Was the housing crisis in the UK 'engineered'?

[mayfly13]

A few days ago I posted a thread about the housing crisis in Australia and NZ., due to which almost entire generations are gradually becoming "generations rent".
Case forgotten, move on to the next sensationalistic news.

But after subscribing recently to "Telegraph", I was startled to see that Brits. are having a similar crisis.
And, even more striking, it developped in a similar, almost carbon-copy manner:


Wtf? What is going on in first-world countries?
And are the US and Canada confronting similar problems?




Here are excerpts from the article:


Tories’ housing failure will usher in a nasty era of extremism
Liam Halligan 24 October 2021

"(the book) Home Truths explains why, since the 1960s, the UK has built around 3m too few homes. This has seen property prices spiral way ahead of earnings.
That’s why millions of young adults are stuck in shared, rented accommodation and have put their lives on hold – with countless others denied social housing.

The house building industry is dominated by a few over-mighty firms – which is why Home Truths argues a full Competition and Markets Authority inquiry is required.
---Drastic changes are also needed regarding the provision of land and planning permission. Ministers have talked tough for years but failed utterly to tackle entrenched vested interests.
--- Over the last decade, as local councils have granted more permissions, large developers who control the industry have engineered a go-slow, making higher profits by building fewer homes.

Yet, over a year after ministers promised radical planning reforms “unlike anything since the Second World War”, and despite almost 45,000 consultation responses, Gove has now halted such reforms.
---Boris Johnson confirmed this change of tack, insisting “our green spaces will be preserved” amid reports the manifesto pledge to build 300,000 homes each year – designed to appeal to “priced out” young adults and “generation rent” – could be dropped.

No one wants to ruin areas of outstanding natural beauty – which are anyway protected.
But the “greenbelt” now covers 13pc of this country, while residential housing covers just 2pc. Far from being “concreted over”, designated greenbelt acreage has more than doubled over the last four decades. Much of this is urban scrub, ripe for development, or humdrum farmland close to major towns and cities where people want to live and work."


https://www.telegraph.co.uk/business/2021/10/24/energy-housing-policy-missing/

 

[oggbashan]

The article ignores the fact that successive Labour governments didn't address the issue either.

Both shades of government have been afraid to act because any significant change would devalue the prices of those who currently own, or are buying with a mortgage, the houses they live in. People remember 'negative equity' when house prices fell and people were paying mortgages and unable to move because if they sold, the price would not cover the existing debt.

 

[mayfly13]

The article ignores the fact that successive Labour governments didn't address the issue either.

Both shades of government have been afraid to act because any significant change would devalue the prices of those who currently own, or are buying with a mortgage, the houses they live in. People remember 'negative equity' when house prices fell and people were paying mortgages and unable to move because if they sold, the price would not cover the existing debt.

I read a similar thing in an Australian blog too.
That if you try to help renters you will bankrupt home owners, and vice versa (houses have doubled in price over the last years).

What a mess!
Such incompetent or croney (not sure which of the two, or both) governments....


In a related vine, I noticed a less tolerant attitude towards foreigners.
Do I blame locals any longer, after reading these? No!!

Over the last decade there's been a massive influx of either cheap labor immigration (by businesses and the Right), or refugees and illegals (the Left) without wages protection and house building to keep up.

And both R and L govts are focusing on "racists versus freeloaders" to deflect Public's ire over the govts. and businesses that created this mess.

 

[oggbashan]

Property prices in the UK have been rising for more than fifty years.

Take my own experience:

I got engaged fifty years ago in August. We were both considering buying a small property but we decided, foolishly, to wait until we married in the following March.

We bought a house for £8,000. Had we bought in August a similar house would have been £6,000. The owners were delighted. They had bought it five years earlier, brand new, at £4,000. Within six months the interest on the loan had risen from 8.5% to 14.5%.

We sold it for £18,000. We bought a much larger house for £23,000. We sold it for £186,000 and bought our present home at £230,000. That house is now valued at £750,000.

If, in the UK, you have £1,000,000 to invest, buying a property gives by far the best return even if it remains empty.


PS. When I was at school in Australia, almost all my fellow pupils had a plot of land bought for them by their parents on a subdivision that would not be built on for about ten years. The usual cost was about £250 Australian Pounds.

When they left school and university and wanted their own place, they could either build on 'their' plot, or sell it and buy a house elsewhere.

 

[mayfly13]

Property prices in the UK have been rising for more than fifty years.

Take my own experience:

I got engaged fifty years ago in August. We were both considering buying a small property but we decided, foolishly, to wait until we married in the following March.

