Going up, coming back
Prices are increasing and people expect them to go up further. They have risen 11 consecutive months in the longest run of increases since 2016, and by over £50,000 during the period since the start of the pandemic. Yes, that’s it — UK house prices.
While spiralling inflation for food and fuel has shocked us all, Britons are accustomed to rising house prices. Housing charity Shelter estimated that a frozen supermarket-sold chicken would cost £51.18 if grocery prices had increased at the same rate as house prices since 1971. That calculation was made nine years ago, and that chicken is much pricier now.
A new Ipsos survey finds seven in ten people believe house prices in Britain will increase over the next year — a quarter expect them to increase a lot — and a very similar proportion think there is a housing crisis. Currently, 36% are concerned about their ability to meet mortgage and rental costs, up from 30% two years ago. If we exclude owners, concern has increased from 38% to 47% over the same period.
The pandemic underlined the importance of home but also crowded-out the issue of housing, relegating it to one of several crises. It was mentioned spontaneously by, on average, 17% of people every month as an important issue facing the country throughout 2019, but this fell to 8% in 2020 and has stayed there since. In May, petrol prices (then yet to reach their peak) were more salient.
House prices and affordability are seen by the public as the most important housing problems, but 30% think rising prices are a good thing for them personally. They tend to see rises as good for sellers, bad for buyers (most people active in the housing market need to do both) and something that cuts across generations, splitting housing ‘haves’ from ‘have nots’. As a focus group participant told me in Wimbledon several years ago:
“…there is a part of me that goes, oh, OK, so our house is worth £1m or whatever, that’s amazing, but it kind of doesn’t mean anything and then you look to the future and you go actually my kids will never be able to get on the ladder…”
He equated house prices to a dangerously addictive drug; something you can neither live with, nor without. According to Legal and General, 22% of those in work plan to use the value of their home to fund their retirement following record house price increases; millions depend on housing equity. For those starting out, getting on the ladder looks even harder than ever; according to Zoopla, first-time buyer home costs around £225,000, up from £197,600 at the start of the pandemic.
What should be done? Supply is the obvious answer. People support home-building but pick under the surface and opinion is extremely conditional. They want new housing developments to avoid greenfield, to be affordable, to be in keeping with the local surroundings and built with sufficient infrastructure. They want development done urgently but diligently and democratically.
These are not unreasonable requests, but you can see why local politicians often find themselves on the back foot, tempted to file the issue as ‘too difficult’. The result can be that national government finds itself taking the lead, has bouts of radicalism borne of frustration and then retreats as a ‘protect’ instinct in public opinion counterbalances a ‘progress’ one.
People are sure that there is something government can do to fix housing, even to ‘fix’ the market, but are also fatalistic and doubt that what is needed will get done. Two-thirds lack confidence that the UK will build enough affordable new homes. They associate new builds with premium flats which are out of the reach of what locals can afford.
The public pretty much supports any housing policy going. You name it — rent controls, Help to Buy, funding 95% mortgages for first-time buyers, the extension of Right to Buy, more robust taxing of second homeowners — they support it. This reflects a desire to ‘do something’, anything. During the pandemic, there was strong support for Government bans on renters being evicted and the mortgage holiday scheme. Have people got used to housing being more than the “wobbly pillar of the welfare state”?
The crisis sentiment is amplified by increases in housing costs. For most people, the lion’s share of their income is spent on housing. Rents are rising — average asking rents are 14% up year-on-year in London — with reports of “bidding wars” in the media and mortgage costs set to increase with interest rates (while many people are on fixed rate mortgages, terms tend to be of short duration). The cost-of-living crisis is impacting on saving and, alongside supply shortages, is pushing the first rung of the housing ladder out of reach; we shouldn’t forget the second rung and upwards too.
Politicians face a quandary; should they weaponise the issue of housing or neutralise it? Do they talk to aspiration or manage down expectations? Use it as a photo-op — hard hats and high vis — or push it away, matching opponents’ rhetoric to nullify any sense of difference?
In her final few days as Prime Minister, Theresa May lamented a lack of decisiveness and a failure to embrace social housing. Michael Gove has picked up the baton and brought new attention and energy to housing policy while also watering down planning reforms to unlock new supply and managing expectations about hitting house building targets.
As an issue, housing got its bark back before the pandemic. It was beginning to bite too. That changed with Covid, but the cost-of-living crisis might get it running again. The question is, who will bring it to heel?
* Housing market data from Zoopla, Halifax, Nationwide and Rightmove