URL originale : https://books.openedition.org/psn/7522

UK House Price Inflation since 1980: Some Causes and Some Implications
p. 65-83
Texte intégral
1Rapid upward movements in residential property prices are a matter of concern in many countries. The table of annualised growth rates from 2005 to 2006 is headed by Estonia at 17.0% followed by Denmark (16.1%), New Zealand (13.5%) and Bulgaria (12.5%). Other countries with an annual growth rate in excess of 10.0% include South Africa, Spain, Ireland and the U.S. (Knight Frank Press Release, 29 April 2006). In the UK, as elsewhere, the recent era of low interest rates has cheapened credit. Lenders have become more ‘flexible’ in extending repayment terms up to 35 years (sometimes under ‘interest only’ arrangements). Both these factors have facilitated the borrowing of a larger capital sum in relation to the borrower’s current monthly income. Much of the buying is not for owner-occupancy. Many investors have turned to acquiring ‘buy to let’ residential property following some bruising experiences on the stock market. The more widespread this trend, and the greater the dependence of influential investors on further property price rises, the more politically difficult it will be to take measures to regulate these tendencies and to keep house price trends in some sort of long term relationship with earnings and other consumer prices. Whether all this is a problem, or simply the acceptable workings of ‘the market’, is a matter for political judgement – so long as that judgement takes appropriate account of issues such as those raised in this chapter.
2The chapter is divided in six sections. It starts with some key definitional issues to then provide evidence of declining affordability in the UK. The third section unravels the reasons behind this trend. Section 4 identifies its negative social outcomes while Section 5 turns to the adverse trans-sectoral cost effects. The chapter ends with a series of policy recommendations.
Definitional issues
3Two terms, ‘social housing’ and ‘unaffordable housing’ are central to the housing debate in the UK. They are habitually used as if they were self-defining but this is by no means the case. The lack of definitional clarity detracts from the cogency of the debate and obscures some key political realities.
‘Social housing’
4The term ‘social housing’ is widely used to mean both rented housing in the local authority sector (‘council housing’– about 11% of the UK stock) and housing owned and managed by housing associations or ‘registered social landlords’(the RSL sector – about 9% of UK stock). The term ‘social’ is not helpful since all housing fulfils a social purpose in the sense that almost everyone in society lives in it. But beyond this, the term has no obvious meaning. It certainly does not mean ‘housing provided with subsidy’ since all UK housing attracts elements of subsidy in varying forms. In fact, in recent years, the ‘council’ sector has been subsidising the rest of the economy since a net £630 million per annum has been abstracted from local authority Housing Revenue Accounts with obvious pressures on rent levels (Audit Commission, 2005).
‘Affordable housing’
5The term ‘affordable’ is also used in a misleading way. In Government parlance, it appears to mean any housing that is available at something below the full market rent or price in any given locality. This is a clear distortion of the English language because the price or rent may bear no relationship to what the user household or person can actually afford. In the recent memorandum on housing unaffordability presented to the Prime Minister in May 2005 a definition on the following lines was offered:
‘Affordable housing’ means that once necessary payments on rent or mortgage (including service charges and Council Tax) have been made by the household, an individual, a family or people of pension age, there remains sufficient income to sustain safe and healthy living, support the needs of any children of the household at school and participate in the life of the community. ’Unaffordable housing’ means that the residual income left after all housing costs have been met is not sufficient for these purposes. (Zacchaeus 2000 Trust, 2005: 4)
6This definition meets the criteria of both common sense and legal defensibility but it is not the basis on which affordability is discussed in the next two sections. This discussion is necessarily based on official definitions and data.
UK house prices since the 1950s
Trends
7All the historical indices of UK house price changes tell much the same story. For example, the Nationwide historical index shows an approximately eightyfold growth in the current all-house price index from the end of 1952 (average price £1,891 = 100.0) to the end of 2004 (average price £153,778). The index for all houses was 8,132.1. For new houses it was 7,711.3, for modern houses (built post-1919) 7,575.3 and for older houses (built pre-1914) 9,880.4.
