Game of Homes (Part 5)
In this series of blogs, I use board games to illustrate the tenuous interdependencies that underpin the UK housing market.?Monopoly invites a direct comparison with land acquisition and house building whilst Kerplunk and holding all the marbles in place whilst pulling on straws illustrates the balancing act for policymakers when making inroads into housing reform.?
Previous instalments examined the housebuilding decline and monopolisation of select companies, land acquisition and how it has contributed to the inaccessibility of home ownership, and competition to house those in need.? The series has also explored the issues with our ageing population and their health and housing needs as well as the skills deficits we have in vital sectors needed for both.?
The new Government have announced that they intend to build 1.5 million more homes in cities and towns over the lifetime of this parliament, (Labour, 2023).? In order to achieve this a solution must be found to overcome a long running skills shortage in the construction industry, (Haughton, Nanda and Kingston, 2024).? Not only that but unless new properties built to this scale can be made more affordable, it will not meet the current housing demand or alleviate homelessness, (Apps, 2024a; NAO, 2024), even if those properties are built in areas of high demand.?
Clarke and Herrmann (2007) observed a high prevalence of skills shortages and unfilled vacancies in the construction industry and the social housing sector.? Many firms recruit through ‘word of mouth’ and hire based on experience over qualifications often firms may poach from each other.? Recruitment through ‘word of mouth’ has led to exclusion of minorities and a reluctance to give outsiders a chance creating a predominantly white workforce that overlooks a potential additional labour source.? Further discriminatory practices towards skilled workers who are required to provide their own tools is to favour employing those who own kits that are of better quality, as opposed to the skill of the worker, (Chan, Clarke and Dainty, 2010).?
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In 2022, the UK construction sector had 674,000 self-employed workers, representing the highest level of self-employed jobs within the UK economy (16.7%).? However, in comparison to 2021 the number of self-employed construction workers decreased by 24,000 (3.4%).?? The largest proportion of UK insolvencies in 2022 occurred within the construction sector at 18.8% representing a slight increase from 2021 (18.4%), (Office of National Statistics, 2023).? ?Apart from a brief 23% increase in visa applications for skilled workers between April and July 2024, they have remained at approximately 6,000 monthly applications since January 2022, (Home Office, 2024).?
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In recognition of the ongoing skills shortage, the previous government amended immigration rules.? The Shortage Occupation List which itemises job types which are difficult to fill in the UK was extended to incorporate more construction related roles such as bricklayers, roofers, carpenters, plasterers and other building trades which UK employers can hire at 80% of the going rate accompanied by lower visa fees, (Colvin and Woolridge, 2023).? In construction management there is evidence of retention through training and promotion (Clarke and Herrmann, 2007), but more broadly within the industry, fulfilling the training needs for other staff and is now viewed as a necessary strategy to enable the industry to recover from its slump.? This includes providing workers with skills needed now and, in the future, (Mintel Group, 2023).
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Lack of skills, knowledge and competency, were significant findings arising from phase 2 of the Grenfell Inquiry, (Moore-Bick, Akboor and Istephan, 2024), which recommended that being a fire engineer should be a ‘fully registered and regulated profession,’ (Apps, 2024b; Moore-Bick, Akboor and Istephan, 2024).? This is because ‘fire engineer’ is not a protected title and anyone can claim to be one.? The recommendation of the inquiry is that all fire risk assessors should be registered and undergo “a system of mandatory accreditation to certify the competence of fire risk assessors by setting standards for qualification and continuing professional development”.?? (Apps, 2024b; Moore-Bick, Akboor and Istephan, 2024).?
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Amidst these ongoing recruitment problems, the former Conservative government announced in 2017 a target to build 300,000 new homes annually by the middle of the decade.? In 2022-23 the housebuilding shortfall against this target was 65,000.? The target was soon dropped, (LGA, 2024a; NAO, 2024).? But had this target been met consistently year upon year since 1996, the level of output would certainly have exceeded household growth, but as far as affordability is concerned, modelling suggests it would only have achieved a 7% reduction in house prices which since 1996 have grown by 120%, (Kazi and Macfarlane, 2022; Mulheirn, 2019; NAO, 2024).?
