House prices and housebuilding

[RT4038]

When have major changes to the rental sector been offered in a manifesto? because if nobody has offered it then nobody can vote for it!

I guess (although we are getting a bit off the subject) that any political party who thought they might attract votes, would put it in their manifesto. So if it hasn't been, it follows that no party sees it as a major issue (or too much a hot potato).

 

[DB]

I guess (although we are getting a bit off the subject) that any political party who thought they might attract votes, would put it in their manifesto. So if it hasn't been, it follows that no party sees it as a major issue (or too much a hot potato).

I'm sure I have read that the number of MPs who own rental properties is well above the national average (and not just Tory, either)

 

[Tetchytyke]

ASTs are worthless - they give no security to tenants who can be booted out with two months' notice, no reason needed.

That isn't true.

You can't use s21 (the "no fault" possession claim) during the fixed term of the tenancy agreement. You can only use s21 once the fixed term has ended and it has become a rolling contract. Tenants and landlords can agree a new fixed term instead of allowing it to become a periodic tenancy. Many do precisely that.

During the fixed term there must be a reason for seeking possession, and not all of these grounds result in possession automatically being granted to the tenant. The main mandatory ground is the equivalent of two months' rent arrears.

I would also point out a tenant doesnt have to leave at the end of the notice period. If they don't, the landlord has to go to court to get a possession order. And then, if they still don't leave, the landlord has to go back to court again to get a Warrant of Eviction.

Similarly there's nothing to say the fixed term of an AST cannot be more than 12 months. In most cases people don't want to agree a longer deal- tenants in case their landlord is rubbish, and vice versa.

The tenancies used for social housing might be a good guide,

Housing Associations use Assured tenancies. These are pretty much identical to Assured Shorthold except there is no end date on the tenancy and therefore s21 doesn't apply.

HAs will usually issue Assured Shorthold tenancies to their new tenants, so they can get tenants out if they don't pay or don't behave. These will usually change to assured after 12 months, assuming the tenant has behaved properly.

It's only councils who still issue secure tenancies, and fewer and fewer councils still control social housing stock- most have sold/transferred to housing associations. And even councils will issue introductory tenancies- with fewer rights- for the first 12 months.

I'm a landlord and a tenant because I moved here. I'm renting my house out in England and renting my house here. My tenant isn't paying his rent whilst bitching about cosmetic issues in the house (e.g. the wooden worktops he hasn't oiled). So I'm paying my mortgage from my funds, as well as paying rent here.

As for all this talk of extending notice periods- the Tories reckon six months now, on top of the two months arrears that must exist to use a "mandatory" ground. The notice period has already gone from 14 days (which was too short) to three months (too long). This notice period is just to start Court action, btw: a tenant doesn't have to leave until a Warrant of Eviction is executed.

This just gives tenants even less incentive to pay the rent, because it leaves a landlord powerless to do anything about it. If my tenant stops paying entirely he could potentially owe me eight months rent before I can even start Court action. If that's not skewing things in favour of tenants, I don't know what is!

 

[DB]

That isn't true.

You can't use s21 (the "no fault" possession claim) during the fixed term of the tenancy agreement. You can only use s21 once the fixed term has ended and it has become a rolling contract. Tenants and landlords can agree a new fixed term instead of allowing it to become a periodic tenancy. Many do precisely that.

Yes, that's true but the reality is that in practice most are either six or 12 months then allowed to run as a rolling contract.

 

[Tetchytyke]

Yes, that's true but the reality is that in practice most are either six or 12 months then allowed to run as a rolling contract.

It depends. Certainly in London you would be expected to renew the tenancy at the end of the fixed term.

And the flexibility of a periodic tenancy does work both ways- tenants only have to give a month's notice.

 

[DB]

nd the flexibility of a periodic tenancy does work both ways- tenants only have to give a month's notice.

But not everyone wants that. ASTs are ok for some purposes, but fairly useless for anyone wanting long term stability.

 

[Bletchleyite]

Back to my previous question, which you ignored - what do you see as the alternative solution?

Build houses. Build to sell, build to rent, build for social rent. Build the houses people want (typically 2-bed terraces), not massively profitable 4 and 5-bed megahouses.

The fundamental problem is that there is a shortage. If you build enough houses that there's a surplus, the problem just goes away.

 

[DB]

Build houses. Build to sell, build to rent, build for social rent. Build the houses people want (typically 2-bed terraces), not massively profitable 4 and 5-bed megahouses.

The fundamental problem is that there is a shortage. If you build enough houses that there's a surplus, the problem just goes away.

