Britain is embroiled in a severe housing crisis where there is simply not enough supply to sate rampant demand and therefore property prices are rocketing at a ridiculous pace.
So, earlier this week David Cameron’s government pledged to try and reduce the chronic under supply of affordable housing by building 30,000 “starter homes” on brown field sites across the UK. It is aimed at getting more people on the property ladder.
But, guess what? The National Federation of Builders on BBC Radio 5 Live this morning said in no uncertain terms that these so-called starter homes are going to be completely unaffordable for “the vast majority” of Britain.
That’s right — the very people the housing bill is aimed at won’t be able to afford it.
“There are parts of the bill that will encourage development but that’s only one part of the equation,” said Paul Bogle, head of policy and research at the National Federation of Builders.
“The homes that are being built and will be built will not be affordable, so the idea they are affordable homes is a misnomer. So, even though you have the starter homes [announcement] this week, that the government will be providing 30,000 starter homes, at a reduced rate, those [properties] are still not going to be affordable for a vast majority of people in the country.”
Earlier this week, Cameron unveiled a new housing bill aimed at helping at alleviating the housing crisis.
There are a whole load of new measures in the government’s plans, but some of the most important ones include:
- Building 13,000 new homes on four sites outside London in 2016 — 40% of these houses will be considered affordable “starter” homes.
- The sites are spread across the south-east, with one in Kent, one in Cambridgeshire, one in Sussex, and one in Hampshire.
- A similar approach will then be taken in Old Oak Common, north west London, once the first wave of homes is completed.
- The government will also create a £1.2 billion ($1.77 billion) “starter home fund”, designed to allow at least 30,000 new starter homes, and 30,000 so-called market homes, to be developed on 500 brownfield sites across Britain.
The latest data from the Office for National Statistics showed that the average property price in Britain is at £287,000. Meanwhile, the average home price for London is at a huge £531,000.
On BBC Radio 5 Live, Bogle pointed out that all the government’s plans to help the housing market is, in fact, making it worse in a lot of ways.
“We have a supply problem and a lot of the measurements that the government has done has focused on stoking demand,” said Bogle. “So whether it is Help to Buy for a new buy, first buy, cheaper mortgage rates and Funding for Lending for the banks that allow them to offer cheaper mortgages those will allow people to move into buying homes.
“So if you’re on the housing ladder that’s easy for you but trying to get on [the ladder], it’s going to be more difficult [because of increased demand] and your earnings aren’t increasing at the pace of house price increases.”
And Bogle has a point.
The government scheme Help to Buy means people can rustle up just a 5% deposit while the government provides up to 20% of the price of a home. That makes buying a house affordable for a whole new group of people and for those who don’t even earn that much. After all the average salary is around £30,000 ($45,360) a year.
Over the last few months, investment banks and housing experts have warned about the huge gap between the pace of earnings growth in the UK and rate of growth in property prices.
In December last year, Liz Martins and her team at HSBC pointed out the huge gap.
So basically, everything the British government is doing right now, according to the experts, is doing absolutely nothing to help alleviate soaring prices or getting those in rented accommodation onto the housing ladder.