Memorandum by Bolton at Home (AH 26)
THE POTENTIAL
BENEFITS OF
AND SCOPE
TO PROMOTE
GREATER HOMEOWNERSHIP
There is a huge assumption that achieving homeownership
in itself is a panacea for many of housing's problems. The perception
is that becoming an owner automatically bestows a greater willingness
to invest in a property, to take better care of it, and become
less likely to be involved in anti-social behaviour. That, in
itself, an increase in homeownership within a run down area acts
as a catalyst for regeneration. Demonstrates a commitment to an
area assisting with the sustainability and long term viability
of the locality. Also, by becoming a homeowner people rise in
status and esteem. Following these assumptions an increase in
homeownership can be construed as both a positive beneficial economic
and social driver.
Further, the potential benefits of homeownership
over renting are well-rehearsed—such as investing in a significant
appreciating financial asset; having a greater sense of security
and control; and retaining the capacity to "liquidate"
some of the equity held in the property through, for example,
re-mortgaging. Indeed, when asked, most people would say that
they would prefer to own their own property. So there would seem
to be fairly conclusive arguments that the scope to promote homeownership
virtually holds no boundaries.
These views, however, need to be tempered with
a little cold reality. The following factors constrain the scope
for escalating home ownership:
— Renting is a choice many people make.
The reasons for this are varied and include: the wish not to make
a significant capital purchase early in life; the desire to release
equity later in life; the convenience of not having all of the
repairing obligations; where short term housing is desired; where
relationship break-up takes place and further capital outlay on
home ownership is deferred; people prefer to rent because they
are comfortable with the service they receive from their managing
housing organisation and are wary of risking their savings on
the vagaries of interest rates.
— There has been a considerable increase
in the buy to rent market recently and this shows no sign of abating.
Therefore, an increase in the numbers of properties for sale on
the open market will not be directly translated as a commensurate
increase in the number of homeowners.
— The numbers of people facing repossession
is on the increase as the numbers of homeowners grow. (55% increase
in mortgage repossessions in 3rd Qtr 2005 compared to 3rd Qtr
2004) So, there will always be a "fall out" and this
would disproportionately hit those on limited incomes.
— The cost to the individual of homeownership
does not stop at purchase. There has been little research done
about the continued cost of maintenance and improvement, and how
this disproportionately impacts upon those new owners living on
restricted incomes. Further how this, linked to other debts, leads
towards chronic financial insecurity and subsequent threat of
repossession.
— The significant take up of the right
to buy may be seen as further proof of the almost endless scope
for homeownership. The transition between tenant and owner seems
to be a preferred option, and one of the easiest means of breaking
up mono-tenures and creating mixed communities. However, this
optimistic view of the beneficial nature and impact of the right
to buy also needs a reality check. The transfer of stock was achieved
only by offering major discounts on properties, many of which
had outstanding significant debt charges outstanding. As house
prices rose sharply the differentials on offer became, for many,
more than just an incentive to become a homeowner. This led to
the situation where financial speculators were openly prepared
to fund a tenant's purchase on the basis of sharing the profit
on resale. Rather than being used as a means as a direct route
to meet a basic aspiration for homeownership in this context the
right to buy was a means towards realising profit.
— Right to buy has also proven to be
less advantageous for a significant minority of new owners whose
inability to meet running costs and/or mortgage payments has resulted
in serious disrepair or resale or, even abandonment. The demand
for social renting has increased considerably in Bolton and elsewhere,
the supply of which has been made more acute by losses of stock
through the right to buy. This scenario hardly confirms the assumption
that renting has lost its importance and relevance for many people
today.
— The scope for having a higher proportion
of owner-occupation is also constrained by issues relating to
affordability. It is the ratio between house prices and average
local incomes that is essential. Bolton, for instance, has a low
wage economy. This means that hikes in house prices, even at a
modest rate, can disproportionately reduce local people's ability
to enter the housing market for the first time.
THE EXTENT
TO WHICH
HOME PURCHASE
TACKLES SOCIAL
AND ECONOMIC
INEQUALITIES AND
REDUCES POVERTY
Evidence from previous successful regeneration
programmes suggests that one method of increasing the sustainability
of a community is to increase the number of homeowners as a percentage
of the whole. Usually this is largely achieved by importing more
economically active people as homeowners into an area of housing
deprivation rather than increasing home ownership amongst the
"indigenous" population. Similarly, there is no proven
correlation between becoming a homeowner and reducing poverty.
Indeed in some cases the financial strain of buying a home and
taking all the repairing obligations could actually increase poverty.
The dwelling may then be used as collateral to fund further borrowing
and thus run the risk of deepening the cycle of individual debt.