Yes, I don't disagree. But it also reduces prices as the pressure is removed and as we've been told above the BTL lobby won't like that as government policy would be reducing the value of their 'investment'.

 

[Tetchytyke]

But not everyone wants that. ASTs are ok for some purposes, but fairly useless for anyone wanting long term stability.

There are no limits on the initial fixed term for an AST. If it is for more than three years it needs to be executed by deed and more than seven it needs to be registered at the Land Registry. Landlords and tenants can negotiate longer terms if they want.

12 months has become the standard because neither tenants nor landlords want to be tied into something for longer without knowing each other first. This is not peculiar to the private sector: councils and housing associations do the same thing.

FWIW I do think ASTs should be abolished and all tenancies should be Assured. But it won't change that much.

Build houses. Build to sell, build to rent, build for social rent. Build the houses people want (typically 2-bed terraces), not massively profitable 4 and 5-bed megahouses.

The fundamental problem is that there is a shortage. If you build enough houses that there's a surplus, the problem just goes away.

Housebuilders build what is profitable and the hopeless Help to Buy has just massively distorted the market towards these houses. Councils can't build and housing associations can't get the land because the big housebuilders have land banked it all. Planning laws are hopelessly weak in England and so you get these monster estates full of 4-bed detached houses.

There isn't a shortage of housing, though, except in London. There simply isn't. It suits everyone to pretend there is to push through these monster estates, concreting over the last bits of green land. But there really isn't, which is why things like Help to Buy were brought in specifically to persuade people to buy the shiny new house rather than an existing house.

 

[Meerkat]

Build houses. Build to sell, build to rent, build for social rent. Build the houses people want (typically 2-bed terraces), not massively profitable 4 and 5-bed megahouses.

The fundamental problem is that there is a shortage. If you build enough houses that there's a surplus, the problem just goes away.

There isn’t a shortage, except in specific locations. And building hundreds of thousands of houses will make negligible difference to house prices.
The problem is too much money chasing the houses to hold as investments. People are renting the homes they want to buy.

 

[Tetchytyke]

The problem is too much money chasing the houses to hold as investments. People are renting the homes they want to buy.

London excepted, the issue isn't necessarily landlords holding huge portfolios, more that it is increasingly difficult to pass affordability checks for mortgages. The FCA tightened the rules in response to the 2007 financial crisis with the result that people who pay £1000 per month rent are told they can't afford a £700 mortgage. Not to mention how 100% LTV mortgages don't really exist anymore for pretty much the same reason.

London is a whole different ball game with overseas investors.

Those hoping for a property crash need to be careful what they wish for. Most people own their home through a mortgage. If prices crash they'll be in negative equity, which means people can't sell and can't move, having to sit tight. Those in financial distress, such as when fixed terms enf and they can't remortgage, will end up losing their home.

Repossession properties are, by and large, sold to cash buyers. Generally cash buyers are those with an established landlord business. So a property crash will just help business landlords increase their stock on the cheap, increasing rental yields; the very thing that those people don't want to see.

 

[Bletchleyite]

FWIW the best way to deal with house prices is not a crash, but to keep them roughly static (by building more to reduce the value of them) and let inflation do its job. Nobody loses out then.

The argument that there's plenty of houses doesn't hold water as they're not where people want to live. There being a street in some rathole in Liverpool for £1 a pop is not relevant if all the work is around London. Though the way Manchester seems to be transforming to London-in-the-North does seem to suggest there's scope for regeneration to deal with that in part, too.

 

[Meerkat]

(by building more to reduce the value of them)

It’s counter-intuitive but you can’t build enough houses to materially affect prices. Historically huge numbers of new houses only affects prices by a couple of percent (and probably won’t affect the prices in the areas where the biggest problems are as you can’t build large numbers of houses there).
There is too much money chasing houses. Prospective owner/occupiers get outbid by investors who can pay in cash and complete quickly, and then the want to be owner occupiers end up paying rent to live in the houses they want to buy.

 

[DynamicSpirit]

It’s counter-intuitive but you can’t build enough houses to materially affect prices. Historically huge numbers of new houses only affects prices by a couple of percent (and probably won’t affect the prices in the areas where the biggest problems are as you can’t build large numbers of houses there).

I'm not sure that's true - if you build enough houses. The reason that house-building isn't really affecting prices at the moment is because demand for houses (whether to buy, or to rent) tends to outstrip supply in most parts of the country. And since somewhere to live is something that people, by and large, have to have, they will pay whatever they can afford to get it. So prices stay high.

