The Housing Market Analysis report from Oxford Economics, commissioned by the National Housing Federation, has been published today. It is being headlined that ‘the era of house ownership is over’. This is rather embarrassing for Grant Shapps, the housing minister, since it seems to deny Thatcher’s dream of a house-owning nation. His response has been to blame the previous government, and generally wave his arms about. In fact there is a great deal more to it than simply falling numbers of home owners. The problem is you have to work it out for yourself.
There are two questions. Do we need to build more houses? And who will own them?
Firstly, do we need more houses? The report estimates that due to a rising population and falling average household size, the number of households will rise from 26 million in 2006 to 30 million in 2020. If you work that out its roughly 1% a year. The number of dwellings in England (only) in 2009 was 22 million. One per cent of that is 220 thousand. But the report shows that the number of new starts is only around 100 thousand a year. Therefore the number of new house building is only about half of what is needed – unless the demographics alter. And this also ignores old house being demolished.
The second question is who will own them. The report forecasts house prices to continue to increase. This seems reasonable. If fact Shapps does not want to see house prices fall – it would be political suicide if they did. With supply continuing to fail to meet demand, they would rise. And since they already represent a very large fraction of the UK’s personal wealth, few would want to see them fall. So the number of people being able to buy there own house, or to save for a deposit in a reasonable length of time, will inevitably fall.
But someone will own those houses. Who?
The report shows a significant rise in buy to let mortgages in the 2nd quarter of 2011. This is consistent with the rest of the pattern. An increase in the number of people renting their house means there must be an increase in landlords doing the letting.
So what is actually at the heart of this report is another instance of the widening inequality in society. A small number of people are rich enough to own and let houses in addition to the one they live in. And a large number of people cannot afford other than to pay rent, to those rich people.
Maybe Thatcher won after all.
