The housing crisis in Britain is the worst in a generation, MPs have been told.
During a Commons debate on housing, shadow housing minister Jack Dromey accused Downing Street itself of having manufactured the homes crisis.
He said: “The facts are stark: house building is down, homelessness is up, private rents have hit record highs, and we have a mortgage market in which people struggle to get mortgages.
“The latest Government figures tell us that fewer than 100,000 homes were started in the 12 months to June, which is a 10% decrease on the previous 12 months and amounts to fewer than half the 230,000 new households being formed every year.”
He reminded the Commons that two years ago, then housing minister Grant Shapps had said: “Building more homes is the gold standard upon which we shall be judged.”
But, said Dromey, the collapse in the house building industry had been catastrophic.
He said: “We meet regularly some of the major developers and building companies, and they all say the same thing. They have planning permission for in excess of 300,000 sites, and the figure is rising, but they simply do not feel that they can proceed, not least because of the state of the economy and the mortgage market.”
Dromey said that homelessness had risen and that, contrary to claims made by both David Cameron and Shapps, private rents had not fallen.
He said that according to LSL, rents hit a record high over the summer, helping to lock more young people out of home ownership as they struggled to raise a deposit.
Dromey said that the Government had come up with a number of ‘half-cocked’ initiatives, but none had worked, and the banks were still not lending.
Replying, new housing minister Mark Prisk said the fact that the housing debate was the first initiated by Labour in over two and a half years ‘shows just how interested they are in the subject’.
He said: “However, the fact cannot be ignored that under the Labour government, house building fell to the lowest peacetime level since the 1920s.
“Labour had its nine different ministers and ten different housing Acts, but for all that activity it delivered very little. Maybe that is why it has taken it two and a half years to muster up the courage to have a debate on the subject.
Prisk said that the Government is now “focused on getting houses built, providing more affordable homes and making sure that home ownership is affordable once again”.
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Comments
Link asks me to sign up for MSE before I can access anything. Why you feel the need to post them over there, I've no idea. My original comment was to post them here.
@Rant
The link works fine. Just tested it.
Although I see you've already moved on to yet another discredited bear meme.
Ah well...
Slashing immigration would help considerably. Just let in those married to British subjects, skilled persons and students on renewable 3 year visas with no right to remain and no right for children born here to gain citizenship.
Well this headline took a lot of working out - obviously written by a genius. He should be given the job of prime minister for his statement of the bleedin obvious!
Jack Dromey needs to be watched as he could be our replacement bufoon for Shapps and lets face it we have had some mileage out of that twit.
As I said in my last posting banks don't have the money and are doing all they can to get rich quick and not lend to anyone for any reason.
Hamish - the majority of people in the UK earn a lot less than the mean average salary. I am most certain housing is less affordable now than when you purchased, and disposbale incomes are lower too.
However, having said that finding 3 bedroom houses for 120K up north is not difficult....finding work there is another story.
Pbro agent - its not lovely at all, and that 55 minute commute is hell, but hey ho thats just my opinion ;0)
Tried your link Mr. McTavish. It didn't work. So, can't really comment.
"The problem with your scenario lies in the fact you're mandating a 3 bed house, usually a second step property with equity behind you, as they've neglected to buy a house before having kids. "
Any thoughts why in this scenario the family haven't bought a house before having kids? The fact they were even more expensive before, the massive deposits required, the amount of student debt they have to pay back... How much equity do you think a FTBer who bought in the last five years has behind them right now? How long do you think people should wait until house prices are low enough for them to buy a house before having kids? How about 45 years old each?
Why don't you tell us what salary multiple you bought your first house for and what type it was?
I often find those who harp on about houses today being readily affordable often had to make far fewer sacrifices to get on the property ladder than they are suggesting younger people do today. How much was childcare when you first bought? If you are married, how much was a partner's salary needed to get a mortgage?
Let's compare how things were when you were younger to how they are today. Convince us all that it's just the same.
