Tag Archives: housing crisis

A Voter’s Manifesto (part 4 of 5)

Link to part 1

Link to part 2

Link to part 3

Welfare/Social Security

It should be a principle that in this, one of the wealthiest countries in the world, none should starve. So punitive measures that are taken to remove benefits from those in need will be made illegal. With a level of retrospective action, any such measures which may be shown to have had a significant influence on anyone’s death, either by starvation or suicide, will be deemed to bear a portion of responsibility for that death and any person who enacted or directed such measures shall be held criminally liable.

Hate speech that is directed to claimants of benefits, either individually or collectively, should be made a crime, along with other forms of hate speech that are currently recognised as such. Any penalties for such hate speech should be ringfenced and directed into the benefits system. So if person X calls their fellow human being and neighbour, a scrounger, and they get fined £500 then that £500 will be go directly into funding social security, for providing for those who have fallen on rough times.

The bedroom tax must be condemned as the product of a warped and malignant ideology and therefore must be repealed immediately.

This is not the only punitive measure that has been introduced by the current coalition government. One may think especially of their attacks upon the disabled. All such evil measures are to be rolled back to allow for disabled people to live dignified lives, where they get all the help that they need and they shall not be subject to humiliating tests. There will also be a complete overall of the work assessment capabilities, where assessments will no longer be carried out by for-profit companies, but by a person’s own GP, with potential 2nd opinions available made from other local GPs. If an assessment is subject to any appeal then the person should not have their benefits reduced or sanctioned in any way during the time of the appeal.

Any and all targets for welfare sanctions, whether overt or covert, shall be illegal. Any direction given by any minister of the government, any manager in a job centre plus or any other such person of responsibility will be punishable by ensuring that they are in receipt of unemployment benefits and that as soon they are in employment to be subject to a fine not less than the total amount of benefits that they denied to those in need.

The single best way to reduce out of work social security is by creating jobs that pay a living wage. It is an ideologically fuelled folly to believe that the way to increase employment is to cut out of work benefits. Any efforts to reduce the expense of out of work social security should be by investment in jobs.

Europe

Given the increased popularity of Euroscepticism in recent years, it seems that there is sufficient disillusionment with the current relation between the UK and Europe to warrant a referendum on whether the UK should remain part of the European Union. I have written more about that here.

We must reaffirm our commitment to human rights and the treaties governing it. Any organisation that seeks to undermine the implementation or withdrawal from such treaties represents a threat to basic human rights and shall be considered as a potential terrorist organisation.

International Aid

At present, the United Kingdom pays 0.7% of its GDP in international aid, but this is not set in statute. I would propose that this should be legislated for and will be subject to review once every 7 years.

Housing

It cannot evade the notice a reasonable person that at the moment, there is something of a housing crisis in many parts of the country. This is a classic example of excessive demand and insufficient supply. There are a number of measures that can be undertaken.

To address the issue of under-occupation, any house which is owned by left vacant will be subject to an increasing scale of tax to encourage either its sale or a reduction in the asking rent to make it affordable. If a property is left vacant for more than 6 months, then 5% of the property of the value will be levied as a vacant property tax. If the property remains vacant for over a year, then this will increase to 10%. Any property left vacant for 2 years should then be subject to a compulsory purchase order and turned into social housing.

Buy-to-let landlords do provide a valuable commodity, namely a home for someone to temporarily live in. However, in so providing this commodity, this reduces the supply of housing available for purchase and increases the price in the rest of the market. As such, there should be disincentives on landlords unreasonably buying up properties. Such measures could include a flat 45% tax on income from 2nd homes or even a ban on private landlords owning more than 2 homes.

Consecutive governments have failed to build enough new social housing to replace the stocks that were sold off under the Thatcher regime. As such, increased investment must be made to increasing social housing stocks. As these are for those more in need than private home owners, the building of social housing shall be prioritised over and above affordable private housing, though that is not to be neglected.

Economically, this will come at some initial cost, though one notes that this will provide employment for labourers, who, paid at a fair wage will contribute via income tax and that the building firms they work for will be able to reap profits from their work which shall also contribute to the treasury via corporate taxation.

This will also have the effect of increasing supply, reducing demand and so push down house prices, which is a necessary corrective measure to the rampant house price inflation which currently plagues us.

Utility Costs

As has been noted in recent years, the privatisation of the utility companies has transformed the energy market from a monopoly to an oligopoly. This has not yielded any great improvement in customer service and the aim of competition to reduce prices has proved to be a complete failure, with energy prices going up at the first hint of increases in the supply market and failing to come down when the supply market reduces its prices.

As a result of this failure of the private sector, the energy suppliers should be taken back into national ownership and price rises limited by statute to no more than 2% above inflation. This has the added benefit that any profits made the renationalised service will go straight back into the provision of utility services and not being siphoned off to shareholders.

