England
HOME TRUTHS 2012
The housing market in England
Housing’s vicious circle We are not building enough homes in England. Last year 390,000 new households were formed1 but only 111,250 new homes were built2 – not even half the number needed. Even when the economy was booming, before the financial crisis, housing supply wasn’t keeping up with demand, and since 2007 the situation has worsened. The shortfall of homes year-on-year has huge consequences. Rising house prices mean the dream of home ownership is beyond the reach of millions and the size of a mortgage deposit alone stops many would-be first-time buyers from getting on the housing ladder. More and more people are therefore being pushed into the private rented sector and as demand rises there, so too do the rents. With private rents becoming increasingly unaffordable, and with the lack of security, and often quality, that private renting offers, many people are
turning to the affordable housing sector for a home. One in 12 families in England is now on a social housing waiting list and homelessness has risen by 26% over the last two years.2 High housing costs increase the financial pressure on both families and the Government. When people can’t afford the homes they need, it stops them moving for work, it prevents young couples starting families, and overcrowding and poor housing conditions put a strain on people’s health and relationships. Aspiration is stopped in its tracks.
Despite the Government’s efforts to tackle public debt, it is actually spending more money on housing benefit. 417,830 more working people are now reliant on housing benefit to help them pay the rising private rents on their home, an 86% increase in just three years.3 That is simply unsustainable. But latest forecasts from Oxford Economics show the housing market could be about to get a lot worse. We need to break housing’s vicious circle urgently.
417,830 more working people are now reliant on housing benefit to help them pay the rising private rents on their home, an 86% increase in just three years.
1. English Housing Survey: Households report 2010/11, July 2012 2. Communities and Local Government (CLG) housing statistics 3. Housing and Council Tax Benefit Caseload Statistics, Department for Work and Pensions, August 2012
The National Housing Federation runs iN business for neighbourhoods in partnership with members to promote the neighbourhood work of housing associations.
HOME TRUTHS 2012
Increasing number of households Lack of mortgage availability (developers can’t sell homes so don’t build them) Uncertainty of funding for new homes
Increasing demand for affordable homes
Higher housing benefit
Higher demand for market rent leads to higher prices
Affordability problems
Effect
Cause
Issues with land availability and cost
Lack of supply
Housing: cause and effect
Increasing house prices
What the Government should do The Government and the whole housing industry need to take a long-term view, tackling the market difficulties with a joined-up, holistic approach. Addressing the lack of houses – the supply shortage – is crucial to ensure we have a healthy, sustainable, affordable housing market across all tenures (home ownership, private rent and social housing) that strengthens our economy rather than
weakens it, and meets people’s aspirations rather than defeats them. Housing associations are ready and able to play their part and deliver more homes. The Government has recently put in place some welcome important short-term measures, including a debt guarantee. But now, broader long-term solutions are needed.
Housing associations could do much more if there was a ready supply of public land available to build on, if they had more certainty over rent levels after 2015 so they could raise the additional finance needed to build, and if red tape preventing them from using their homes and other assets flexibly and productively was cut.
England | 3
To stem the chronic housing shortage, the National Housing Federation calls for: ■ The rapid release of publicly owned land to housing associations so they can build homes. For the quickest economic impact, the Government must immediately release small parcels of brownfield sites, which can be delivered more quickly than larger sites. Each of these could be capable of delivering up to 100 new homes. Based on the Government’s own data,4 we have already identified land equivalent to two cities the size of Leicester that could be built on.
■ The Government should provide certainty on its long-term plans for investing in social housing. Currently housing associations are struggling to plan beyond 2015, when the current programme ends. Without certainty that there will be government support for new homes, it is too high risk for housing associations to commit to new development. One way that the Government could create some certainty is by retaining the present rental formula for housing associations until 2020, allowing them to commit to delivering new homes in the future. ■ The Government must also cut red tape to allow housing associations to unleash their entrepreneurial skills. For example, housing associations need more freedom to be innovative in the use of their assets and their ability to raise finance. The flexibility to take an imaginative approach would allow housing associations to build more homes.
4. National Land Use Database
4 | Home Truths 2012
■ We know people want more homes to be built, and we need to encourage their voices to be heard above those of the NIMBYs. Public support for more homes is vital. That’s why we’ve launched our new campaign, Yes to Homes. Visit www.yestohomes.co.uk to join the campaign.
