Why Labour and the Conservatives have failed to address the housing crisis and are going to make it worse

publication date: May 6, 2015
author/source: Kate Faulkner

Why Labour & the Conservatives have
failed to 
address the housing crisis and
are going to make it worse

I have worked in the property industry now for over 15 years. I have seen many changes, some which have really helped to deliver a genuinely better service to consumers, and others which have meant much better homes both new and renovated to live in.

Sprawling new build estates with properties that are riddled with problems have now been pretty much stamped out in favour of new estates which offer a tremendous mix of properties, on brownfield sites and new towns, such as Cambourne in Cambridgeshire. Properties are now well built with fantastic energy efficient measures.

Estate agents have dramatically improved their service thanks to the government finally introducing a redress scheme which gives buyers and sellers a free complaints service, and the Ombudsman: Christopher Hamer, has worked tirelessly to help agents do a much better job and the credit crunch wiped out many a bad agent.

Lettings have been transformed for both tenants and landlords. Those agents and landlords who abide by the 100+ rules and regulations, know the rights and responsibilities of both landlords and tenants, and belong to organisations such as the Residential Landlords Association and the likes of NALS, ARLA and the RICS, operate a tremendously professional lettings market, which delivers a superb service to tenants and landlords alike.

The growth in property investors renovating older properties back to life, which were not suitable for habitation, has added tremendously to our housing stock, as has dividing individual properties, pubs and car showrooms into fantastic homes or rooms to rent. And the ‘old’ idea that renting a room equals a poor quality hovel is over. Renting rooms is now big business, and many have amazing facilities which are cost effective and fun to live in. A good example is in the student market, where companies such as Code Students and Bill Free Homes have transformed the way students are housed.

Housing Associations are delivering some fantastic new affordable homes in both the social and the private market. At the recent First Time Buyer Awards,I judged the quality of build, the locations and the prices being charged to first time buyers, especially through shared ownership, which has helped put an end to being able to spot ‘a council house’ from a ‘private home’ for some.

All this excellence is delivered by industry experts and those that really care – and understand - their market.

But with a population growing a lot faster than our ability to house them, without the determination and ambition at national and local government level to solve this problem, it will get a lot worse. If the housing crisis isn’t tackled effectively, our economy will be severely held back. One report by Professor Michael Ball, suggested London will lose around £1 billion a year if it doesn’t sort out its affordable housing crisis.

Everyone should have a decent roof over their head – instead, Labour and the Conservatives could double the housing crisis
Unfortunately, the Conservatives won’t commit to a target to deliver new homes and Labour are guaranteeing to fail to do so, by only offering 200,000 homes by 2020.

  • Experts say we need 250,000 a year to keep pace with population growth.
  • Going into the recession we were 1,000,000 homes short.
  • During the recession, this has worsened due to halving the number of homes built, so that’s another 700,000 homes short.
  • Another five years of under-building means this deficit of 1,700,000 homes could rise to 2,000,000.

And, not that any Labour or Conservative candidate wants to talk about it, but we have nearly 2 million people with their lives on hold on a council waiting list.

That means under a mix of the main parties, whoever gets in, despite their policies, the housing crisis could be twice as bad as it was prior to the recession.

We don’t have a ‘housing crisis’ everywhere – it’s affordable and social
homes we need 

Why won’t the major parties pledge to solve the housing crisis? The biggest problem to me is they are scared it can’t be done.

That’s not the kind of ‘leadership’ we need in a crisis – what we really need is determination and ambition to solve the problem politicians created.

Secondly, and in my view, they don’t really understand the housing crisis. They think it’s ‘everywhere’, and that’s partly the industry’s and statisticians' fault. Over 50% of people in England now own their own home outright. They don’t have a housing crisis. Many who have owned property before 2004 don’t have a problem, they have all benefited from pretty big house price rises.

A crisis to me exists in areas where the entry level cost of homes to rent/buy has outstripped incomes for essential workers – the police, essential admin workers, teachers, nurses, firemen.

If, in places such as Mayfair, the community are either millionaires or in social housing with nothing in between, communities can’t operate effectively and neither can business.

However, using measures of average wages versus average house prices, when neither to me are relevant measures any more, makes the crisis look worse than it actually is. It makes it look like a problem ‘everywhere’ when it isn’t - it’s a location specific problem.

Only ever reporting property prices year on year rather than versus the highs and lows gives the wrong picture – most property prices and rents aren’t rising, in fact they haven’t yet recovered to heights seen in 2007 and 2008.

Thirdly, any stats on property are automatically interpreted as ‘bad news’ rather than really checking whether they are showing a change in culture which is positive:-

  • Why is it bad that people are renting? It saved hundreds of thousands of first time buyers from buying in 2007 and ending up in negative equity, which they would struggle to move on from, and offers a flexible lifestyle in an increasingly unpredictable world.
  • Why is it bad that intergenerational living is growing? It can be a great way for families to live, especially with an ageing population which needs caring for, and at the other end of the scale, considering the cost of child care.
  • House price rises are not bad news – slow growth of up to 5% (suggested by the RICS and then slammed some years ago), help people to move up the ladder and encourage the building of new homes.