There is a common-held opinion that homeownership
is in some way intrinsically superior to renting - a crude belief
that the only reason for renting is because people do not have
sufficient resources to buy or come from a social class were renting
is the norm. Thus renting is associated with a social stigma that
is unfair but persistent. As this is a perception rather than
a reality there needs to be a more reasoned and balanced public
discussion about the relative merits and advantages of renting.
The stereotype that someone who rents from the Council (or within
certain parts of the private sector) has to be in someway socially
and economically disadvantaged needs to be challenged.
Because there is a dearth of empirical evidence,
there is a need for more research into testing how and to what
extent home purchase is a key factor in tackling inequality and
reducing poverty. Whilst it almost certainly does play a role
it is strongly suspected that it is only important as part of
a whole suite of regeneration tools aimed at improving infrastructure
and building up sustainability.
THE ECONOMIC
AND SOCIAL
IMPACT OF
CURRENT HOUSE
PRICES
House price fluctuation has always carried a
wider social and economic impact. However, over the last few years
this impact has expanded exponentially in relation to the significant
shift in investment preferences from stocks & shares into
bricks and mortar. The growing intervention into housing markets
by the (institutional) investor, whose principal motivation is
profit through asset management, is beginning to twist, distort
and inflate such markets as a cause for concern. For instance,
the first time buyer once the key driver of housing markets, is
gradually being squeezed out in the face of spiralling house prices.
As a direct consequence of this a new dynamic is emerging where
a growing number of older householders are looking to release
equity in their own homes in order to pay for their children to
get on the first rung of homeownership.
The future change to pension investments to
be introduced allowing investors to secure tax breaks through
properties to be included in their pension investment portfolios
will also boost housing as an investment option.
Mortgages are an expensive lending option, invariably
families' major investment choice. Whereas rent paid to a social
landlord goes directly to cover management and maintenance/improvement
of the dwelling money raised through the mortgage process is a
profit shared by the private institution.
There is again a crude assumption that house
prices will continue to rise ahead of (or in line with) inflation,
thus providing the perfect "copper-bottomed" investment
opportunity. However, the certainty is that prices at sometime
will either stagnate or decline—already in 2005 a nationwide
check on prices and sales is being experienced month-on-month.
This is partly due to people waiting for the outcome of decisions
on interest rates, partly on properties being over-valued during
the last price surge, and partly on other factors relating to
what may be basic weakness in the market as a whole. These could
be manifestations of a range of factors, such as: regional differences;
developer over-confidence; the over-reliance on developing at
the most expensive end of the market; and the possible over-penetration
of buy to let investors. Though stagnation in prices are not necessarily
connected with a general downturn in the economy, as it could
be argued that speculators are more likely to retreat to stable
"bricks and mortar" investments as a hedge against hard
times.
THE RELATIONSHIP
BETWEEN HOUSE
PRICES AND
HOUSING SUPPLY
House prices rise at a differential rates, dependent
upon a complex mix of location, speculation and demand—the
real danger emerges when both "hotspots" and "coldspots"
emerge with the real possibility of, on the one hand, areas where
most people are priced out of homeownership and in others where
market collapse takes place. Crudely low supply means high prices,
whereas, high supply helps to depress values. However, in reality,
it is a much more complex relationship. This is largely due to
the fact that supply is not the only factor behind house price
levels. For instance, the existence of a popular school puts a
premium on housing in a particular location.
Further, it should not be assumed that the provision
of additional housing sufficient to meet housing need gaps in
a specific highly popular area will automatically act as a depressant
on prices. Rather, it could simply act as a spur to demand and
set off further inflationary pressures.
The quality, the location, and the suitability
of supply have a more sturdy relationship to house price than
merely the rates of supply. The key to establishing a balanced
level of housing price is to have a balance of supply; with houses
available at a range of different prices along with a choice of
property types, sizes, and tenures.
OTHER FACTORS
INFLUENCING THE
AFFORDABILITY OF
HOUSING FOR
SALE INCLUDING
CONSTRUCTION METHODS
AND FISCAL
MEASURES
New affordable housing for sale, in most circumstances,
has to be imposed on private developers through planning constraints.
Left unregulated developers would supply whatever generates most
profit, and in most cases this would be high value housing. In
order to alleviate reduced profit margins on schemes that have
affordable housing as an element they go for much higher densities.
This is not a pejorative statement as these are businesses with
an obligation to maximise the profits of their shareholders—therefore
it is unreasonable to assume that they would seek to achieve anything
else. This means that Councils, acting within a regional context,
have to intervene to ensure that a sufficient supply of affordable
housing is created. The issue is that public subsidy (via the
Housing Corporation amongst others) should be limited with the
main burden for financing affordable housing falling on the developers—a
point of view that does not seem to be held by Government at the
present time.