If you reach the point of building slightly more houses than people need to live in, then it's almost inevitable that prices would fall - because it would then be developers/landlords struggling to sell/rent all their houses, not buyers struggling to buy/rent them. Normal human behaviour will then kick in, and some of those with houses to sell/let will drop their prices, because it's better to get a lower price than to get nothing - and then other developers/landlords will be forced to follow. The problem is - as I say - in most of the country, we're a long way from having enough houses for that situation to apply.

There is too much money chasing houses. Prospective owner/occupiers get outbid by investors who can pay in cash and complete quickly, and then the want to be owner occupiers end up paying rent to live in the houses they want to buy.

That's certainly true - but once again, that situation would very quickly change if you had even slightly more houses available than people need to live in. Investors will very quickly stop buying if they discover they can't let all their houses (because not enough people want to rent) and that house prices then start falling.

 

[Meerkat]

I'm not sure that's true - if you build enough houses. The reason that house-building isn't really affecting prices at the moment is because demand for houses (whether to buy, or to rent) tends to outstrip supply in most parts of the country. And since somewhere to live is something that people, by and large, have to have, they will pay whatever they can afford to get it. So prices stay high.

If you reach the point of building slightly more houses than people need to live in, then it's almost inevitable that prices would fall - because it would then be developers/landlords struggling to sell/rent all their houses, not buyers struggling to buy/rent them. Normal human behaviour will then kick in, and some of those with houses to sell/let will drop their prices, because it's better to get a lower price than to get nothing - and then other developers/landlords will be forced to follow. The problem is - as I say - in most of the country, we're a long way from having enough houses for that situation to apply.



That's certainly true - but once again, that situation would very quickly change if you had even slightly more houses available than people need to live in. Investors will very quickly stop buying if they discover they can't let all their houses (because not enough people want to rent) and that house prices then start falling.

I can’t prove it with the link but I thought the same as you until I was given a couple of links to research that showed you couldn’t really build your way to lower prices.
Part of the reason is practicability - the population is rising so to building enough homes to cover that and then enough to affect prices is just unrealistic. Remember that there are c. 29m homes in the UK so to make a significant percentage increase to that is a monumental undertaking.
There aren’t that many homeless people in the UK, and there are quite a lot of empty homes, which doesnt really support there being a supply shortage.
Houses are selling at these really high prices, which shows that someone has enough money to afford them, and when the prices go up there is still the money to buy them. There is basically too much cash chasing homes, and people are having to rent homes they want to buy - because investors have cash they need to invest and the stock market and savings returns are weak.

 

[JamesT]

I can’t prove it with the link but I thought the same as you until I was given a couple of links to research that showed you couldn’t really build your way to lower prices.
Part of the reason is practicability - the population is rising so to building enough homes to cover that and then enough to affect prices is just unrealistic. Remember that there are c. 29m homes in the UK so to make a significant percentage increase to that is a monumental undertaking.
There aren’t that many homeless people in the UK, and there are quite a lot of empty homes, which doesnt really support there being a supply shortage.
Houses are selling at these really high prices, which shows that someone has enough money to afford them, and when the prices go up there is still the money to buy them. There is basically too much cash chasing homes, and people are having to rent homes they want to buy - because investors have cash they need to invest and the stock market and savings returns are weak.

The population has been rising for the last few decades, unfortunately house building has not been keeping up which has put the pressure on prices.

There very much is a supply shortage. Taking just England (as the figures from https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants are easily to hand), there are 24.4m dwellings of which 225k are long term (more than 6 months) vacant. There’s another 420k short-term vacant, but that’s just the normal lubricant to the housing market you need. With those very broad statistics it’s hard to say how many of those houses would be immediately usable.

The homeless are only one aspect of demand. A far more numerous group will be people currently in inadequate housing who would buy a house if they could. For example professionals sharing a rented house whilst they save for a deposit.

 

[Meerkat]

The population has been rising for the last few decades, unfortunately house building has not been keeping up which has put the pressure on prices.

There very much is a supply shortage. Taking just England (as the figures from https://www.gov.uk/government/statistical-data-sets/live-tables-on-dwelling-stock-including-vacants are easily to hand), there are 24.4m dwellings of which 225k are long term (more than 6 months) vacant. There’s another 420k short-term vacant, but that’s just the normal lubricant to the housing market you need. With those very broad statistics it’s hard to say how many of those houses would be immediately usable.

The homeless are only one aspect of demand. A far more numerous group will be people currently in inadequate housing who would buy a house if they could. For example professionals sharing a rented house whilst they save for a deposit.