HOME TRUTHS 2012
Housing need 2011/12
Households on housing register April 20115
Homelessness acceptances 2011/126
Households in temporary accommodation Qtr 1 20126
1,837,042
50,290
50,430
91,914 233,902 272,407 116,439 183,945 160,267 366,613 225,250 186,305
1,800 4,190 4,900 3,790 8,560 5,270 12,720 5,320 3,750
210 1,100 940 740 1,420 3,010 36,740 4,280 2,000
Region ENGLAND North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West 5. CLG Housing Strategy Statistical Appendix 6. CLG Quarterly P1E returns
England | 5
New homes built 2011/12 Private enterprise8
Housing association8
Local authority8
ENGLAND
72,876
43,164
1,830
North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West
3,596 5,393 6,328 7,972 5,668 11,366 5,608 14,568 11,807
1,254 4,117 3,252 1,818 2,632 4,234 14,152 7,562 4,143
440 90 260 140 340 20 280 110 150
House building starts will recover only gradually, from 100,000 homes this year to 140,000 in 2014, but with increases flattening out from around 2016/2017.7
7. Housing Market Analysis report for National Housing Federation, Oxford Economics, August 2012 8. CLG Housing Statistics Live Tables and Homes and Communities Agency completions data
6 | Home Truths 2012
HOME TRUTHS 2012
House prices and private rents – relative to 2012 levels 140%
130%
120%
110%
100%
90%
80% 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
House price Private rent
Private rents are likely to be broadly stable through 2013, but could see steep increases in 2015-18 of around 6% a year as interest rates and house prices rise. Private rents will be 27% higher in 2017 than they are today.9
9. Housing Market Analysis report for National Housing Federation, Oxford Economics, August 2012
England | 7
The cost of privately renting a home has risen 37% in the past five years.10
Average weekly rents (current and forecast) Housing association rents11 2012 2018 % increase* ENGLAND North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West
Private sector rents12 2012 2018 % increase
£87
£105
21.7%
£181
£245
35.1%
£74 £75 £74 £79 £80 £91 £111 £98 £83
£90 £91 £90 £96 £98 £110 £135 £119 £100
21.7% 21.7% 21.7% 21.7% 21.7% 21.7% 21.7% 21.7% 21.7%
£109 £121 £124 £118 £126 £159 £311 £195 £152
£131 £156 £171 £166 £171 £222 £404 £256 £202
20.0% 29.0% 37.9% 40.5% 35.7% 40.2% 29.9% 31.1% 32.6%
*It is assumed that the annual permitted increase to housing association rents will remain at RPI + 0.5% across all regions 10. The Housing Report, Edition 2, National Housing Federation/Chartered Institute of Housing/Shelter, May 2012 11. HCA NROSH+ SDR data (2012) with forecasts by Oxford Economics 12. Valuation Office Rent Officer data (2012) with forecasts by Oxford Economics
8 | Home Truths 2012
HOME TRUTHS 2012
Affordability 2011 Region
Average house price13
Average earnings14
Ratio
Income needed for 75% mortgage15
ENGLAND
£236,518
£21,346
11.1
£50,682
North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West
£136,605 £154,816 £155,303 £160,997 £171,707 £232,504 £421,395 £280,067 £223,870
£19,120 £19,432 £19,474 £20,030 £19,698 £22,022 £26,962 £23,130 £19,484
7.1 8.0 8.0 8.0 8.7 10.6 15.6 12.1 11.5
£29,272 £33,175 £33,279 £34,499 £36,794 £49,822 £90,299 £60,014 £47,972
House price13
Earnings14
94%
29%
106% 100% 110% 89% 81% 87% 105% 78% 87%
34% 28% 30% 31% 25% 25% 34% 25% 29%
House price and income increase 2001–2011
Region ENGLAND North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West
13. Land Registry data, 2001 and 2011 14. Annual Survey of Hours and Earnings (ASHE) 2001 and 2011 [affordability in 2011 based on home address, increase 2001-2011 based on workplace address] 15. Based on a 75% mortgage at 3.5 times annual earnings
England | 9
House price forecasts16 Region
2012
2013
2014
2015
2016
2017
2018
ENGLAND
£235,362
£230,698
£235,694
£248,649
£263,146
£277,423
£292,060
North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West
£135,100 £153,600 £155,200 £160,900 £171,100 £238,200 £430,900 £285,000 £224,200
£129,200 £147,600 £149,600 £155,900 £164,800 £233,900 £426,600 £282,100 £219,100
£129,400 £148,100 £150,400 £157,500 £165,800 £238,600 £440,800 £289,200 £224,600
£134,500 £154,100 £156,900 £165,100 £173,000 £252,200 £468,300 £304,900 £238,100
£139,900 £160,400 £163,200 £173,200 £180,700 £268,000 £495,400 £326,600 £253,900
£145,100 £166,600 £169,400 £181,200 £188,300 £283,500 £522,500 £348,500 £267,900
£150,200 £172,800 £175,500 £189,300 £195,800 £298,800 £551,100 £370,700 £282,900
The weakness of the economy will see modest falls in house prices into 2013, but demand will support renewed house price growth of 5-6% a year across England during 2015-2017.16
16. Housing Market Analysis report for National Housing Federation, Oxford Economics, August 2012
10 | Home Truths 2012
HOME TRUTHS 2012
House price forecasts (annual percentage change)16 Region
2013
2014
2015
2016
2017
2018
ENGLAND
-2.0%
2.2%
5.5%
5.8%
5.4%
5.3%
North East North West Yorkshire and Humber East Midlands West Midlands East of England London South East South West
-4.4% -3.9% -3.6% -3.1% -3.7% -1.8% -1.0% -1.0% -2.3%
0.2% 0.3% 0.5% 1.0% 0.6% 2.0% 3.3% 2.5% 2.5%
3.9% 4.1% 4.3% 4.8% 4.3% 5.7% 6.2% 5.4% 6.0%
4.0% 4.1% 4.0% 4.9% 4.5% 6.3% 5.8% 7.1% 6.6%
3.7% 3.9% 3.8% 4.6% 4.2% 5.8% 5.5% 6.7% 5.5%
3.5% 3.7% 3.6% 4.5% 4.0% 5.4% 5.5% 6.4% 5.6%
Note The facts in this booklet use the latest available official government statistical sources at the time of going to print. In some areas, the National Housing Federation has carried out additional analysis to draw out the social and economic implications of the figures. The commentary is our own. Some of this data is Š Crown copyright.
16. Housing Market Analysis report for National Housing Federation, Oxford Economics, Aug 2012
England | 11
National Housing Federation Lion Court 25 Procter Street London WC1V 6NY Tel: 020 7067 1010 Email: info@housing.org.uk Website: www.housing.org.uk
Find us or follow us on:
The National Housing Federation is the voice of affordable housing in England. We believe that everyone should have the home they need at a price they can afford. That’s why we represent the work of housing associations and campaign for better housing. Our members provide two and a half million homes for more than five million people. And each year they invest in a diverse range of neighbourhood projects that help create strong, vibrant communities.