Housing

What is the housing crisis?

Housing is shaping up to become one of the hot political issues of Gordon Brown's premiership.

At first homeowners responded positively to rapidly rising house prices, especially as many are reliant on property to fund their retirement. The government was reluctant to attempt to stem house price inflation, arguing a strong overall economy would forestall a crash.

However, Middle-aged parents have now become deeply concerned about their children's ability to buy homes and the government is increasingly aware of the voting power of this growing demographic.

Background

The problem itself derives from various factors, all of which have an effect on each other:

A shortage of affordable housing

High house prices

Population growth

Changing household patterns.

Shortage of affordable housing
Affordable housing has quite simply not been built over the last 20 years. Demand for housing now far outstrips supply, with only 3.1 new houses or flats completed a year for each thousand of the population.

Meanwhile, the council houses that remain are being sold in vast numbers by local authorities and land for house building is restricted by planning laws and local opposition.

High house prices
The under-supply of housing then massively distorts the property market, leading to a 676 per cent increase in UK house prices since 1980 and a tripling in house prices since Tony Blair came to power.

Needless to say, the extent of the price rise growth vastly outweighs any rise in wages, thereby further limiting supply of affordable housing and making the problem even worse.

The average cost of a home is now six times the average wage, and nine times in London.

Population growth
All of which is made worse by the exponential rise of Britain's population.

According to the Royal Institution of Chartered Surveyors, the number of households is growing at 200,000 a year.

The UK's population is predicted to rise from 60 million in 2005 to 65 million by 2021.
Immigration, predominantly from eastern Europe, will also impact on the growth rate.

Changing household patterns
Cultural and demographic changes are also creating a disproportionate increase in single person households.

Properties with one occupant number 22 million in 2007, but are set to rise to 26 million by 2026.

An aging population will naturally feature an increase in small, older households, but a general societal tendency towards later marriage has led to a similar process among the young.

Controversies

Housing dominated the legislative priorities of Gordon Brown's new administration and figured heavily in the preview of the 2007's Queen's speech.

Mr Brown has promised three million new homes by 2020, an increase of 40,000 per annum on the previous yearly target of 200,000.

Economic concerns, environmental groups and local councils are the main obstacle to change.
Economically, any radical change implemented to dampen property prices could easily panic the market and hinder economic growth.

Environmental groups are concerned about the green implications of massive house-building projects, and share with many local councils a deeply-held opposition to building on green field sites.

The government claims it will avoid such sites as much as possible. But Alistair Darling, the chancellor, and Hazel Blears, communities secretary, are both on record implying housing concerns overrule environmental objections.

The Conservatives repeatedly point to the lack of house-building during New Labour's first decade in power, despite the problem being well understood.

Cynics say this might have something to do with the welcome economic and electoral effects of high house prices.

Statistics

Number of home in the UK: 25 million

Percentage of homes in the UK owner-occupied: 70

Rise in home owners since 1997: One million

Percentage of home ownership in London: 58

Average age of first time buyer: 33

Average deposit: £24,000 (£44,000 in London)

Average years it takes to save for deposit: 5

Percentage of first-time buyers relying on parental help: 40

Quotes:

"Putting affordable housing within the reach not just of the few but the many is vital both to meeting individual aspirations and a better future for our country."

Gordon Brown, prime minister, 2007.

"With 1.6 million households currently on waiting lists, it is crucial that we deal with out desperate shortage of affordable homes. This means delivering 70,000 new homes per year for rent and low cost ownership. Any less than this will represent a failure of ambition on the part of the government and condemn a generation to live in substandard, overcrowded and overpriced housing."

David Orr, chief executive of the National Housing Federation

"Planning is a sensitive issue. I will yield to no one in my determination to protect our heritage, but if we don't increase the supply of houses the problem will get worse and worse and worse… The idea that we should stop building houses is one I don't accept."

Alistair Darling, chancellor of the exchequer, 2007.

"Gordon Brown's commitment to build three million new homes by 2020 is a major boost for families through the country, and should help young people finally get a foot on the housing ladder."

Adam Sampson, chief executive of Shelter