Think I am missing your point? There is a shortage but there are lots of empty houses?
The person renting whilst saving isnt homeless due to a lack of supply, they are homeless because their target homes cost too much (due to investors bumping the market). Either they will be renting a home - in which case the problem is an investment rental preventing owner occupying - or they are sharing - which is usually in areas where you really aren’t going to build a lot more homes (ie inner suburbia).

 

[GusB]

The homeless are only one aspect of demand. A far more numerous group will be people currently in inadequate housing who would buy a house if they could. For example professionals sharing a rented house whilst they save for a deposit.

We could really be doing with lots of small flats, whether they be one-bedroom or bedsits studio flats for people who are living on their own. When I was on the list for a council flat many years ago I was offered a large two-bedroom place and was obliged to take it (otherwise I'd have been bumped down the list for a refusal). A few friends had places that had a single living space with separate kitchen and bathroom, while some had one space with just a separate bathroom. Either option would have been ideal for me at the time.

There's much to be said for having your own space, no matter how small, rather than having to house-share.

 

[Meerkat]

We could really be doing with lots of small flats, whether they be one-bedroom or bedsits studio flats for people who are living on their own. When I was on the list for a council flat many years ago I was offered a large two-bedroom place and was obliged to take it (otherwise I'd have been bumped down the list for a refusal). A few friends had places that had a single living space with separate kitchen and bathroom, while some had one space with just a separate bathroom. Either option would have been ideal for me at the time.

There's much to be said for having your own space, no matter how small, rather than having to house-share.

House shares are great if you share with friends, or you are the type that is likely to get on with strangers.
Obviously its a younger thing, before we get older and grumpier!
i do often wonder whether they would be good for single old folk, rather than them being trapped on their own.

 

[GusB]

House shares are great if you share with friends, or you are the type that is likely to get on with strangers.
Obviously its a younger thing, before we get older and grumpier!
i do often wonder whether they would be good for single old folk, rather than them being trapped on their own.

This is precisely why single-person accommodation is needed. Don't get me wrong, I had some fun times house-sharing, but there were times when it wasn't so great. Such as waking up in the morning to go to work and finding that there was no milk, despite the fact that I'd brought a four-pinter back the previous day.

 

[DynamicSpirit]

Think I am missing your point? There is a shortage but there are lots of empty houses?

The figures @JamesT quoted imply 1% of homes are vacant for more than 6 months, and a bit over 1% vacant for shorter periods. That doesn't seem a lot to me - I'd imagine you could easily account for that proportion from homes being uninhabitable while building work is done on them, homes where the normal occupants are away for a few months but don't wish to let, people owning 2nd holiday homes that they stay in for a couple of months a year, and homes that are temporarily unoccupied because of the inevitable short gaps that often occur between someone moving out and the next people moving in while lettings/house-sales are agreed, and student accomodation which will often be unoccupied outside terms. All those reasons (with the possible exception of holiday homes) imply that houses are for very good reasons not realistically available for people to live in. Therefore those figures are perfectly consistent with there being a housing shortage.

The person renting whilst saving isnt homeless due to a lack of supply, they are homeless because their target homes cost too much (due to investors bumping the market). Either they will be renting a home - in which case the problem is an investment rental preventing owner occupying - or they are sharing - which is usually in areas where you really aren’t going to build a lot more homes (ie inner suburbia).

Yes, you could make that argument for someone who is renting (roughly) the same kind of flat or house that they would have bought if they could afford it. But there are also huge numbers of people who are renting a room in a house share or living with parents, when they really want to be living on their own - in other words, people being confined to a smaller space than they want (or need) to be in. It's hard to argue that isn't being caused by the housing shortage.

 

[py_megapixel]

A tiny amount of England is "concreted over". This is about the biggest myth going, particularly if you build higher density on brownfield sites.

But that's not what private developers want to do. It's more lucrative to build 2/3/4 bed detached houses with huge gardens and parking spaces on greenfield sites, so unless they are regulated in some way, or something is done to make the high-density housing on brownfield sites more attractive to them, that's what they'll do.

If local authorities have targets to get X homes built by the year Y, the way they're expected to do that is by pandering to private developers, which is stupid.

 

[jonty14]

Do we really want to concrete over England with more and more houses?

Exactly. There are so many empty houses that could be used before building new ones. I am trying to sell a house. Been on the market for 2 years. It even has a 5 inch gauge railway in the garden!