We bought a house for £8,000. Had we bought in August a similar house would have been £6,000. The owners were delighted. They had bought it five years earlier, brand new, at £4,000. Within six months the interest on the loan had risen from 8.5% to 14.5%.

We sold it for £18,000. We bought a much larger house for £23,000. We sold it for £186,000 and bought our present home at £230,000. That house is now valued at £750,000.

If, in the UK, you have £1,000,000 to invest, buying a property gives by far the best return even if it remains empty.


PS. When I was at school in Australia, almost all my fellow pupils had a plot of land bought for them by their parents on a subdivision that would not be built on for about ten years. The usual cost was about £250 Australian Pounds.

When they left school and university and wanted their own place, they could either build on 'their' plot, or sell it and buy a house elsewhere.

wow.
Do you think it might be related to the Reagan/Thatcher thing in the 70's,
or what's your take on it?

 

[oggbashan]

wow.
Do you think it might be related to the Reagan/Thatcher thing in the 70's,
or what's your take on it?

No. In the UK, Mrs Thatcher introduced 'The right to buy' for council house tenants. That meant many more people became property owners.

The sub-prime crisis that started in the US had more effect as lenders became more reluctant to lend to people who didn't have a secure income. But house prices have risen so high that even a married couple with two reasonable incomes in most of the UK cannot afford a house.

When we got married, the lenders would lend up to three times the man's annual salary and might add another half of the woman's salary. Now the average house price is eight or ten times an annual salary. You cannot borrow that much. Even saving for a minimal deposit becomes impossible. By the time you have saved say £10,000 the minimal deposit has possibly become £30,000.

 

[mayfly13]

No. In the UK, Mrs Thatcher introduced 'The right to buy' for council house tenants. That meant many more people became property owners.

The sub-prime crisis that started in the US had more effect as lenders became more reluctant to lend to people who didn't have a secure income. But house prices have risen so high that even a married couple with two reasonable incomes in most of the UK cannot afford a house.

When we got married, the lenders would lend up to three times the man's annual salary and might add another half of the woman's salary. Now the average house price is eight or ten times an annual salary. You cannot borrow that much. Even saving for a minimal deposit becomes impossible. By the time you have saved say £10,000 the minimal deposit has possibly become £30,000.

wow. That's third-world country level stuff, and it's the UK!
The Right claim that the standard of living is way better than decades ago, cause minimum wages have increased & everyone can buy a fridge. But the real measure should be the house prices-wages ratio.

The other thing that baffles me is:
Why hasn't the 3D printed houses movement taken wings?
The houses are up to 10 times cheaper, and they are just as safe.

 

[BabyBoomer50s]

In the US it’s happening too. About one in five single family houses are sold to institutional investors seeking better alternatives to low yield bonds. Add to that escalating land prices, lumber and other materials, and labor. On top of that, there are emerging local, state, and federal policies designed to incentivize conversion of owner-occupied single family houses to multi-unit rental properties.

 

[oggbashan]

wow. That's third-world country level stuff, and it's the UK!
The Right claim that the standard of living is way better than decades ago, cause minimum wages have increased & everyone can buy a fridge. But the real measure should be the house prices-wages ratio.

The other thing that baffles me is:
Why hasn't the 3D printed houses movement taken wings?
The houses are up to 10 times cheaper, and they are just as safe.

The standard of living in the UK is much higher than it was in the late 1940s or early 50s, much more so when Harold MacMillan said 'You've never had it so good'.

But housing costs have skyrocketed, whether bought or rented. Modular build houses were available in the late 40s and early 1950s. My uncle and aunt lived in a prefab, hurriedly thrown up to rehouse people who had lost their homes to bombing. They had never had such facilities before: an Internal bathroom, running hot and cold water; central heating; and even a fridge. They moved to a 1950s modular built house. It needed repairs in the 1990s but they were built for a twenty-five year lifesapn in 1949!

Edited for PS:

In the UK developers can make money by NOT building. They can buy land, get planning permission, and sell the land at a profit. If they hold on to the land, its value will increase.

A local example. There was a sprawling 1920s bungalow on our seafront. It had not been maintained for decades. It was sold when the elderly lady who owned it moved into a nursing home and died a couple of months later.

It sold for £850,000. The buyer applied for permission to demolish as beyond economical repair and to build two detached houses. Two years later, having demolished the old building, he offered it for sale at £1.5 million as bare land. The demolition, including selling the materials, cost him about £10,000. It has now been bought and two detached houses will be built on it, one for the family, the other as a holiday let at about £2,000 a week.

