Home ownership has stalled – we can get it moving
Here’s your starter for ten. In the decade 2001-2011, what was the increase in owner-occupied homes in Greater Manchester?
The answer is that at the end of the decade, the number of owner-occupied homes was virtually the same as at the start. A little under 700,000. Social rented housing fell slightly but the big leap was in the private rented sector.
So here’s the next question. Why?
Most people, when asked, say they would prefer to buy rather than rent. House prices across much of Greater Manchester are comparatively low. So what is the market failure that’s making it hard for people to buy, even in cheaper areas?
We must start by acknowledging the effect of the 2008 Crash and the widening gap between incomes and house prices. But that isn’t the whole story.
There are two other points worth drawing attention to.
The first is that, while house prices in Greater Manchester are much lower than in equivalent parts of London, rental costs are only a little lower. That makes buy-to-let more profitable up here than down there. It acts as a strong incentive for businesses to snap up new builds and rent them out.
The second is the stubborn ratio between new builds and house sales. We know that there are roughly ten property transactions for every one new home that’s built; though, according to The Economist, we don’t really know why. A sluggish housing market means fewer new homes, and more elderly people living in over-large properties. This in turn pushes younger people into more crowded, more expensive rental properties.
What can we do to boost home-ownership?
This is all very interesting, but so what?
There is an opportunity, made greater by devolution, for housebuilders and politicians to work together to deliver what people want: more homes that younger people and families can afford to buy.
If it can be done, there are big rewards. More house sales would get the market moving again, Remembering that 10:1 ratio, it would also make building more homes economical. And providing homes for young people to buy would make it much easier for politicians to sell large-scale housing developments to sceptical voters.
A solution for home owners
What might such a solution look like? One approach might be for local councils and Combined Authorities to give developers the confidence of a secure development pipeline. In return, they could enforce stricter conditions on the percentage of affordable homes and preventing buy-to-let. House builders might have to accept a lower profit margin, but would get a higher volume. They would also gain the confidence to invest in new technologies to boost productivity.
There are alternatives, but what they all have in common is a closer partnership and understanding between housing developers and local government. That won’t be easy. But with Andy Burnham’s “radical rewrite” of the Greater Manchester Spatial Framework pushing the likely adoption date back to 2020, innovative solutions are going to be needed. Otherwise the housing bar chart for this decade may look no better than for the last.
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