25 Sep 2013

Broken Ladder: a plague on all our houses?

As part of a series on the housing crisis, Channel 4 News looks at the two issues facing politicians seeking to tackle a broken market: availability and affordability.

The lack of new houses is a fundamental problem for would-be house owners.


In a report published in September 2013 the Joseph Rowntree Foundation warns: “The long-term failure to produce sufficient new housing year-on-year is a root cause of housing market volatilaty. Shortages create underlying pressures on house prices, and so help to establish the inflationary expectations that fuel unsustainable house price booms.”

Back in 2006-7 new housing starts hit a peak of over 180,000 a year. Then came the run on Britain’s fifth largest lende,r the Northern Rock bank, and by mid 2008 new housing starts slumped to below 80,000.

Fast forward to today and the latest government figures show that between April-June 2013 there were 29,510 new homes started – that’s equivalent to around 110,000 new homes this year.

So an improvement from the depths of the crash, but nowhere near the number needed.

Increasing demand

For some time the housing supply has not kept up with demand, partly due to increased life expectancy and the growing number of one-person households. In 2010 there were 1.8m households on English local authority authority housing registers, and significant levels of overcrowding in private and social housing. And the number of households in England is expected to grow by 221,000 a year for the next two decades.

By 2021 the government says there will be 24,307 English households – that’s 2.2m more than in 2011.

Housing Minister Mark Prisk told a Spectator magazine housing Q&A in January 2013 that new home building remained at an insufficient level, but insisted that the coalition had made significant progress in the last two years:

“Last year housing starts were just below 100,000 at 98,020. But actually, because of conversions and changes of use, there were 135,000 additional homes last year – putting new housing supply at its highest since 2008”.

In his 2013 speech to the Labour party conference, Ed Miliband pledged that a future Labour government would “have a clear aim that by the end of the parliament [2020] Britain will be building 200,000 homes a year.” But it remains to be seen how he will enforce his “use it or lose it” threat to those developers holding land without building on it.


Getting on the housing ladder has become increasingly expensive.

At the end of 1992, an average first time buyer would, according to Nationwide building society figures, have spent 22.8 per cent of his or her take home pay on mortgage payments. By the end of 2012, that had risen to an average of 33.7 per cent.

And as prices have risen, the amount would-be home owners have to save for the deposit has soared. At the end of 1992, the average deposit for a first-time buyer was £1,841.73. Twenty years later in December 2012, it was £27,408.

Against this background the cost of rents has risen too, making it harder to save for a deposit.

Housing charity Shelter, in a January 2013 report, said “The growth of renting – up 69 per cent in the last 10 years – is not a reflection of changing lifestyle choices: some 55 per cent of renters want to own a home but think they will never be able to afford it.”

A YouGov survey carried out for Shelter in December 2012 found that over half of renting families have less than £50 a month left over after paying rent and other essentials.

And now they are competing with foreign buyers too.

Increased competition

Developers Redrow London are building a “highly complex 21 storey scheme” comprising 207 apartments, office space and retail units at one Commercial Street in London.

The company told Channel 4 News: “To deliver such a complex scheme and to offset the some of the purchase and build cost risk, we forward sold approximately 40 per cent of the total value of the project some 18 months ago. The only market available to us at that time existed in Hong Kong and Singapore where the majority of purchasers do not require debt to fund their purchases.”

Foreign buyers not only have the ready cash, but are more accustomed than English buyers to paying out for a property that only exists in an architects drawing.

Not all Redrow’s developments are funded this way – at Kingston Riverside over 95 per cent of buyers were “from the local market”. But in a recent report from the Smith Institute it was estimated that around 85 per cent of new-build properties in central London have been bought by overseas buyers.

Home owning democracy

For over 30 years rising house prices were seen as a means to individual prosperity, a pension plan and a way to reduced dependence on the state. But with the housing ladder broken, has the vision of the property-owning democracy become a unrealistic dream for too many?