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The new governments vision to kickstart housebuilding hearkens back to the post war years when house build was a priority enabled by the 1947 Town and Country Planning Act which has shaped modern planning regulation, through planning permissions required to be granted before property developers can build.? Compulsory purchased orders allow land to be acquired for building enabling successive governments to realise their council house building programmes through powers to grant planning permission, acquire land at low cost and provide tenanted social housing in the alternative to ownership, (Kazi and Macfarlane, 2022; Ryan-Collins, Lloyd and Macfarlane, 2017).?
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As we saw in a previous instalment the dominant explanation that “housing is in short supply” is misleading when the output of house build outnumbers household growth (Kazi and Macfarlane, 2022; Mulheirn, 2019).? Despite the fact that there is so much housing, there was a 3.6% increase in the number of disused empty homes across England between 2021 and 2022, and part of any solution to meet housing demand should incorporate bringing these properties back into use. The total number recorded was 676,304, approximately 37% of these properties were classed as ‘long term empties’ mainly having been vacant for over six months, (Wilson, 2023).? Grant funding is available for social housing providers, Charities, housing associations and local authorities under the governments Affordable Homes Programme 2021-2026, to bring empty home back into use as affordable housing where a housing provider purchases a home requiring refurbishment and is eligible to bid for grants between ￡1,500 to ￡10,000 per dwelling.? Funding is also available for new empty acquirements under lease and repair for properties leased between 5 and 30 years (DLUHC, 2020; Wilson, 2023).??
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All of this fails to adequately explain why house prices have hiked so much in the last 30 to 40 years.? Aside from supply the increase has been driven by policy change to promote home ownership as an asset to invest in, with available mortgage credit and lower interest rates.? This has shifted the outlook under successive governments to “get people onto the property ladder” and not just buying a house to live in but buying a house as a means to accumulate wealth, (Kazi and Macfarlane, 2022).? This has been achieved through increasing cash flow into the property market under successive Conservative and Labour governments.? Home ownership peaked at 71% within England’s housing stock during 2003, but in 2020 was shown to have declined to 65%, (Kazi and Macfarlane, 2022; MHCLG, 2020).??
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When English homeowners are stratified into age ranges the decline is significant amongst mortgagors aged between 25 to 34 which in 2003 stood at 59% but was found to have decreased to 47% by 2020, (DLUHC, 2021).? Whilst there was a slight corresponding decrease in private renters in the same age group from 42% in 2020 to 37% in 2021, the proportion of private renting tenants aged between 45-54 increased from 11% in 2011 to 16% in 2021.? During the same period the number of homeowners in that age group decreased from 74% to 65%.?? The flaw in government strategy behind home ownership is that it has served to push house prices up and has made it harder for prospective new buyers to get on the ladder (DLUHC, 2021; Kazi and Macfarlane, 2022).?
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Using stratification to examine homelessness figures, grouping those who work either part time or full time, and grouping those who don’t work reveals a decrease amongst workers from 27% in the third quarter of 2018-19 to 22% in the same quarter during 2023-24.? But overall, during these periods there has been a 23% increase in the number of households that applied for housing assistance and were owed a homelessness prevention or relief duty rising from 64,080 in 2018-19 to 78,980 in 2023-24.????
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All of this bears out what any housing practitioner already knows, there is a widening gap between average earnings and housing affordability.? In the past, owner occupiers accumulated higher wealth because paying a monthly mortgage costing either the same or less than monthly rent until it is paid off, resulted in owning a home that increased in value.? Those accessing the property market during the 1990’s at a time where the average house prices to income ratio was lower at 3.5 times the average wage will have accumulated greater wealth than successive generations whose mortgage repayments when compared to their incomes are higher, (Bangham, 2020; Mclaughlin, 2024).? Assuming a 6% mortgage rate, a prospective first-time house buyer on an average income is likely to spend 43% of their earnings after tax, compared to 32% on average if they were renting, (Kazi and Macfarlane, 2022; Mintel Group, 2023).? Mortgage repayment costs have increased by 11% since July 2022, accompanied by a level of completions that has reduced by 20% compared to pre-pandemic levels in 2019, (Mintel Group, 2023).?
