The UK is not alone in seeing house prices continue to rise while wages struggle to keep up. This is a problem which has been ongoing for decades now and, while perhaps more acute today, what are the answers to UK housing woes in the long-term?
Increased social housing
As more and more of the UK government’s benefit budget goes on housing individuals and families who would normally have fallen under the social housing umbrella, there is a need for action. Back in the 1980s the Conservative government introduced a so-called “right to buy” which allowed many people to acquire their social housing at below market price. On a positive note, this most certainly kickstarted the U.K.’s homeownership revolution but on the downside this reduced social housing stock going forward.
One of the main reasons why UK house prices have pushed far beyond the natural affordability factor is because of a lack of social housing and many people switching to private rental. We also have enthusiastic first-time buyers who are unable to build up a significant deposit and in many cases would struggle to maintain mortgage payments going forward. As a consequence, many of these have also been forced to look at private rental properties in the short term. Naturally, investors have seen an opportunity to make money in the short, medium and long term, buying up housing assets which has pushed prices higher and higher.
We recently covered the subject of micro flats which are in effect small than average properties available in major cities around the world. This revolution does seem to be taking hold of London, and no doubt other parts of the UK, and will eventually take some pressure off the private rental market. The idea is that because micro flats are smaller than the average property they would cost less and there affordability factor would be more attractive. Time will tell but obviously living in a smaller property does have an impact upon your standard of living.
There’s also the fact that many authorities across the UK will need to give permission for these properties to go beyond the current minimum housing dimensions. Will they see sense or will they stick to the current rules and regulations?
While we often tend to focus on the house price multiples again salary it is worth noting that even if the UK government turned on the taps for newbuilds right across the country there would still be a massive skills shortage in the construction industry. We need to see more money for apprenticeships, more incentives for training and, rather controversially, perhaps an increase in the minimum wage for apprentices and young workers.
There is no point in discussing a revolution for the UK housebuilding market unless we have the skills available to push this through. Critics will also point towards Brexit and the potential lack of additional skilled workers from Europe. In reality this is a bit of a red herring as immigration into the UK will still follow after Brexit but under a different regulatory system.
Final word on UK housing
There are ways and means of improving access to UK houses for first-time buyers and those looking to move up the property ladder. The introduction of more social housing and micro flats, where relevant, will take some of the heat out of local property markets and in time hopefully allow wages to catch up with the affordability factor. Whatever you think about the UK housing problem it is set to get worse before it gets better.
There is also a need for more social housing, which would take some pressure off the private rental market, although this would cost many billions of pounds. Unfortunately political parties seem averse to commit themselves to such spending programs at this moment in time, preferring to focus on short term wins and low hanging fruits.