Over the last few years homeownership has been
boosted by low base rates that had allowed lenders to encourage
potential mortgagees through low fixed term introductory rates.
However, the steady downward trend of base rates during the last
five or so years has now been replaced by a more fluctuating path.
In turn this breeds less confidence amongst purchasers and a market
more vulnerable to boom and bust. Intuitively lesser market activity
should mean that there is less inflationary pressure, so the housing
market would settle back to provide more affordable housing for
sale. However, this is not always the case as "boom and bust"
could create a more cautious market with fewer properties for
sale; fewer properties for sale reflects scarcity and scarcity
is a driver of price inflation.
The need to use modern innovative construction
methods to produce housing at a price between £60,000 and
£70,000 is both admirable and pertinent. The danger to be
avoided is to produce housing without a reasonable shelf-life.
One salutary lesson from the 60's is that cheap dense low cost
housing may solve an immediate problem but without tough quality
control during construction and a consideration of impact of infrastructure
it can become obsolete very soon. This is evidenced by the demolition
of so many 'modern' high rise and deck access property. Perhaps
the solution is to look at providing housing that may be low cost
but has the potential for growth, flexibility, and continued development
along the lines of a lifetime home.
THE SCALE
OF THE
GOVERNMENT'S
PLANS TO
BOOST HOUSING
SUPPLY
The scale of new housing proposed by the Government
is reasonable as a direct response to growing demographic demands.
There has been much scaremongering about the impact this will
have on the countryside but this seems to be somewhat exaggerated
and hyperbolic. What is of issue though is the difficulty that
will be experienced in actually ensuring that the new housing
built fits the needs and aspirations of the customers it is aimed
towards. If the assumption is that just increasing supply will
solve the housing shortage then a mistake is being made. Rather,
greater emphasis needs to be put upon producing new housing that
is customised to meeting the full range of housing needs not just
those of people at the top end of the market and also not just
restricted to homeownership (affordable or otherwise).
Further, greater emphasis needs to be placed
on producing housing expansion plans that help deliver regional
economic planning aims. For instance, by helping the north to
bridge the national output gap by encouraging more diverse quality
housing to be built in the region as a means of attracting new
investment and boosting existing housing markets.
The major concern over the Government's proposals
is the total reliance on boosting homeownership, seemingly at
the expense of the rented sector. There needs to be a more thoughtful
approach to the problem that challenges the traditional dichotomy
between rent and homeownership. This would involve developing
the idea that everyone is given a stakehold in their property,
and this "stake" could be traded up or down. At a stroke
this would re-interpret the individual's relationship to property;
removing the stigma relating to renting and providing a much more
flexible model to outright homeownership.
THE RELATIVE
IMPORTANCE OF
INCREASING THE
SUPPLY OF
PRIVATE HOUSING
AS OPPOSED
TO SUBSIDISED
HOUSING
Should not be about increasing the supply of
private housing at the cost of subsidised housing. Rather public
subsidy should be largely directed towards regeneration and within
areas (such as housing renewal) where the private sector builder
is more reluctant to tread. The Private Sector needs to bear the
main burden for creating new affordable housing from builders
profit and not from the public purse. Homebuy in all its forms,
whilst providing a range of innovative means towards homeownership,
should not be used by the private sector to off-load their responsibilities
for providing unsubsidised quality affordable housing.
HOW THE
PLANNING SYSTEM
SHOULD RESPOND
TO THE
DEMAND FOR
HOUSING FOR
SALE
The spatial dimension of housing demand is of
immense importance. Planners have a crucial role to play in working
with housing in delivering Regional Plans that not only locate
present and future demand, but also, help to shape and direct
demand away from hotspots so as to contribute to regeneration
of areas in decline. Have a stronger role to play in the types
of dwelling being developed eg prevent a proliferation of apartment
development—ensure a range of housing offer is available
to meet the needs of the locality not a free range to produce
high density developments. As previously mentioned the planning
system (through Section 106 and other measures) has an absolute
central role in ensuring that private sector developers produce
affordable housing as part of balanced mixed community schemes.
Affordable Housing provision via planning gain should be recognised
as number one priority over other planning gain requirements.
Further, the planning system needs to respond
to all housing demands not just those of housing for sale.
THE SCALE
OF HOUSING
DEVELOPMENT REQUIRED
TO INFLUENCE
HOUSE PRICES
AND THE
IMPACT OF
PROMOTING SUCH
A PROGRAMME
ON THE
NATURAL AND
HISTORICAL ENVIRONMENT
AND INFRASTRUCTURE
PROVISION
As previously explained the scale is important
but not as important as the methods used to ensure the housing
produced is relevant to and responsive of contemporary needs and
aspirations. Also that there is no simple easy correlation between
increased supply and lower prices. It is more about providing
appropriate housing (not profit-led) even if this is scaled down.
