How long do you have to live in London to become a Londoner? Is it 10 years? 20? Or does it come with a birth at one of the capital’s hospitals and to nobody else. I consider myself a Londoner having lived here for 12 years in various flats and houses. My first place was in West Kensington that was accessed from behind a fish and chip shop.
Housing is a hot button issue in the capital as well as around the country. A couple of weeks ago a rally in London called “Homes for Britain” saw around 2,500 people gather with MPs, environmentalists and construction professionals to discuss how to solve what many see as “a housing crisis”.
Supply and Demand
The fractured nature of UK politics means there are few areas of consensus nowadays but the need for more housing is one of them. That’s why you can throw a stone on any day at a building site and hit a politician in a high-viz jacket enduring an awkward conversation about last night’s football results.
Unfortunately, that’s where the consensus ends. Labour estimates that the UK needs at least 243,000 homes a year just to keep up with the number of new households being formed. That compares with an average of 137,000 homes a year that have been built through the past decade. David Cameron and the Tories want to build 200,000 starter homes with 20% off the price as long as the house is held onto for at least 5 years. We will have to pick up the pace somewhat to make up the lag.
A house can be a castle as well as a home to nobody
The housing debate is complicated by the fact that it’s not just a question of volume; we need the right types of properties too. Particularly in the areas where housing is in highest demand, the type of homes that are being built are not what people truly want. In the capital, for example, developers insist on knocking up high-density (and high-margin) flats and apartments with little green space to call their own. Opening up the ability to build into the greenbelt would easily loosen the tourniquet that sits around London and other metropolitan housing markets, but at what price?
‘Help to Buy’ or ‘Help to Bubble’?
Since its inception in 2013 ‘Help to Buy’ has been a solidly divisive subject. Not between political parties however, but more between political parties and economists. The politicians extol the virtues of helping the young and low paid to finally realise their dreams of homeownership, while economists must point out that the plan does not cheapen homes for buyers but instead simply makes the debt cheaper. These are not one and the same and serves only to prop up house prices via an increase in demand.
Talk of a house price bubble outside of central London is overdone in my opinion, but with interest rates only moving higher from here we have to once again doubt the affordability of the average two-up, two-down. We have to remember that rates are not just at a very low level at the moment but remain around 2% below the average through the past couple of centuries. If you can’t afford a home now then you are unlikely to be able to in a couple of years’ time regardless of what plan the government of the day manages to conjure up.