Hamish_McTavish: 'The salary multiple argument is a red herring.
Even at the peak of the boom, salary multiples for actual FTB-s remained below 3.5 times income on average, and have since fallen closer to 3 times income'
But why not answer the question? Which is - what do YOU think is a sensible salary multiple for a couple to take on to provide a modest family home. Allowing for a mortgage of 25 years and the fact that interest rates will rise during that mortgage.
You cannot argue that because interest rates are now 5% and used to be 15% therefore salary multiples should be much higher because, for one thing, interest rates were never 15% for very long. 10% is a fair batting average.
Are you SURE interest rates won't reach 10% again in the next 25 years. Because, in a world of low wage inflation (unlike the 60s, 70s and 80s) taking on a high salary multiple mortgage in the expectation that in 10 years time your wage will have doubled so it won't be too bad would, clearly, be insane in this globalized economy with negative wage pressures.
So, come on, get off the fence. What do you think is a sensible salary multiple?
And, as to your argument that most house buyers earn more than the average salary and can, therefore, afford a bigger mortgage - you really don't have to think about that for too long to see the flaw in your argument.
Historically, over the last 50 years, everyone including bricklayers, postmen, mechanics, engineers (of the lathe and tool making variety), gas fitters, low grade public servants etc. etc. could afford to own their own house.
Now you are suggesting that it is reserved for those earning above average salary. Which I would have to say is true now - but means that home ownership will decline and that, therefore, people on lower wages will have to rent and, therefore, house prices will have to come down to match mortgage repayments of the people that do buy houses to let out so that those on below average wages can rent them.
@Rant
There are plenty of three bed terraced houses in Peterborough for £110k. 55 minutes to Kings Cross on the East Coast Main Line, an hour to Cambridge or Nottingham if you choose to go by car.
Come to Peterborough - it's lovely!
@Rant
That's your entire list done.
All of them, for under 120K.
Most areas, there were acceptable houses available at significantly less.
http://forums.moneysavingexpert.com/showthread.php?t=4171917
No doubt you'll continue to ignore the evidence presented and pop up with another argument tomorrow.
I look forward to it. ;-)
@Rant
[[[[[[OK then, let me give you a scenario. Mr and Mrs FTB, lets say aged 32. Have one two year-old and another sprog on the way. He's on the average UK salary of £25k pa. She's part-time, making £12k. A relative looks after the wee one for free so she can work (I'll be generous here). ]]]]]]
First of all, what on earth are they doing having kids and dropping to a part time second income before buying a house???
Second of all, on those salaries they're towards the bottom end of the income spectrum of house buyers (remember the average salary of house buyers is markedly higher than the average salary of all people), so they'll have to accept their choices will be limited.
[[[[[They are currently renting a two-bed place, but with another baby on the way would like a three-bed place, ideally with some kind of grass garden so the two-year old can be outside in the warmer weather.
Three times their joint annual income, rounded up to include some deposit (they'll have fees to pay too though), so lets say £110k. ]]]]]]
OK, so 3 x income = £111K. Add a 10% deposit and you're at 121K. Fees for a buyer will be a couple of grand, they'll have to save that too.
120K-ish is the average FTB house price, there or thereabouts.
The problem with your scenario lies in the fact you're mandating a 3 bed house, usually a second step property with equity behind you, as they've neglected to buy a house before having kids.
Ooooops.
[[[[[[Post some Rightmove links of what they can buy around any three of the following for £110k that you think is suitable: York, Chester, Solihull, Shrewsbury, Cambridge, Edinburgh, Aberdeen, Oxford and anywhere in the South.]]]]]]
As above, 120K, not 110K, and I'd be pretty comfortable it can be done in most of those. Of course, salaries will be higher in Edinburgh, Aberdeen, and large parts of the South, but I still reckon this is an interesting challenge.