 

[Meerkat]

But there are also huge numbers of people who are renting a room in a house share or living with parents, when they really want to be living on their own - in other words, people being confined to a smaller space than they want (or need) to be in. It's hard to argue that isn't being caused by the housing shortage.

Again, that is a price problem - there are plenty of houses for sale that they would like to buy, but they can’t afford them.

But that's not what private developers want to do. It's more lucrative to build 2/3/4 bed detached houses with huge gardens and parking spaces on greenfield sites

TBF developers build them because that’s what people want to buy! Largely we want a house with a garden (not sure anything but the footballer houses is built with a huge garden any more!), the English don’t really like sharing a building with other people! That might be different if they were really cheap but they aren’t going to be.

 

[thejuggler]

Apart from the industry press and pressure groups on social media it has largely been unreported that there are currently 3m flats which can't be sold as they are valued at £0 due to Grenfell and the requirement to have a piece of paper which states the flats are safe to live in. Other flats have seen huge increases in service charges which makes them unaffordable and less saleable.

This will have a huge effect on the property market for decades, especially in areas where new flat developments dominate the first time buyer market.

 

[JamesT]

Think I am missing your point? There is a shortage but there are lots of empty houses?
The person renting whilst saving isnt homeless due to a lack of supply, they are homeless because their target homes cost too much (due to investors bumping the market). Either they will be renting a home - in which case the problem is an investment rental preventing owner occupying - or they are sharing - which is usually in areas where you really aren’t going to build a lot more homes (ie inner suburbia).

There is a shortage because there aren't lots of empty houses. 225k long-term vacant is a fairly small number in the overall scheme of things. England's population increased by 358k 2017-2018, even if we assume an average household size of 2, that's most of those houses gone just to cope with one year's growth. What happens the next year? There's analysis such as https://www.bbc.co.uk/news/business-51605912 saying:

This gap - the difference between the current housing stock and the number needed for everyone to have a decent home to live in - is more than one million homes, according to the BBC Housing Briefing.

As others have pointed out, the distribution of empty housing is fairly uneven. A row of £1 houses in Liverpool doesn't help people with jobs in the South-East looking for housing. It's local demand that drives the prices hence places like Oxford (lots of high quality jobs, greenbelt preventing expansion) having a very overheated housing market.
I'm unconvinced that foreign investment is having more of an effect on house prices than demand. They're buying properties to let, they need people willing to rent them and there is certainly that demand in many parts of the country.
Inner suburbia is probably the place where government should be incentivising the replacement of low-density housing with higher density to provide more homes in those areas.

 

[RT4038]

The figures @JamesT quoted imply 1% of homes are vacant for more than 6 months, and a bit over 1% vacant for shorter periods. That doesn't seem a lot to me - I'd imagine you could easily account for that proportion from homes being uninhabitable while building work is done on them, homes where the normal occupants are away for a few months but don't wish to let, people owning 2nd holiday homes that they stay in for a couple of months a year, and homes that are temporarily unoccupied because of the inevitable short gaps that often occur between someone moving out and the next people moving in while lettings/house-sales are agreed, and student accomodation which will often be unoccupied outside terms. All those reasons (with the possible exception of holiday homes) imply that houses are for very good reasons not realistically available for people to live in. Therefore those figures are perfectly consistent with there being a housing shortage.



Yes, you could make that argument for someone who is renting (roughly) the same kind of flat or house that they would have bought if they could afford it. But there are also huge numbers of people who are renting a room in a house share or living with parents, when they really want to be living on their own - in other words, people being confined to a smaller space than they want (or need) to be in. It's hard to argue that isn't being caused by the housing shortage.

Everyone cannot have the home that they want, any more than everyone can have their own car. There has to be a brake on the quantity that can be provided.

 

[Bletchleyite]

Everyone cannot have the home that they want, any more than everyone can have their own car. There has to be a brake on the quantity that can be provided.

Everyone should be able to have a suitable home, though, which means one properly sized for their family unit, even if that unit is of 1. That's the basics of civilisation. As the Levellers put it recently - food, roof, family. The basics of life.

If there are more households of one, we need to build more houses (flats, more likely) suitable for that.

 

[Meerkat]

It's local demand that drives the prices hence places like Oxford (lots of high quality jobs, greenbelt preventing expansion) having a very overheated housing market.

And you can’t build your way out of that, you either improve transport links or move the jobs to where the housing is.

 

[Bletchleyite]

And you can’t build your way out of that, you either improve transport links or move the jobs to where the housing is.

The increased feasibility of working from home in office jobs may well do just that. Liverpool-London, say, is no great hardship once a week.