 

[pecksniff]

Why would a housing crisis be engineered? Who would gain by it?

 

[mayfly13]

Why would a housing crisis be engineered? Who would gain by it?

It's not the best word
But the author claims that in the UK, large developers, alongside mega-property investors have a vested interest in maintaining the status quo:


"The house building industry is dominated by a few over-mighty firms – which is why Home Truths argues a full Competition and Markets Authority inquiry is required.

Over the last decade, as local councils have granted more permissions, large developers who control the industry have engineered a go-slow, making higher profits by building fewer homes."

 

[astuffedshirt_perv]

It's not the best word
But the author claims that in the UK, large developers, alongside mega-property investors have a vested interest in maintaining the status quo:

Actually that's a quite silly take: a business who makes money building things has an incentive to build. Instead, the status quo is held by voting base like Ogg mentioned, property owners and voters, who do not want to see their largest financial investment get devalued. They prevent builders from building, which causes under supply in the face of rising demand.

Build more housing!

 

[Champakian]

In the US it’s happening too. About one in five single family houses are sold to institutional investors seeking better alternatives to low yield bonds. Add to that escalating land prices, lumber and other materials, and labor. On top of that, there are emerging local, state, and federal policies designed to incentivize conversion of owner-occupied single family houses to multi-unit rental properties.

Not a fan of governments trying to change markets.

It always comes with unintended consequences like
putting people into housing that they can only afford
in the short term because home ownership is desirable
as a coveted part of the local tax base...

 

[MadeleineSinha]

The article ignores the fact that successive Labour governments didn't address the issue either.

Both shades of government have been afraid to act because any significant change would devalue the prices of those who currently own, or are buying with a mortgage, the houses they live in. People remember 'negative equity' when house prices fell and people were paying mortgages and unable to move because if they sold, the price would not cover the existing debt.

Labour have been in power for about 29 of the past 77 years so to try and suggest they are equally to blame is disingenuous at best. The only government in recent times to achieve it's housebuilding targets was the Labour government from 2005 - 2007.

 

[JohnnySavage]

For a decade or so I've been hearing about the younger generation(s) wanting a more balanced work/home lifestyle.

Here it is. Don't work, you can't afford the things you want.

 

[oggbashan]

Most large housebuilders have a stock of land on which they could build and have planning permission already. But they don't build.

Why not?

Because they know if they wait they can sell the new houses for a much higher price and make more profits.

Locally, each development has to have a percentage of so-called 'affordable houses'. But 'affordable' is defined as being lower than the average local price. That isn't 'affordable'. Even buying an affordable house would be eight to ten times the average local salary and people can't borrow that much. Even part rent/part buy requires an income much higher than the locals can get even if they commute to London and pay £4,000 of taxable income for their rail ticket per year.

They won't build modular houses because although the build costs are cheaper, so is the sale price and therefore reduced profits.

Local rents are ridiculous. A small two and a half bedroom house is at least £1,000 per month. Our friends have had to move four times in the last ten years because they are renting and each time the landlord has raised the rent beyond that which they could afford, even with housing benefits.

What we desperately need is more social (or council) housing, but every time a suitable piece of land becomes available, the major housebuilders buy it for more than the council can afford. Our local council housing list means that only the top few, maybe a dozen, can be accommodated each year out of thousands on the list. Most will NEVER get a council property.

 

[Titsandclits]

Like you Ogg, we bought our first house a two bed semi in 1985 for £17500 two years later we sold it for £32000 and bought a 3 bed detached for £42000. In 1985 interest rates were 15% and I earned £5000 ish per year. We are still in the second house. By 1992 it had risen to £90000 ish. When we had the price crash and so many people ended up in negative equity. Our house value went down to about £50000, so we were OK. 35 years later we are still here and it is now worth in excess of £300000. Although my salary has gone up it would not be sufficient to buy this house. My two boys can not afford to buy a house as you rightly say because the required deposit is to high. I agree that a deposit should be required as it was the "no deposit required mortgages" in the late 80's early 90's that fuelled the housing crisis.

I hope I have the correct dates of the housing crisis when the prices collapsed. Feel free to correct me. The only way my kids will be able to buy a house is when we die assuming that it's value hasn't been consumed with care home fees.

I don't know the answer and pointing the finger doesn't really help. We are where we are, what needs to be to fix the problem. Stop builders buying land and sitting on it waiting for the value to go up is surely one thing that should be addressed.

Over to you.