So sure.... Pop over here if you're interested.
http://forums.moneysavingexpert.com/showthread.php?p=55749739#post55749739
OK then, let me give you a scenario. Mr and Mrs FTB, lets say aged 32. Have one two year-old and another sprog on the way.
He's on the average UK salary of £25k pa. She's part-time, making £12k. A relative looks after the wee one for free so she can work (I'll be generous here).
They are currently renting a two-bed place, but with another baby on the way would like a three-bed place, ideally with some kind of grass garden so the two-year old can be outside in the warmer weather.
Three times their joint annual income, rounded up to include some deposit (they'll have fees to pay too though), so lets say £110k.
Post some Rightmove links of what they can buy around any three of the following for £110k that you think is suitable: York, Chester, Solihull, Shrewsbury, Cambridge, Edinburgh, Aberdeen, Oxford and anywhere in the South.
@Rant
Wrong again old bean....
-The average age for all FTB-s is 29.
-The average age for unassisted FTB-s is 33.
http://www.cml.org.uk/cml/publications/newsandviews/104/390
And the main reason for the age of unassisted FTB-s rising is the increase in deposit requirements thanks to mortgage rationing post-2008.
As for your other claims.....
- Mortgage rationing: Bank expectations of price movement have nothing to do with deposit requirements. They're simply reducing the pool of buyers to match the limited pool of funding.
- Interest rates: So mortgage rates are at 300 year lows, eh? Or is it base rates at 300 year lows, and the banks have kept mortgage rates far closer to normal to rebuild balance sheets? Because I could swear I've seen a lot in the news about SVR rates soaring of late, and 90% LTV mortgages being priced at closer to 6% than 0.5%.... Thanks to bank profiteering and mortgage rationing.
-Prices too high: Both prices and average interest rates are down slightly from 2007, affordability is better, yet more people are locked out of the market now thanks to mortgage rationing than ever were by higher prices.
-Large swathes of the country out of reach: Nonsense. You can still get affordable housing, even for lower paid workers, within an hours commute of every major employment hub in the country.
The average age for an assisted FTB, courtesy of BOMAD etc is 29. Unassisted it is 38.
You can try to skirt round the major issue Hamish, but the truth remains that even at 300 year-low interest rates, property across large parts of the UK remains mostly out of reach to FTBs. Banks aren't making mortgages easily available to these folks, because they expect property prices to drop further.
Sure, with lots of help from Mum and Dad, two earners on above average salaries who can find a relative to look after any little ones for free etc, then it can be done. The numbers in such a scenario are diminishing though and will continue to do so.
@Rant
- If you think rates will soar, you can now get a 25 year fixed at 5.39%. No penalties for early repayment after 7 years. 80% LTV.
- The average age for an FTB is 29. This hasn't changed much since the 90's.
"base rates look unlikely to cross 5% any time in the next decade or more."
Good job that most mortgage terms are under ten years then...
How old was the average FTB in the 90s? How old are they now? No surprise then if the salary multiple to FTBs appears to have been constant whilst house prices have risen - they are further on in their careers. What type of property would you consider suitable for an FTB aged 23 or an FTB aged 37?
Mr. McTavish - today's asking prices have hit new records in recent months. Even if the banks lend to more FTBs at the realistic LTVs you suggest, there are whole swathes of the country where that still would not be suffiicent to buy a garden shed.
@POTW
The salary multiple argument is a red herring.
Even at the peak of the boom, salary multiples for actual FTB-s remained below 3.5 times income on average, and have since fallen closer to 3 times income..
Because the average income of house buyers is greater than the average income of all people, and FTB-s do not tend to buy the "average" house. Those who do buy "average" houses are more often 2TB-s with equity behind them.
But putting that aside for a minute, the historical salary multiple which was affordable when mortgage rates were 15% is very different to the affordable multiple today, when base rates look unlikely to cross 5% any time in the next decade or more.
