council houses had market rent levels then the waiting lists would disappear.

The only solution to our housing crisis is for house prices and rents to fall dramatically to affordable levels. The Govt should let the market work. Housing Benefit has pushed up private rents in some areas. Remove Govt support and tax houses properly as investment assets and prices will fall and people will be able to afford to rent or buy them.

Reforming private rental agreements to give security to tenants would also be necesary so people did not have to buy just to get security of tenure.

The Bank of England and Govt is terrified of letting house prices fall though as it would ruin the banks again and trigger another financial crisis.

@ chil1234

the thing is there is a big difference between a "stagnant" market and "dropping" prices. and yes as stated in my previous post i do need to move my house is tiny, was bought when i was just married and was all i could afford. i now have 1 DC and another on the way.
unfortunately due to the current "stagnant" market my house won't sell and i'm in negative equity despite having a deposit when i bought.

what people are suggesting on here is to raise the interest rate to bring prices down, this would mean my house payments would no longer be affordable and i would still be in huge debt if it were sold/repossessed as the prices are driven down, i know i'm not the only one in this situation, basically every 1st time buyer who bought in 2006/2007 is in the same circs. as a result we'll all be homeless as the queue for inadequate social housing gets bigger and bigger.

@dreamingofsun

"i think things should be done to encourage people to locate to areas where the population density is currently lower. and build some housing there if required. that way its not all concentrated in the south with the corresponding pressure on the infrastructure"

I have an idea - lets get rid of 'london weightings' where people get paid more for the same job in the SE of england. This has just fed the market and caused prices to rise faster - vicious circle in action. Of course all teachers / nurses / police officers will have to move away as they won't be able to afford to live there, and then, when the schools have no teachers all the parents will move away - somewhere along the way rents and house prices will drop enough to become affordable again ...

more seriously: those people who bought at the top of the market - what a nightmare. Going bankrupt (or the less extreme options that are available now) is one way out but not an attractive one. No answer really but keeping the housing bubble is not a good option either.

My previous job involved finding rough sleepers, there are a lot of empty buildings, in my opinion these should be converted into short term accommodation or even 1 bed flats.

Care leavers have very few places to go which is why they are massivley over represented in the homeless sector.

i really think the way forward is to legislate better rights for tennants, this would give renters the same security of tenure as homeowners, it would weed out all "bad" landlords and free up some of the more affordable properties for 1st time buyers.

in addition its not realistic for banks to be requesting 20%+ deposits from home owners particularly 1st time buyers.

the government has to look after citizens more and bankers/landlords a lot less!!

Thanks for the link to the Shelter page - very interesting, and I think they make some good points, particularly that the new homes need to be desirable.

We've got an application to build a group of affordable houses near our village at the moment - sandwiched into a strip of land between the local tip, with lorries in and out all day, and the main road. Now, who on earth is going to want to want one of those houses? Really unfair for the potential inhabitants. And, no doubt, they'll still be costing £220k or so, which isn't at all affordable.

why shouldn't a 20% deposit be seen as realistic? it's called saving your money and only buying a house when you can afford it. A practice in place for centuries. What's really not realistic was for banks to ever have offered 100% or 125% mortgages that relied on house price rises.