Comment: Fiddling at the margins of housing crisis

Martin Flanagan
Martin Flanagan
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THOSE bores for Britain who once crowed smugly about their fail-safe investment in bricks and mortar have had their comeuppance. For a lot of them, Generation Y offspring have switched from bringing their washing back from uni to taking up semi-permanent residence again, with little chance of getting on the exorbitant housing ladder that their parents inadvertently pulled up after ascending.

Swamped with tuition fee debt (at least down south) and other university bills, a generation is being not so much groomed for a rented lifestyle, as rudely shorn of expectations of gaining the mystical “mortgage”. From smugly boasting about their “asset-rich” status, the Bank of Mum and Dad is now finding significant strains on their more liquid financial resources.

And, as things stand, the parents are getting limited help from the housing environment, if somewhat alleviated by the Chancellor’s vote-winning Budget measure last week of a Help to Buy ISA. Ironically, the housing crisis has been disguised in the past few years by a recovery in the fortunes of British housebuilders.

Publicly quoted businesses in the sector like Persimmon, Taylor Wimpey, Barratt and Redrow have seen a recovery in their fortunes driven by various factors. Society has come through the financial crisis and 2008/09 recession.

The UK government and the Bank of England have pump-primed the housing market with initiatives such as the previous Help to Buy and Funding for Lending schemes. And in the fallow years after the financial crash, housebuilders pulled in their horns, and instead repaired balance sheets and rebuilt profit margins.

Companies are therefore much better placed to finance the acquisition of building land, and increase volumes and average selling prices. Their financial returns are back up to the mid and high teens; the sector is not shunned by investors any more.

But scratch the veneer of recovery and the wider housing picture is bleak. There are said to be 700,000 empty homes in the UK, often “built to leave” pre-bust in the hope property values would rise and owners could make a killing. Swathes of central London have been given over to “super-prime” dwellings commandeered by Russian, Middle Eastern and Far Eastern super-wealthy.

The top brass from the Scottish Federation of Housing Associations (SFHA) attended a rally in London last week organised by Homes For Britain to focus attention ahead of the general election on the intractable problem.

What is the solution? It can only really be more relaxed building controls nationwide to allow far greater numbers of new homes to be built, and for that extra capacity to take the steam out of the housing price market. Only a step-change in the amount of property available for new buyers will change the situation meaningfully.

Without that, the initiatives of the authorities to encourage home-lenders to finance borrowers will be relative fiddling at the margins.

We owe it to the next generation to do something more radical. «