(Guest Post) The housing bubble: a homeowner’s perspective

In response to my piece last week on the housing bubble from a would-be first time buyer’s perspective, my brother-in-law, Radionotme, has written from a homeowner’s perspective. 

Used under creative commons license. Picture by walknboston.

Used under creative commons license. Picture by walknboston.

As someone on the other side of the divide, as Simon puts it, I have to say I broadly agree with what he says. As with most things though, it’s not quite that simple.
To own your own home is an aspiration for most of us, although oddly in some cultures this isn’t the case at all. French, German and Japanese home ownership rates are less than 50% for example.
It is an aspiration I share, and am currently working towards.
Some would say that since I live in a house that I have a mortgage on, that I own that home. I’ll even refer to myself as a homeowner most of the time, but of course the truth is that I do not own the home. The bank, and in turn the institutions that the bank has borrowed from, own the home. If I miss a payment, then my home is at risk of being taken away from me. If I miss several, then this is virtually guaranteed. As such, I do not think I can truthfully say that I own my own home at this stage.
What I can say, is that I am fortunate enough to be on the property ladder. I agree with Simon, that renting is inherently more expensive that buying, but for different reasons. Renting is usually cheaper to start with than buying, but whereas rental costs will increase over time (dependent on market conditions), the price you have paid for a house is final, and the only changes to the monthly payments relate to the interest rate, which can go either up or down (though you may be forgiven for not realising that up is a potential direction for interest rates given the last few years!).
I am currently able to ‘enjoy’ the low interest rates in terms of how it affects my monthly payments, although I remain opposed to them when considering how they affect the wider economy. Even so, my mortgage payments take up between 30 and 40% of my take home pay.
When I first bought my home, and locked into a 6% interest rate for 5 years (oh, what a mistake with the benefit of hindsight), my mortgage payments were over half of my take home pay.
I expected however, and have so far fortunately been proven correct, that my take home pay would increase over time, and so that percentage of my salary that the mortgage payments took up, would decrease.
This plays into Simon’s figures, once you have the relevant context. Mortgages on average take up a smaller proportion of salaries, however that is in part due to people towards the end of their mortgage term won’t be paying much, when compared to those just starting out. Those people are often paying significantly more than their renting peers.
I’d also disagree that 5-10 years ago, prices were ‘cheap’. They may look that now, however even in 2003 there were warnings of an impending house price crash, and reports that houses were out of pace with wage growth. Although I’m on the property ladder, I jumped on years after some of my friends, and years before others. The ones who jumped on earlier were able to make more from the house price rises than I could, even though I bought 10 years ago, and they bought 13-14 years ago.
Finally, I take issue with the rather flippant comment that those on the property ladder don’t care about those not on it. We do, both for selfish reasons, and unselfish. I care deeply that my younger siblings, have and will have considerable difficulty getting on the ladder. I worry for my son, and whether he will be able to own the roof above his head when he grows up. I worry about the wider economy, and how the unending house price rises give rise to buy to let landlords, who have no interest but to make as much money as possible.
I agree that something needs to be done, but I have little faith that any of the main government parties are up to the challenge, or even that it is a problem that government alone can tackle. Whatever the solution though, it has to start with more ‘normal’ interest rates, that can encourage people to save, as well as to borrow.

The housing bubble: A would-be first time buyer’s perspective

Used under creative commons license. Photo by meddygarnet

Used under creative commons license. Photo by meddygarnet

Anyone who reads the economics section of the press can hardly have failed to notice the concern over house prices at the moment. While it can be easy to look at numbers and forget the humans behind them. I am just one of those humans and here I present a wholly individual anecdote, with some reflections on the wider economic scene. My circumstances won’t match everyone’s, but there may be echoes that are recognisable. And if the current housing market does not currently affect you adversely, then perhaps this may help you see things from another’s perspective. If anyone who is on the other side of the divide would like to respond, I would be very willing to host it as a guest post on this blog and give it equal publicity.

From the time I started my current career, shortly before I turned 23, I have aimed to save money. In so doing, I freely confess to having a selfish streak within me. I try to be generous where I can, so I save less than I can possibly could. The purpose of the saving has always been clear: it is for a deposit to buy my own home. Having abandoned any youthful hope of ever marrying, I know that I shall never have to spend money on a ring or two, a wedding or children of my own. Of course, that then precludes the possibility of marrying someone more wealthy who could contribute a lump sum towards the deposit. Though, given the average cost of weddings these days, if I were to contribute towards that I wouldn’t have a penny left towards a home.

