Azara Blog: Housing in Britain a disaster story

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Date published: 2005/05/22

Housing in Britain has hit the headlines again. The BBC says:

The number of places in which public sector key workers cannot afford to buy a house has almost doubled in three years, according to research.

Nurses are worst off, being priced out of the market in 93% of UK towns, said the Halifax.

Gerrards Cross, Buckinghamshire, is the most unaffordable town, with the price of the average house now 26 times higher than the average nurse's salary.

The study also said problems were no longer confined to the South East.

The number of towns in the north where property is too expensive for nurses rose from 13% in 2001 to 79% in 2004, it suggested.

Firefighters struggle to buy in 85% of towns in the region, and in 90% of UK towns as a whole, according to the research.

For teachers, the number of unaffordable places nearly doubled from 34% to 77% since 2001.

Homes in nearly three quarters of towns are now beyond the salary of police officers.

In Scotland nurses could not get on the property ladder in 62% of towns at the end of last year, compared with just 5% three years ago.

Weybridge, Surrey, was found to be the second most unaffordable place, with property selling for an average of 20.4 times a nurse's salary, followed by Richmond, also in Surrey.

There are only two towns in Britain where nurses could buy a home with a mortgage of three times their salary - Lochgelly and Cowdenbeath, both in Fife, Scotland.

One of the regular bits of "research" by the Halifax, they seem to love this theme. It is amazing the BBC and the rest of the media give credence to such pathetic press releases. But of course the media loves to claim the world is at an end, and especially so if they can beat the government up at the same time.

Notice that Halifax tries to confuse the situation by throwing lots of apple and orange statistics around, as if that proves anything. The BBC story does not even give a definition as to what it means to "afford to buy a house" (perhaps the original Halifax press release does). Many single people in Britain cannot afford to buy a house but most couples can. So are they treating nurses as individuals or as part of a household, when they are quoting these statistics. And if the typical nurse household earns less than the average household then you would expect them not to be able to afford an average house. Is this strange?

And what is it about "key workers" (i.e. government workers who the general public supposedly like) that they deserve such special notice. House prices are high for everybody in Britain not just "key workers", and this phrase is one of the most obnoxious of the ones introduced by New Labour. We need a government for all the people, not just a select few politically correct categories.

Not surprisingly New Labour responded almost immediately to the Halifax report. The BBC says:

Struggling first-time home buyers could gain cheap mortgages funded by public money under plans revealed by Chancellor Gordon Brown.

Couples would have to raise as little as half the cost of homes sold on the open market, he told the Observer.

The remaining equity in the house would be shared by the government and the bank or building society.

Mr Brown said the scheme would help hundreds of thousands of people get on the property ladder.

"It means that people who couldn't afford the full price of a home can afford the partial price, and they can gradually ramp up their stake - it's putting home ownership within the reach of thousands of people who would not be able to do so," Mr Brown told the newspaper.

The Observer said the scheme would affect about 100,000 purchases and cost hundreds of millions of pounds over three years.

Mr Brown said many people felt home ownership was "beyond their grasp".

"This is part of our idea of helping people meet their aspirations for themselves: I have no doubt that more people want to be able to get a foot on the housing ladder earlier."

Under the new scheme, average monthly repayments on a £200,000 home could be cut by up to £372 a month.

The mortgage help will not be restricted to key public sector workers previously helped by the government, and there will be no means test.

However banks and building societies will have to sift out deserving applicants whose salaries simply will not stretch to the average-priced house, from those simply angling to buy dream homes well above their means, the Observer reported.

This is not the stupidest idea that New Labour has come up with, but it is not that far off. The problem with housing in Britain is with the supply. Throwing government money at the problem in this way does nothing to increase the supply, which is restricted mainly because of lack of building land. Even worse, this proposal represents a government subsidy of housing so its main effect will be to push up house prices. Surely someone in the Treasury told Gordon Brown this, so since he has chosen to ignore that advice it is obvious he has decided to play politics above running the country sensibly. The main winners will be the banks (e.g. the Halifax), who will get more business, and the developers, who will be able to charge higher prices for housing.

And the final paragraph illustrates perfectly well one of the other stupidities with this scheme. Who is going to decide who is eligible, and under what conditions. People on low salaries should not expect to "stretch to the average-priced house", they should expect to be on the bottom rung of the housing ladder, which is where everybody else in life starts out.

Heaven forbid when Gordon Brown takes over running the country, if this is the best he can do.

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