8These figures need to be compared to rises in earnings. The Nationwide average gross earnings index dates only from 1970. Since then, the gross earnings index has gone up by a multiple of 18.7 compared to a multiple rise of 34.5 for the all-house house price index. Thus house prices have risen at nearly twice the rate of earnings over the past 35 years. Much of this divergence between the two indices has occurred over the past decade when house prices have outpaced earnings by a factor of over five. Between 1993 and 2004, the gross earnings index rose by 59.1% compared to a growth of 306.8% for the house price index.
9The Barker Review (Barker, 2004) noted that only 37% of new households could afford to buy in 2002 compared to 46% in the late 1980s. Similarly, Office of the Deputy Prime Minister statistics (ODPM, 2004) show that the proportion of first time buyers aged under 25 has fallen from 25% in 1993 to 16% in 2003 and that the proportion of first time buyers paying in excess of £100,000 has risen from 6% to 46% over the same period. Clearly affordability for this group has diminished sharply.
10The Office of the Deputy Prime Minister has sought to address this issue with a First Time Buyers Initiative (ODPM, 2005). The intention was to provide 15,000 new homes for first time buyers up to 2010 on land to be provided by English Partnerships1 from former National Health Service sites and other public sources. Half will be for ‘key service workers’, i.e. police officers, ambulance staff, teachers and firefighters. The homes will be sold at ‘construction cost plus’ and there will be provision for occupiers to acquire equity shares. The landowners will have first refusal on resale. The same document announces a Design for Manufacture competition to build up to 1,000 homes on English Partnerships land for a target cost of £60,000, ‘without sacrificing quality’ and with a view to mainstreaming ‘high quality modern developments for volume developments’. This has been interpreted in some quarters as meaning homes will be available for purchase at £60,000 but unless firm steps are taken to ensure that resale prices are costrelated, and rise only in relation to general inflation rather than behaving in the same way as the general run of house prices, this expectation is misleading and any affordability gain is likely to be short-lived.
Regional variations in affordability
11Regional variations in affordability are set out in a Joseph Rowntree Foundation report (Joseph Rowntree Foundation, 2004). This compares the local price of two and three bedroom houses with the gross income of households that include working people aged 20 to 39 (see Table 1).
Table I — Regional price/income ratios
England |
4.11 |
London |
4.69 |
South West |
4.66 |
South East |
4.61 |
East of England |
4.27 |
West Midlands |
3.80 |
Source: Joseph Rowntree Foundation, 2004, page 7.
12Of the 10 local authorities with the highest ratios, five are in the South West, two (Westminster and Brent) in London and three (Chichester, Adur and Lewes) in the South East. All these except Lewes have a ratio over 6.0. It should be noted that the mortgage ratio of loan approved to income for a multi-earner household is rarely over 3.5. On this evidence, access to home ownership is difficult, if not impossible, for first time buying households of this type in very large areas of England.
Affordability and take-home pay
13Affordability can also be measured in terms of the percentage of take-home pay required for mortgage repayments. The Nationwide series of this indicator runs from Quarter 1 of 1985 (index = 100). For the UK as a whole, this index rose into the 150s during the 1989 house price inflation but was running in the 50s and 60s for much of the mid-1990s. It has now risen again and at the end of 2004 stood at 107.4.
14Given the unprecedented rise in house price levels, it may seem surprising that affordability, in terms of take-home pay used to pay the mortgage, should have remained relatively low in the early 2000s. The explanation probably lies in a combination of factors – historically low interest rates, ‘low-start’ mortgage products and lengthened repayment terms are all possible factors that reduce the month by month impact of expending higher capital sums on house purchase. Clearly, there are dangers here from the rising trend in interest rates and/or if disruptive life events such as unemployment, disability or relationship break-up occur during the extended repayment period.
15Perhaps the most telling data on declining affordability is provided by the survey undertaken by Halifax Bank of Scotland in mid-2006. This found that nurses were unable to afford to buy in 97% of the areas surveyed (compared to 43% in 2001). It also found that people in ‘key worker’ roles have been priced out in 339 of the 519 areas (compared to only 124 areas in 2001).