Clearly there are issues about ensuring new
developments are as unobtrusive as possible—once more planning
taking a lead policing role here. Every effort has to be made
to ensure that brownfield options are exhausted—this would
need planning policies to be more flexible in that they should
resist the temptation to mothball potential sites indefinitely
under zoning for, say, commercial/industrial use. Also, for the
developer, a brownfield site is usually much more an expensive
option to build on than a greenfield site. This is true both in
terms of construction costs and in likely returns from sales.
So, once more greater encouragement—though not necessarily
in terms of public subsidy except for help in pre-construction
site assembly/decontamination - needs to be given by Local Authorities
to direct interest away from greenfield sites as being the first
choice for private developers.
A public debate needs to take place over the
preservation of certain buildings deemed to have historical interest
balanced against the needs of the country to grow its residential
base to meet the needs of the present and of future generations.
It could be argued that the bias has shifted too far in one particular
direction. For instance, there are serious challenges to the demolition
of rows and rows of empty obsolete terraced housing because of
a perceived priority for conservation over demolition. Unless
a more realistic view is taken major regeneration schemes, such
as those prompted in the Housing Renewal Pathfinders, would be
undermined. A compromise needs to be struck where a handful of
older dwellings of specific historical/architectural importance
are preserved without it threatening major re-construction.
The development of new housing, whether for
sale or otherwise, without a commensurate expansion of infrastructure
is a recipe for future problems relating to sustainability. Much
more work needs to be done on perfecting a three dimensional model(s)
that shows the impact on infrastructures of new development and
how this can vary by location. This could then go on to explain
how best to adapt infrastructures to absorb the increased residential
base. The presumption is that not all new developments will require
significant infrastructure change there being a critical mass
to reach within a specific area. It would also provide the basis
for discussion in areas where there is simply no capacity for
sufficient infrastructural development to meet the proposed housing
scheme.
THE REGIONAL
DISPARITIES IN
THE SUPPLY
AND DEMAND
FOR HOUSING
AND HOW
THEY MIGHT
BE TACKLED
The importance of tackling regional disparity
is mentioned elsewhere and is central to any attempt at resolving
the nation's housing problems through the increase in stock to
meet growing demand.
The Northern Way seeks to eradicate the huge
output gap between our region and the rest of the country. A key
element of the action plan is to develop housing more suitable
to the needs and aspirations of the present regional population,
whilst also anticipating the growing demand that prosperity would
bring. The City Region will now provide the central point for
developing strategy to make this happen. Importantly, housing
issues of this nature will not be addressed in isolation but as
one element in an overall co-ordinated economic plan aimed towards,
in our case, enriching the Manchester City Region.
There is a growing and more sophisticated understanding
emerging within the region over how our housing problems and issues
are best articulated. Rather than dealing in simple terms such
as "high" and "low" demand we are now seeing
supply and demand issues through the need to create balanced communities.
This concept embraces the more complex dynamic nature of housing
markets and challenges the crude concept that the north's housing
problems are largely caused by low demand. Within our region there
are hotspots of demand that sit cheek by jowl with areas of housing
stress. Excepting Cheshire, the house prices within these hotspots
are nowhere near as inflated as, say, the south east but their
relative impact on the local social, environmental and economic
structure is equally acute (eg incomes tend to be lower and there
are hotspots were house price to income ratio prove to be prohibitive
for local people).
The means towards eradicating regional disparity
in housing is a huge challenge and would include all of the following:
— Dispel some of the stereotypical
thinking that crudely prescribes the south as progressive and
the north as being in decline.
— Work towards holistic solutions—housing
problems are not divorced from other social and economic factors.
For instance, increased quality employment opportunities would
generate the demand for more quality housing in the region.
— Move the emphasis away from using
public subsidy in housing primarily to prop up the private sector
in delivering affordable homes for sale. Rather, re-direct this
to housing renewal/regeneration where the private sector builders/developers
are very reluctant partners. Leaving the private sector largely
to pick up the bill for meeting affordable housing through a reduction
in their profit margin. This would have the general effect of
moving resources to those regions where economic circumstances
are more likely to depress house prices rather than inflate them.
— Look to producing new and improved
housing that has "added value" in those regions that
lag behind the national average. This "added value"
could include anything from help with moving fees to it being
linked to employment and training opportunities.
— Embrace the Barker Report findings,
in particular in relation to providing homes for the most vulnerable
people in society. Taking this a stage further by adopting spatial
strategies aimed at integrating low and high cost housing and
mixed tenure.
— Develop new innovative housing design,
construction and fittings that provide for lifetime flexible homes.
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