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Despite the fact that there has been a slight decrease of 1.3% in the average house price for homes bought with a mortgage from ￡391,000 in May 2023 to ￡386,000 in May 2024 (Office of National Statistics, 2024), the median house price has increased to 9 times median earnings and in London as from 2021 it is as much as 13 times median earnings.? Average rents in London have increased by 9.7% in the last year to an average of ￡2,098pcm in 2024 compared to ￡1,912pcm in 2023, (Office of National Statistics, 2024).? During April to June 2024 there were 5,343 mortgage possession claims representing an increase of 34% compared to the same period in 2023 and a 29% increase in repossessions.? Landlord possession claims also increased by 9% whilst repossessions increased by 16%, (Ministry of Justice, 2024).?
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This is despite the fact that the previous Conservative government increased hourly pay rates by 24-26% for low-income earners such as bar staff, waiters and cleaners, (Cominetti and? Slaughter, 2024; Kazi and Macfarlane, 2022).? But the UK employment rate has fallen since 2019, and average wages overall have only risen by 2.5% over the past 15 years, (Cominetti and? Slaughter, 2024).? In 2021 the average wage for all UK employees was estimated to be ￡25,971, between March 2021 to February 2022 average UK house prices increased by ￡27,215. Meanwhile the proportion of income tenants spend on rent since 1980 which was 10% has more than tripled on average to 32% in England and 42% in London, (Halifax, 2022; Kazi and Macfarlane, 2022).?
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Whilst the UK is not the only country to experience slower wage growth the effect has been worse in comparison to other countries such as Germany or the US whose average workers despite slow wage growth are ￡3,600 better off per year in comparison, (Cominetti and? Slaughter, 2024).?
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Clearly if housing is to become truly affordable then prices need to be stabilised to ensure that the ratio between affordability and average income reduces to enable people trapped in the private rented sector to get on the property ladder, (Kazi and Macfarlane, 2022; Monbiot et al., 2019).? Amidst concerns that local authorities could go bankrupt owing to an increasing and unsustainable expenditure on temporary accommodation consuming over 50% of their budgeting for homelessness, (NAO, 2024; Rodd, 2024), the Local Government Association (2024b) has called for the government to devolve more power to local authorities to be able to manage their Right to Buy schemes and set their own discount incentives and to remove restrictions on property acquisition using funding from Right to Buy sales.? Acquisition is currently capped at 50% but if this was removed local authorities with larger housing stocks and or higher proportions of empty homes will be able to acquire more stock cost effectively and increase the supply of affordable social housing.?
The new Labour government are considering separating the ownership of housing and the land it is built on through what they call the Common Ground Trust, to prevent properties from being treated as financial assets.? What this means in real terms is that land that a home is built on will be bought by a non-profit trust, this will make the house deposit more affordable for buyers who then pay a socialised land rent to the Trust, diverting this into common ownership rather than towards banks or landlords, (Monbiot et al., 2019).?
At the same time the private rented sector would still need to undergo reformation as indicated in the Kings Speech (Prime Minister’s Office, 2024).? Elements of the new Renters (Rights) Bill will remove retaliatory evictions and force landlords to use other grounds that require stronger justifications and will also cap rental increases, prevent tenant bidding wars and discrimination against tenants on benefits or households with children, and hopefully make it easier for tenants to save for deposits, (MHCLG, 2024).?
Housebuilding and affordability should go hand in hand if the Government are to truly succeed in resolving the housing crisis.? And providing buildings that are intended to be homes for the many families trapped in private renting and not just investment vehicles.?
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The problems in the construction industry run deeper than just their recruitment problems and over the next two instalments the finding of the Grenfell Inquiry Phase 2 will be examined to show that the lessons from the tragedy extend beyond fire safety to the management and treatment of social housing tenants as well as the need for the construction industry to modernise and self-regulate its professional development more efficiently.?
In part 6 we look further at the Grenfell inquiries findings on the role the building and construction industry played in the tragedy.
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Paul Oatt is the Author of the following titles.
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Private Sector Housing and Health: Evaluating the Effectiveness of Regulation Intended to Protect the Health of Tenants
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Selective Licensing: The Basis for a Collaborative Approach to Addressing Health Inequalities
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Both available now from Routledge, Taylor & Francis
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References
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