16The National Housing and Planning Advice Unit’s report (2007) shows that in 1998 there were very few areas in the country where the lowest house prices were more than six times average earnings. In 2006, this six times multiple applied across almost the whole country and in many areas, the multiple of house prices to earnings was eight or more. The problem of housing unaffordability has rapidly spread across the whole nation.
Earnings, retail prices and house prices since 1952
17Figure 1 shows the movements in average gross earnings, consumer prices and house prices since 1952.2 All three series have been reduced to 1952=1.00. It is possible to take issue with the particular measures used and no doubt, changes in definitions over half a century have produced some inaccuracies. But the main features of the comparative movements in the three indices are clearly discernable.
Figure I — Earnings, Prices and House Prices (1953–2005)

18Until the early 1970s, the three indices remained in close touch and grew only very slowly. From about that year there has been a growing divergence between the consumer price index and the other two. Earnings have risen much faster than consumer prices and now stand at about three times the prices index. This reflects the approximately threefold rise in real earnings and living standards that has occurred since World War II and primarily since about 1970.
19The house price index has behaved in a much more volatile fashion. It remained in close touch with the earnings index until about 1987. Since then it first rose faster than earnings, then fell back to well below the earnings index by the mid 1990s then rose more steeply than earnings until finally since 2002 it has risen to nearly 84 compared to the earnings index of about 55 (1952=1.00). Rough calculations show that if the average house price in 1975 (£10,000) had inflated in line with earnings the average 2005 price would be £98,000. If it had risen in line with the Retail Price Index, which as a consumer item one might reasonably expect, it would be £60,000. In fact, the average house price was £154,000 in 2005 and £179,000 in 2007.
20Why should this be? And why in particular should house prices get so out of touch with earnings and other prices?
Reasons for the trends
The historical context
21Some attention should be paid to historical context. Home ownership in Britain has a particular history. The value of mass owner-occupancy as a ‘bulwark against bolshevism’ had been argued explicitly in Parliament following the 1917 Russian Revolution and the 1926 General Strike (Bellman, 1928). In the 1930s, Neville Chamberlain made the point that ‘… every fruit tree planted [in the garden of a newly purchased house] converted a potential revolutionary into a contented citizen.’ (Feiling, 1946). This decade was marked by a massive growth in house purchase lending by the rapidly growing building societies – from a total debt outstanding of £120 million in 1924 to £636 million in 1937 (Bowley, 1945). By the beginning of the Second World War, home ownership had risen to about 40% of all households.
22Following the heavy emphasis on building council homes by the post-1945 Labour Government, and the successor Conservative administrations until the late 1950s, it was the 1964 Labour Government in its White Paper The Housing Programme 1965 to 1970 that advanced home ownership as a ‘normal’ tenure and part of a ‘long-term social advance’. Within a decade, the political implications were spelled out by the Secretary General of the Building Societies Association who made the point in the mid-1970s that owner-occupancy had become the majority tenure and that “The greater proportion of owner-occupiers the less likely were extreme measures to prevail” (quoted in Ambrose, 1976). He might have added that from that point on no General Election could be won on any programme that appeared to harm the interests of owner-occupiers.
‘Rising house prices equals good’
23Housing is the only ubiquitously used commodity where price rises are universally and uncritically welcomed as a good sign. The owner’s personal calculation is almost always about the rising paper value of the property, not about the rising proportion of lifetime earnings given over to buying it, the rising level of debt involved and the effects that debt may have on other aspects of life. Similarly, in urban regeneration schemes, house price rises are seen as an indicator of ‘success’ although every price rise makes it that much more difficult for non-owning local residents to access ownership. More generally, in discussions of the economy the headline ‘Good news – housing market recovers’ simply means prices are rising again with implied benefits for existing owner-occupiers. Economic benefits are also deemed to come out of increased spending deriving from equity withdrawal – while perversely the rising level of total debt gives rise to worried comment.