Hamish_McTavish: 'Just a wholly sensible 5% or 10% deposit, an average or better credit score, and a stable job, being enough to get a mortgage at non-punitive margins above bank funding costs. But we're about as far away from that being the case today as you could imagine.'
But what salary multiple? That is the $64k question surely. What salary multiple would you say is sensible? Given that most people who buy houses are couples and that one of them is going to want/need to not work for a while to have/raise children.
So, 2.5 times main earner and 1 time the other? Which with someone on the national average of 26k and the other, say, on 20k - would give a mortgage of 85k.
Sounds about right to me - making an average house, say a 2 bed terrace or 3 bed semi - worth about 100k in an average area.
Where I live a 3 bed semi seems to be worth 300k. And in Outer London, not particularly nice, suburbs, I know a bloke who flogged a small one a little while ago for £460k.
@Rant
With banks rejecting up to 90% of FTB mortgage applications that would traditionally have been considered creditworthy, sensible and prudent, it's no wonder that first time buyers are fading away.
There is no need for 125% mortgages, I/O, or liar loans.
Just historically normal, prudent and sensible lending, instead of today's situation with absurdly tight, destructive, mortgage rationing.
And of course with up to 90% of mortgage applications with a historically prudent, sensible and normal 10% deposit being rejected, it's no wonder the builders won't build what they can't sell.
There will be no significant recovery in the housing market or wider economy until the volume of mortgages being issued returns to more normal levels.
And no.... That does not mean returning to the days of 125% mortgages, liar loans, etc.
Just a wholly sensible 5% or 10% deposit, an average or better credit score, and a stable job, being enough to get a mortgage at non-punitive margins above bank funding costs. But we're about as far away from that being the case today as you could imagine.
Mortgage rationing is endemic, bank profiteering is rampant as they try to make 3 times the margin from a third of customers, and an entire generation of potential FTB-s are locked out and forced to enrich their landlords as a result.
Tinkering around the edges won't work. There need to be hard targets for increasing volumes of mortgage lending, and they need to be somewhere around 300% of today's levels if we're to build enough houses for the future.
Otherwise Generation Rent are royally stuffed for the long term, and the economy will remain depressed for a decade or more.
Jack Dromey accused Downing Street itself of having manufactured the homes crisis.
He is correct, only it was the previous tenants that caused the problem! Lets hope the electorate remember that come the next election.
Just remember Balls by name, Balls by nature!
It isn't actually a "housing crisis" at all. If it were, there would be thousands of ordinary hard-working families sleeping rough. They aren't. Everyone in this country who wants a roof over their head has got one. It may not be the one they would like - but so what? All we really have is a situation where a lot of people would like to buy something, if only they could afford it - but they can't. That isn't a "crisis" by any meaningful yardstick.
"It's not a housing crisis, it's a mortgage crisis."
So you think a return to the 125% mortgages, liar loans and interest only deals needed to meet today's asking prices are the best way forward then?
It's not a housing crisis, it's a mortgage crisis.
Was it not the ability to 'repackage' and selling on of loans that caused one of the major problems?
He said: “We meet regularly some of the major developers and building companies, and they all say the same thing. They have planning permission for in excess of 300,000 sites, and the figure is rising, but they simply do not feel that they can proceed, not least because of the state of the economy and the mortgage market.”
Errr, yes, Mr. Dromey - that is because you allowed the banks to lend funny money into the housing market pricing them out of reach of the next generation. That is why there was a financial crisis in 2008 - that's why the mortgage market is in crisis - because the banks can't keep making up the money to lend any more. And your government slashed base rate to 0.5% so there is no point saving any more.
'During a Commons debate on housing, shadow housing minister Jack Dromey accused Downing Street itself of having manufactured the homes crisis.'
Don't you love politicians. The biggest house price boom in history under Labour - which has caused ALL the problems in the housing market - prices up by a factor of 5 or more in many towns - prices at least tripling everywhere - and they are blaming THIS government.
Unbelievable.