The industry does a good job – it’s just not recognised, nor supported by politicians 
When you look at property, it’s fascinating to see how much ‘government policy’ works against the industry – rather than help the good guys thrive.

Cowboy builders and tradesmen exist due to government policy 
Quite simply, government policy doesn’t support making home improvements to our ageing property stock, it also helps to support cowboys in the industry:-

  • Cowboys don’t charge 20% VAT, nor do they pay 20% or more income tax.
  • They do everything for ‘cash’ and may or may not do a good job. Why would anyone want to pay 40% more even for quality home improvements?

In the Isle of Mann this doesn’t happen – they just charge 5% VAT, so the cowboys have gone elsewhere. Only the Green Party is proposing this policy, begged for by the good guys in the industry, to help secure a change in renovators' behaviour and encourage quality home improvements.

Building enough new homes 
We just don’t build enough and need to understand, without doing so, it’s damaging our economy and is making it impossible for your ‘average’ worker to afford to rent or buy in expensive areas they need to live for family or work reasons.

Both the Conservatives and Labour, together with local authorities, planning departments and NIMBYs, have prevented enough homes being built to put a roof over peoples’ heads:-

  1. Rent controls in the 1960s introduced by Labour meant we lost out on institutional landlord investment.
  2. A lack of land being made available means developers struggle to find places to build and face fights with Local Authorities or the existing community which last 10-15 years or more.
  3. Lack of appreciation that for every £1 invested in a new home, £2.83 is delivered back into the (mainly) local economy.
  4. Abroad over 50% of new homes are self or custom home built – we build around 10% of our own homes.
  5. Planning battles have become the ‘norm’ because of a lack of consultation with existing communities.

When it comes to building new homes, Labour and the Conservatives seem set on delivering to first time buyers only.

Labour are saying some of the new homes they are proposing will come from local councils, but aren’t being specific on numbers and aren’t going to build enough homes anyway.

Bar London, the Conservatives seem to fail to mention the need for social homes and just want to cut benefits, leaving vulnerable households in an unregulated PRS they refuse to regulate.

What the Coalition also did was halve the funding for social homes, the crisis we have is a lack of affordable and social homes, this is the problem and this is what Labour and the Conservatives need to face up to.

The Liberal Democrats' housing policy offers 300,000 homes a year, the Greens to build 500,000 social homes.

The Conservatives and Labour have allowed the housing crisis to grow over the last 30 years – they need to make sure over the next five years they don’t continue to allow it get worse, and look at other parties' policies who seem to understand housing need better.

Private Rented Sector 
So far during this election, the Private Rented Sector has been slammed, particularly by Labour and ‘ignored’ by the Conservatives who refuse to regulate, allowing bad practice to continue – supporting rogues not the good guys.

Unlike the rhetoric we’ve heard over the last 12 months, landlords aren’t ‘evil beings’ who are competing with first time buyers. In the main, they provide quality, flexible accommodation to the many people who need and want it. Most of the landlords I meet are doctors, teachers and business owners:-

  • They work hard and invest their money wisely.
  • 78% own just one property and care for their tenants as well as they would their own kids.
  • Most are just ‘topping up their pension’ for fear their own won’t deliver or making sure there is somewhere their kids can always live. They aren’t out to make a ‘fast buck’ as often claimed.
  • Letting agents aren’t ‘fleecing’ tenants blind – the average fees they charge are under £300 in London and under £200 outside.
  • Without the service they provide, tenants have to engage their own solicitor and surveyor – which would cost a lot more than a letting agent trained in ensuring the rights of tenants set out in statute are abided by.

Rogue landlords and letting agents are allowed to thrive in local communities with little enforcement of the plethora of laws introduced.

Bringing in rent controls guarantees tenants will have an increase every year – just as they do in the rent controlled social sector. It is no coincidence that rent rises are twice as high in the social sector than they are in the PRS.

And there is zero evidence that rents are ‘spiralling’ out of control and are still, in the main, affordable at a cost of a third or less of wages.

The ONS and the Belvoir Lettings Index I run, both show rents don’t rise in line with inflation, they have the best ‘natural cap’ which is wages.

What the PRS needs is regulation of letting agents, Client Money Protection insurance to protect rents and enforcement of existing laws so the ‘good guys’ don’t end up abiding by them at a higher cost.

This currently allows the rogues to rent at a lower cost and poor condition properties to the socially vulnerable and low paid, who should actually be in social housing not the PRS. The ‘good guys’ in the industry know what they are doing and know how to solve the housing crisis. Here are the housing industry manifestos.

The question which needs to be asked over housing policy is:-

Why won’t Labour and the Conservatives listen and implement what’s needed to solve the housing crisis they have created?

All our information is brought to you by Kate Faulkner, author of Which? Property books and one of the UK's top property experts.
This website is Copyright © Designs on Property Ltd and Propertychecklists.co.uk protected under UK and international law.