24It is vital to re-examine this piece of conventional wisdom as the ‘taken for granted’ belief that rising prices equals good is in fact a highly partial interpretation of meaning by the more prosperous members of society (owners) against the interests of the less prosperous (non-owners).
Financial deregulation in the 1980s
25The Thatcher administrations of the 1980s introduced a number of measures to deregulate and liberalise financial services and institutions. This formed part of a move in many western economies towards deregulation. In 1981, many restrictions on bank lending were abolished. In 1983, building societies were allowed to borrow from the money market and in 1986 the Building Societies Act introduced a more self-regulatory regime. Regulation was reduced on matters such as reserve ratios, interest rates, down payments and so on. Significant changes, including trends towards de-mutualisation, also occurred within the building society sector itself (Cook, Deakin and Hughes, 2001). Deregulation led to increased competition in the home loans market, more house purchase lending from the clearing banks and the vigorous selling of endowment-linked mortgages where the capital debt is paid off at the end from the product of stock market investment. The vast majority of these have subsequently under-performed and it is estimated that over 60% of the 11 million endowment policies will not cover the full debt on maturity.3
The growth of house purchase lending
26One of the outcomes of the new deregulatory regime was a rapid growth in house purchase lending and thus in the effective demand for houses. As Baddeley (2004: 11, see also Baddeley, 2005) points out:
The increasing availability of mortgage finance will encourage self-propelling increases in house prices: the demand for residential investment will increase as liquidity builds up in mortgage markets and more mortgage financing becomes available on increasingly favourable terms.
27Since the supply of both new and second-hand houses in the market is relatively inelastic, it is inevitable that increases in demand will have an effect on prices. The explosive growth in total house purchase debt between 1980 and 2003 is shown in Table 2.
Table II — The growth in house purchase debt 1980– 2005

Sources: Wilcox (2007), Table 45, page 145 and www.ex.ac.uk/RDavies/arian/current/howmuch.html.
28The growth of total House Purchase Debt (HPD) is set out in the second column. This has been approximately corrected in the third column to allow for the growth in the number of owner-occupied units since 1980, since clearly the debt outstanding might have been expected to increase given this factor alone. The actual level of HPD is in the fourth column and the amount by which this exceeds the RPI related figure is shown in the fifth column. The final column shows that as a proportion of GDP the HPD has risen from 23% to 80% in 25 years. In 2005, HPD was £774 billion more than would have been the case had lending grown in line with retail prices. It is perfectly reasonable to assume that had house purchase lending grown roughly in line with other prices, or with the number of properties coming onto the market year by year, then house prices would also have remained roughly in line with other prices. In that case, earnings growth would have outstripped both general and house price indices, thus producing real gains in capability to access housing. The reality has been quite different because the explosion in lending has massively increased effective demand and pushed up prices.
Increases in the lending multiple
29It has been shown that house purchase lending, and therefore house prices, has risen much faster than earnings for some decades and especially in the last decade. One facilitating factor has been the increase in the multiple of loan made to the current income of the applicant and to taking more fully into the equation the earnings of second and even other members of a household (part of the ‘increasingly favourable terms’ referred to in Baddeley, 2004). The higher this multiple the higher the house price that can be afforded by the purchaser(s) in relation to current income (but of course the higher the debt incurred). Table 3 shows that the multiple has increased considerably since 1984 – by 42% for first time buyers and 39% for movers. This has enabled house price levels to rise disproportionately more than incomes and on the basis of the increase in credit granted. Beyond a certain point, increases in this multiple are likely to be unsustainable by a significant proportion of borrowers, especially if interest rates rise or personal circumstances change.
Table III — Changes in lending multiples

Source: Council of Mortgage Lenders (CML) website (www.cml.org.uk).
