We can’t afford to live here any more

Too many people for the number of dwellings, especially in areas where people can find work: neither Conservative nor Labour nor Coalition governments have come close to solving the problem, which worsens year on year. The UK’s population is rising faster than the number of dwellings, as the chart below shows.

Population soars, dwelling numbers fail to keep pace. Dwellings data is from the Department for Communities and Local Government, statistics table 101. The tiny category of ‘other public sector’ refers to England only. ‘Registered providers’ are essentially housing associations and other ‘social landlords’

Only 281,030 new homes were completed in the two years 2011-12 and 2012-13. Meanwhile, the population rose by 1.678 million, from 2010’s 62.027 million to 63.705 million in 2012. The predominance of small households, one or two people, means that population increase of this order requires over 940,000 new dwellings.*

The shortfall is massive, yet construction firms have land banks lying fallow. Four volume builders — Barratt, Bovis, Crest Nicholson and Berkeley — had a total of 114,419 plots in their land banks, according to the Financial Times in September.** They are releasing about one-sixth of this total annually: not enough to fix the housing shortage, but then why would they do that? They want to keep property prices up, and in any case the number of potential first-time-buyer households is restricted by low incomes, as new data in Family Spending 2013*** makes plain.  The chart below shows that outgoings exceed income for about half the UK’s households. The outgoings count only the net rents paid by households, after receipt of housing benefit and other subsidies. About 35% of households rent their home, up from just over 30% in 2001. The change reflects the declining affordability of home purchase.

UK households are on the financial edge: without housing benefit, subtracted from the financial outgoings, it would be even more apparent that average incomes and expenditures fail to meet until nearly half way up the income distribution. Incomes in the lowest decile, no.1, are under £170 a week, and in the top decile, no.10, are above £1,397 a week. A decile is one-tenth of the total. Data from Family Spending 2013, table A6

Mortgage rates which are kept low by the quantitative easing programme — the creation by the Bank of England of additional, artificial digital money — and rents subsidised by housing benefit have both been critical in keeping roofs over the heads of the hard-pressed population.

Without housing benefit, typical rents would be unaffordable for households with incomes in the lowest 40%, less than £17,784 a year in 2012. Rents in London are so high as to be unaffordable for over three-quarters of households.

In the E1 postcode, immediately east of the City and including Whitechapel and Bethnal Green, until recently regarded as a cheap area, typical rents for two-bedroom flats are between £336 and £450 a week, at the lower end more than the average gross weekly income of 30% of households and at the upper end more than the gross income of 40% of all UK households. Smart postcodes in central and west London are beyond the financial reach of almost all British households.

Our next chart plots gross rents against household incomes in 2012. In the first decile, incomes are below £170 a week, and in the tenth decile, over £1397 a week. Households in the first decile were asked to pay rents of £122.50 a week on average, from incomes under £170. In the second decile, gross rents averaged £118.60 a week, and incomes ranged between £170 and £256. For decile no.3, rents of £124.70 a week would have to come from incomes in the range £256 to £342, were it not for the housing benefit subsidy.

Rents due from households in rented accommodation, compared with weekly incomes. Data from Family Spending 2013, table A6

Static wages and soaring rents have turned housing benefit, a means-tested welfare payment, into a colossus of the social security system, costing just on £24 billion in 2013-14, 14.7% of the total £163.593 billion for all welfare expenditure. By 2018-19 the government itself predicts that housing benefit expenditure will be £28.406 billion, 15.3% of all welfare spending. The only category of welfare costing more is the state pension, £82.997 billion in 2013-14 and £100.731 billion in 2018-19.

Rent subsidies are paid to households right across the income spectrum. Subsidies typically exceed 50% of rental cost for renting households in in the bottom third of the income distribution, and are above 25% for about half of all renting households. The next chart shows the high dependency on housing benefit, over £88 a week in the bottom income decile and more than £47 a week as far up as the fourth decile, for households between the ranks 31% and 40%.

Housing benefit, which is means-tested, has become a colossal liability of welfare expenditure, payable to households in rented accommodation. Data from Family Spending 2013, table A6

While the word ‘sustainable’ is over-used, it’s reasonable to say that, in this era of welfare cuts, the gap between rents and incomes is unsustainable and becomes more so every year that the gap widens between numbers of dwellings and of households.

Given the colossal chasm between supply of and demand for housing, it is no surprise that rents and property prices are so high – especially in areas where jobs are easy to find.

In the towns and villages in the remoter rural areas, like here in northern Carmarthenshire, there are plenty of unoccupied homes, but scarcely any well-paid (or even paid) work. Surely part of any solution to the startling housing crisis should be to help local businesses (a) start up and (b) expand, in a process of rural re-population. That process could not be more expensive than £24 billion a year spent on housing benefit. One problem is the attitude of ‘not-in-my-backyard’ that is common among affluent country-dwellers, another is the rigid planning system which zones land uses and prefers big and corporate to small and individual.

In big towns and cities, have we reached the point at which novel approaches to home provision need to be taken? Municipal conversion of defunct shops, offices and public buildings such as redundant schools into homes at regulated rents, accompanied by a significant dispersion of jobs? Greater use of mobile homes, as in the years after the Second World War?

£24 billion paid in housing benefit is an annual cost of more than £900 for every household in the United Kingdom. The policy is not working. House-builders see no profit in building for people who in reality cannot afford to be housed in a cool, wet country where building regulations are stringent and land costs are exorbitant.

Looking forward, there seems little relief from a critical underlying problem:  the downwards pressure on wages resulting from the globalisation of economic activity, juxtaposed with the upwards pressures on living costs caused by more and more people competing for resources on a finite planet.

Even after counting housing benefit and other welfare payments, about half of the UK’s households spent more than their income in 2012, financing the excess by taking money out of savings and/or borrowing – from family, friends, banks, building societies, payday loan companies, and even loan sharks.

This is no basis for an economic ‘recovery’ but a downward slide towards penury, in a land with too few homes for its people, and too little money to continue with multi-billion £ annual subsidies.

by Pat Dodd Racher

* Table 5, households by size, in ‘Families and Households 2013’ from the Office for National Statistics, October 31st 2013.

** ‘Housebuilders buy up plots at pace last seen in 2006’ by Gill Plimmer, September 25th 2013. 

*** Family Spending 2013 was released by the Office for National Statistics on December 11th 2013.