So while I save, I wait. I acknowledge and am grateful that I am paid more than average salary for this country and that by virtue of having been born into the family and country that I was, I enjoy far more privilege than the vast majority of people in the world. That is just to put things in a little perspective.

If one cannot buy then the only viable alternative is to rent. Yet renting is inherently more expensive than buying. At the end of a rental period I own nothing more than at the start. With property ownership via a mortgage, when make a payment against the mortgage you have the expense of the interest but you also pay back some of the debt. When all the debt is paid, you owe nothing and you own a home outright. It takes decades to do, but incrementally, month by month, you will get there.

As someone who is forced to rent, there are several frustrations. There is what one might refer to as a ‘gap of years’. It’s not even a generational gap. Those who are 5 or 10 years older than me have owned their own homes since they were in their mid-20s, having had the opportunity to put a deposit on their homes when the prices were cheap and the deposit requirements much lower than they are now. As a consequence, it means that those who have mortgages, for an equivalent property, pay far less in mortgage repayments monthly than I do in rent.

As an indicative, rent alone constitutes about 35% of my monthly income after tax. This makes me fairly average for a renter, as a recent survey I read showed that the mode bracket for renters was 30-40% of their net income, while those with mortgages paid 20-30%.

The upshot of this is that those who need to save the most (in order to pay for the deposit) have inherently less disposable income than those who don’t need to save as much. But when this is coupled with the high rate of inflation on house prices, a wedge gets driven between those with property and those without. One of my personal irritations is the smugness I witness from some of those who were fortunate to be able to buy when they did. One person I know likes to boast that the increase in the value of his property on a month by month basis is greater than his net income. The same person then periodically ‘encourages’ me to buy, even though I have told him repeatedly that I cannot afford to do so. In his imagination, I must be able to save the tens of thousands of pounds needed in the space of a couple of months. I have tried making the point to him that now would be a good time to invest in buying a yacht and that it doesn’t matter whether or not he can afford it, he should just do it. Unfortunately, my sarcasm is rather wasted on him as he just doesn’t see the absurdity of his own (lack of) thinking.

To try to put some numbers on the matter, after some investigation, given my income, expenses and current amount of savings, I could probably afford a property up to the value of £200k. Unfortunately, the average price of a 1 bedroom flat where I live is around £330k. The answer is obvious, though, isn’t it? Move to somewhere less expensive!

If only it were that simple. Part of the reason I moved into London last year was because the overall fixed cost of living (rent + council tax + cost of commuting) was cheaper than when I lived in Sussex. Even though the rent is more expensive in the capital, the cost of train fares comes down by more than the rent goes up. So if I were to move back out of London again, then my cost of commuting goes up and therefore the amount I can afford to borrow goes down.

It could be argued that the M25 is a kind of vicious circle. Once you’re inside it, it becomes hard to leave again. A factor in this is the lack of reliability in the private train companies (Southern have been particularly bad this year). The fact that I now have 4 different routes home through London rather than the monopoly that Southern have on the Arun Valley line means that if one or two fail, I have backups I can take.

Another choice would be to move jobs entirely. I’m sure £200k would get me a decent home in my old stomping ground of County Durham. Yet an equivalent job would almost certainly not pay the same as I get in London and so again, the amount I could reasonably borrow would decrease. Then there would also be the problem of leaving a job where I have some level of job security (though is there really such a thing anymore?) and trying to secure a new one in a location where I don’t currently live.

That’s the essence of the problem. Those who got on the “housing ladder” don’t care that the bottom few rungs have come off; for them, it is up, up and away. I’m not arguing that this is inherently unfair, but it is indicative of a problem with our current economics. The low interest rates are partly what is driving this wedge between the propertied and those who aren’t. It means that those with mortgages pay little interest and those who are saving cannot keep their savings value up to speed with inflation. Ideally, the saving rate should be pegged to house price inflation, though I’m not sure any banks would be wanting to offer an 11.8% savings rate.

Another factor is the fashion for buy-to-let. Some buy-to-lets are necessary for the rental market to continue in existence, but I am yet to be convinced that the current number is right. In effect what a buy-to-let does is take a property off the market that could otherwise be bought by someone who needs to live there. Yet the person buying a buy-to-let property isn’t the one who lives there. So they are merely reducing the supply of housing which is exacerbating the problem of increasing prices.

It’s a big problem, which needs a coherent, holistic approach. Tinkering here and there is not, in my view, the best approach. So while we may come up with ideas to tax more heavily the buy-to-let landlords as a disincentive or plan the building of more homes, we need to look at the picture as a whole. Looking to the future, what we may end up with if the market direction continues as it is, is we end up with a generation who will not be able to save enough to ever afford a deposit and must wait until they bury their parents before a home of their own becomes a realistic prospect.

That’s my perspective. What’s yours?