30Another notable feature is the sharp swing over the past decade in the balance of loans away from first time buyers and towards existing owner-occupier movers. This supports the general understanding of the increasing difficulties faced by those seeking to access home ownership. In 2006 the CML Market Briefing Newsletter forecast a modest recovery in the first time buyer proportion to about 34% in 2007 but offered no forecast beyond this date
Government incentives to purchasers and owners
31Mortgage Interest Tax Relief which was costing the Exchequer £6 to £8 billion per year in the early 1990s is now much reduced (to £1.6 billion in 1999/2000 – Wilcox 2007: 210, Table 105). But this has been offset by the tenfold rise in the value of Capital Gains Tax Relief to owner-occupiers since 1997. This increased relief has represented a loss of revenue to the Exchequer and has thus been a burden on the national economy. The net gain to the Exchequer from Stamp Duty4 and Inheritance Tax offset by Capital Gains Tax Relief has fallen from £1.39 billion in 1999/2000 to £0.55 billion in 2002/03 (Wilcox 2005, Table 1.2.3). In addition housing benefits which now cost £15.2 billion annually in Great Britain (Wilcox, 2007: 220, Table 114) is largely a subsidy via rents to landlords and, according to the Henry George Foundation (Lloyd, 2004, page 4) it represents “a further source of house price pressure, pumping public money into an already overheated market”. The Foundation also argues that
it is futile to improve affordability by increasing salaries or subsidising home buying… While each individual home buying grant – such as those under the Starter Homes Initiative – may help the recipient enter the housing market, the combined effect of such grants is to push the market up further, making entry even harder for the next grant recipient. (ibid., page 5)
The political barriers to reform
32This section opened with a brief reference to the pro-ownership politics of the 1920s and 1930s. All UK governments since then have shown themselves to be wary of the perceived electoral sensitivities of the wealthy homeowners of ‘middle England’. In particular, negative equity is seen to be unacceptable in any form. However, the consequences of this position are unsustainable. For negative equity to be avoided, homeowners must be effectively subsidised in perpetuity. The current assumption appears to be that homeowners have a right to profit from rising prices but no corresponding duty to carry the risk of a price fall. This also implies that current owners have a right perpetually to extract wealth from first-time buyers, that speculators on the housing market have a right to keep all their winnings and a right also to state compensation if they lose. It is hard to imagine how any other group demanding such a settlement would be treated.
Adverse impacts of decreasing affordability
33Rapidly increasing house prices, and the heavy debt that underpins them, give rise to a number of adverse consequences and enhanced risks. Some of these have so far attracted little research effort. Others seem intuitively likely or have been identified anecdotally but now require systematic research.
34First, the inability to continue servicing a housing debt can lead to calamitous outcomes if the property is repossessed. If it is subsequently sold by the creditors for less than the loan outstanding, the occupiers not only lose their home, they also remain in debt. Repossessions in the UK rose to very high levels in the early 1990s (75,540 in 1991) fell considerably to 2003 (7,830 in 2003 – Wilcox 2004, Table 51) but are now rising again.
35Moreover, as has been shown (Zacchaeus 2000 Trust, 2005: 60, Appendix 9), the rising prices of newly developed houses feeds through to inflate development land value, with consequent implications for the buyers of land for ‘social’ purposes. One impact of sharp cyclical changes in the price of development land is to make such land a fruitful area of speculation by long term investors or by larger housebuilders. In some stages of the cycle, builders can make more profit from land dealing than from actual construction. This provides very little incentive for builders to compete on grounds of innovation and building efficiency (Dickens et al., 1985).
36The effects on private sector rents represent a further risk. Private landlords are seeking to gain a competitive rate of return on the capital value of their assets so the higher capital values go the higher the rent they will seek. There has been an increasing trend in the UK for council housing to be sold to ‘buy to rent’ investors. The number of ‘buy to let’ loans has increased sharply from a total of 28,700 at the end of 1998 to 120,300 at the end of 2000 and 408,300 at the end of 2003 (Wilcox 2004: 158, Table 55). This has the effect of transferring significant numbers of units from council renting to private renting. It is also relevant that the house sales and transfers normally include the freehold land on which the house stands so this becomes a factor precluding the future development of this land for low rent housing by the local authority. It also precludes the local authority from benefiting from future land value rises.
37There are further effects on bargaining power of organised labour. The relationship between high levels of mortgage indebtedness and trade unionists’ potential and propensity to take industrial action has been recognized since at least the 1920s (see Bellman, 1928). The commitment to mortgage repayments is the most frequently stated reason for not joining a strike and crossing picket lines.
38The effects on fertility rates are amongst those that are the least visible and thus often ignored in debates about housing inflation. It was shown earlier that ‘mortgage multiples’ have been rising partly by taking more account of the income of second earners in households. The more the income of second earner is taken into the loan calculation, the more it is likely that couples will put back the age of having a first child and perhaps further children. The number of live births per 1000 women is shown in Table 4.
Table IV — Number of live births per 1000 women in the UK
1981 |
2004 |
|
20 – 24 |
106.8 |
71.5 |
Source: Social Trends 36, 2006, Table 2.16, page 21.
39Fertility rates are down in total and are sharply down in the under 29 age groups. But in 2004, births to women in their early thirties were considerably higher than in 1981 and for those aged over 35, fertility had almost doubled. This pattern is no doubt the product of a number of factors and it is differential by socio-economic group. Increased and longer participation in the labour market, often related to the servicing of a mortgage, may well be one of the factors affecting the fertility of those in socio-economic groups able to access a mortgage loan. Given the statistical likelihood of more complications for older mothers, there may well be implications for NHS costs arising from these changing patterns.
40The continuance of both parents in work following the birth of a child, which may be necessary when both incomes have been calculated into the mortgage multiple, may have a range of effects. Some may be judged positive and some negative. Very often the requirement that two incomes continue may close down preference options about patterns of parental care and increase the need for bought-in childcare.
41As argued earlier, it is axiomatic that the higher the proportion of lifetime earnings devoted to property purchase, the lower the proportion available for other forms of spending. The shift is towards capital spending and away from revenue spending at the household level.
42More generally speaking, higher loan multiples and longer lending periods mean increased exposure to risks when household finances are disrupted by frequently occurring factors such as relationship breakdown, redundancy, poor health or disability. Increase stress may be felt not only when these events occur but also in the period when they are clearly on the horizon.
43Moreover, the latest burst of house price inflation since the late 1990s has made clear, at least anecdotally, that many older parents are making use of their own capital to help children in their 20s and 30s to get on the ‘property ladder’. This issue appears to have been little researched so its precise extent and effects are not known although one survey carried out in 2004 by MORI for the Joseph Rowntree Foundation found that parents now expect to contribute on average £17,000 to help their children get onto the property ladder.
44Equity withdrawal and increased consumer debt can be cited as further adverse effects. Steeply rising house values have given more ‘headroom’ for owners to borrow for other purposes. It has been pointed out (Wilcox, 2004: 38, Section 2) that the recent rise in house prices has permitted record levels of equity withdrawal. This rose from £45.6 billion in 2002 to £60.8 billion in 2003 and amounted to 8.77% of all consumer spending, a much higher proportion than that reached in the house price boom of the late 1980s. This has a number of effects on the economy and the society. It clearly contributes to economic growth and indirectly to employment levels. But equally, it has an inflationary effect and has been one reason behind the continuing series of increases in the Bank of England base rate since October 2003. Increased spending is conventionally seen as an unmitigated economic benefit. But at a time of deep concern about the social and cultural implications of very high borrowing levels, especially when the debt is incurred by more vulnerable borrowers, ‘economic growth’ may well not be the prime indicator by which the health, morality and cohesion of a society will be judged.
45Finally, governments of all political colours have in the past used the base rate as a regulator either to lift the economy out of recession or to dampen down an overheated economy. The facility with which base rate can be adjusted upwards is significantly restricted when the financial viability of millions of heavily indebted households is put at risk by upward movements in mortgage interest rates. The issue may well become more a matter of electoral calculation and less of economic judgement.
Cross-sectoral cost consequences of unaffordability: the ‘exported costs’
If property prices rise more than in proportion to incomes then, given the unequal distribution of property ownership, there will be an increase in the degree of income and wealth inequality… The distribution of wealth, unless offsetting forces are put in motion, will move secularly in favour of the owners of property. (Corry, 1972: 18)
46This evidence presented in this chapter confirms Corry’s prescience in 1972. It has shown that increased housing unaffordability and shortage has a range of consequences, many of which may be judged to be adverse. It appears that some of these effects impose heavy ‘exported costs’ on a range of non-housing budgets (for a fuller discussion see Zacchaeus 2000 Trust, 2005, Appendix 14, page 81).
47The regressive effects on the distribution of income and wealth are among the most obvious consequences. The Government has spent massive sums on the anti-poverty measures to supplement low incomes for families and pensioners since 1997, the year in which the numbers of children in households under the poverty threshold peaked. But inequality may well depend as much on the relative size of necessary outgoings as on adjustments of income. The proportion of income devoted to housing costs tends to rise as one moves down towards the bottom of the income scale and this may well indicate that the lack of affordable housing is a factor in the persistence of inequality. Regressivity in housing support and Council Tax costs may be a factor partially negating anti-poverty measures based in income supplementation (see Zacchaeus 2000 Trust, 2005, Strategic Issue 7 in Appendix 1).
48It also seems clear that the Corry quote at the head of this section is justifiable in that the housing market as it stands is an effective device for channelling wealth away from those who do not have it into the hands of those who do, in other words it has a systemically regressive effect. This may help to explain why the share of total UK wealth held by the wealthiest 10% has risen from 52% in 1996 to 56% in 2002 and why the poorer half of the population own only 6% of the total wealth (National Statistics 2005, Table 5.25).
49Moreover, the lack of affordable housing in ‘high demand’ areas reduces labour mobility and causes additional difficulties for employers who seek to attract and retain workers in lower paid jobs. The high cost of a non-substitutable commodity such as housing is likely to find its way into higher pay claims or employers in high housing cost areas may well have to offer higher wages and relocation packages to attract key workers. Having attracted the workers, employers may then experience retention problems as employees find the housing costs unsupportable on their incomes and a high rate of staff turnover imposes its own costs. This has applied especially to the recruitment and retention of nurses. In June 2005, the Royal College of Nurses drew attention to the loss of nurses to the profession for this reason, Edinburgh hospitals reported a crisis of staffing and the maternity unit of a Sussex hospital has been downgraded for the same reason with possible serious implications for maternal health.
50The understanding that a sufficient affordable housing is a necessary item of infrastructure to underpin the efficient functioning of the economy has found expression in a campaign known as “the Campaign for More and Better Homes”. This initiative launched in November 2004 comprises an alliance of unprecedented breadth including Unison (a large public sector union), the Confederation of British Industry, Shelter, the National Housing Federation, The Town and Country Planning Association, CABE and two of Britain’s largest housebuilders, Wilson Bowden and George Wimpey. The campaign is urging the South East of England Regional Assembly to recognise the acute shortage of housing in the South East and to significantly increase the number of homes built in the light of both market demand and social need.
51Clearly, the financial pressures on households facing rapidly rising housing costs may well increase the risk of their incurring serious consumer debt. Research conducted in Brighton and Hastings (Ambrose and Cunningham, 2004) found that the households surveyed, many of them benefit dependent, were in debt to credit card companies, banks and store cards to an average of about £9,500. The ‘triggering events’ were often housing-related, including accommodation problems on relationship break-up or delays in receiving housing benefit or overpayments by mistake. This had knock-on effects in that debt itself was a frequently quoted impediment to entering employment. Increased debt was also one of the outcomes of the increased household costs in a study undertaken in Stepney in east London (Ambrose and MacDonald, 2001).
52There is now a rapidly growing literature on the adverse health effects of poor housing conditions and housing shortage on mental and physical health. Some attempts are now being made around the world to calculate the cost of these housing problems to a range of public budgets but this work is at an early stage (see selective reviews of this literature in Zacchaeus 2000 Trust, 2004 and 2005).
53There is also a growing literature examining the nature of the links between housing factors – including conditions, degree of crowding, price and stability of occupancy – and educational achievement at school (see Ambrose, Barlow et al., 1996 and Clark et al., 1999). A report for Shelter (the UK national campaign for better housing provision) has made the point that:
Reading… takes concentration. If there is no silence, you’re in a room with four or five other children and the TV is always on, or if it’s freezing cold and damp, you have no chance. (Mustafa, 2004: 11)
54A study conducted in Brisbane and Sydney (Phibbs and Young, 2005) explored the link between movement into improved housing conditions in assisted public housing and a number of positive ‘non-housing’ outcomes. The populations had previously been housed in privately rented housing with a pattern of overcrowding, poor security and frequent moves. Following the moves, surveys indicated more money to spend on food, more space to prepare it (reducing reliance on prepackaged food), greater tenure security, less mobility and increased neighbourhood safety. The better home conditions, residential stability and home space were correlated with better subject performance at school by 53% of respondents. These beneficial effects were confirmed in interviews with teachers.
55Finally, the opportunity cost of the unregulated house purchase is worth mentioning. It was shown earlier that the amount of largely unregulated house purchase lending over the post-Thatcher years has been almost £800 billion more than might have been expected had lending volumes risen in line with general consumer prices. The housing debt outstanding has risen from 23% to 80% of GDP. This vast lending flow has been used to inflate house prices when it could alternatively have been invested in public infrastructure (schools, roads, hospitals, etc.) or in more productive ways such as the updating and capitalisation of UK industry, the research and development of new inventions and so on. It is also instructive to compare this £800 billion figure with the estimated £20 billion now required to bring all social housing to a decent standard or with the estimated £150 billion to modernise the National Health Service.
Conclusions and policy recommendations
56The evidence and analyses presented in this chapter summarise those presented in the form of a Memorandum to the UK Prime Minister in May 2005 (Zacchaeus 2000 Trust, 2005). This Memorandum offered a number of recommendations for consideration by various departments of state. They include the following:
- instigate and fund some systematic research to assess the cost of poor and unaffordable housing on both housing and non-housing budgets;
- adopt the strategic aim of ensuring that rents in all rented sectors rise more slowly than earnings over the next decade;
- to help achieve this aim, stop all sales and transfers of council-owned housing and move rent-setting strategies back to some cost-related basis;
- reconsider the overall balance of supply side to demand side housing support and take steps to shift the balance back towards the supply side so as to stimulate production not rents and prices;
- take firmer control of the flow of house purchase lending so that it comes into better balance with the rate of property transactions and with the current earnings of applicants;
- develop and support more ethical lending practices that are consistent with the variety of belief systems held in an ethnically diverse society;
- consider measures to ensure a better flow of development land, to eradicate land speculation by fiscal means and to maintain more freeholds in public and community ownership;
- develop and support more ecologically responsible building technologies and planning strategies.
57It seems vital that countries where house price inflation is at an early stage should give careful consideration to the data, analysis and the review of effects in this paper since there appears to be much that can be learned for the recent UK property price history.
Bibliographie
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Notes de bas de page
1 English Partnerships is the UK Government’s National Regeneration Agency. See www.englishpartnerships.co.uk
2 The gross earnings and house prices data are derived from the Nationwide website (www.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls) and the consumer price data from the Economic History Resources website (www.eh.net/hmit/ukearncpi)
3 See http://www.uk-endowment-mortgages.com.
4 The duty paid on UK residential property transactions as a percentage of the contract value.
Notes de fin
* The author would like to thank the Zacchaeus 2000 Trust, UNISON, the Children’s Society and others for arranging and funding a number of seminars on the issues raised in this chapter. This chapter also draws on research carried out over the past ten years in Stepney (east London), Brighton and Hove and Hastings in very fruitful collaboration with Dee MacDonald and Liz Cunningham, both Research Fellows in the Health and Social Policy Research Centre at Brighton University. The author would like to thank them for their care, professionalism and friendship.
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