Housing is one of the major factors to affect stability in British society which may cause risk to government efficiency. Every classes, every people facing housing problems especially to underprivileged, political leader who responsible to adopt efficient housing policy to increase social mobility and become independent from government. In recent years, tackle down the challenge of broken housing market in Britain is one of the priorities to the government or political leader. As 1951 Conservatives Manifesto mentioned that housing not only just a roof over our heads but also part of our safety and springboard to a better life. It is evident that a better living environment leads to better quality of life to future generations. A decent, affordable and secure place should be provided to every social class, house is a part of basic needs of human beings (Secretary of State for Housing, Communities and Local Government by Command of Her Majesty,2018). From the graph given by Government White Paper, 2017 states that the ratio of median house price to median earnings raising from 4 in 1997 to 8 in 2015. The affordability of housing to residents seems high, average house costs almost eight times of average earning.
As data collected by (OpenDataCommunities, 2016) shows that the percentage of 25-to34-year-olds who are privately renting a property more than doubled between 2003-04 and 2014-15. It emphasizes that young households/ generations could not own its affordability to private housing, and they afford the rental only.
According to the report made by Holmans’s ‘New estimate of housing demand and need in England, 2011 to 2031’, United Kingdom government requires to build around 242,000 homes to meet the demand.
Housing is a key factor of social policy because it can affect the housing prices/ rental/ mortgages to buyers, political decision makers can affect investment made by tenants. The major factor to lead financial tsunami in 2008 partly driven by ‘mortgage backed securities’ (Thakor 2015). Performance of housing policy can affect the voters satisfactory on political leader therefore housing polices can influence recent elections (Dorling & Pattie & Johnston, 1999). Housing is a major driver of social inequality, because it may take a larger proportion to the living income. A huge and growing disparities in house prices can cause regional inequalities which leads further social discontent (Glaseser, Resseger & Tobio 2009). There are 2.2 million working households with below average incomes spend a third or more than half disposable income on housing. (Office for National Statistics, 2017). This data illustrates that underprivileged and lower class are facing unaffordable rental especially takes larger part of their income. Furthermore, Housing can affect social mobility of the family or children as well. If rental takes lots of percentage in family income, their chances of climbing up mobility will decrease as well (Hawley, 2016). Over the life-cycle, an individual’s chances of gaining employment or leaving poverty were significantly reduced if he/ she lived in a poor area in long time. Generations of underprivileged families now facing denied the chance to breakout or to but their own property.
To deal with above society discontents to housing policy, market intervention is necessary for broken housing market. Therefore, this essay will demonstrate and compare the efficiency of housing policy made by central government such as marketization of social housing, Right to buy, Stock transfer.
Main Factors Driven to Broken Housing Markets
From the housing tenure data made by Survey of English Housing, it states that the percentage change of housing tenure in the UK over 90 years. The graph illustrates that the housing tenure the percentage of social housing decrease after 1980s as the government started their marketization of social housing scheme. Furthermore, the graph states that the number of private renting have increased since 2000 and owner occupied have decreased since 2000 as well (Holmans, 2013). It is evident that after the Right to Buy and stock transfer scheme made by government in 1980s, the number of owner-occupied properties increased, and number of social housing decrease as private renting dropped a lot since the affordability of buying house increase.
However, the number Private Rented Sector (PRS) in the United Kingdom has risen in the years subsequently and it accounts about 16.5% of all United Kingdom Household (Rugg & Rhodes,2018). Number of people living in the private rented sector has rising a double since 2000. More young family and group reduced reliance on home ownership scheme, the numbers have fallen from 59% in 2007 to 37% in 2017 (ibid). It is evident to state that the affordability of buying property become more unaffordable than before and lots of people willing to rent a private dwelling instead of purchasing. The decrease in owner occupied is not an ideal phenomenon to the society because private housing can be symbolized as store of wealth because the housing prices usually increase as inflation rate. Therefore, working labour willing do investment in property market to give an insurance for retirement themselves.
As white paper announced couple of regulations to interevent broken housing market, United Kingdom will provide £7.1bn to provide more flexible and affordable homes programme for housing associations and local authorities (Collinson & Elgot, 2016). For those young household or lower income families, white paper suggests that the population density will rise in urban areas in England such as central London, Birmingham these large cities (ibid). In recent decades, with lots of international trading between United Kingdom and different major international cities such as Shanghai, New York, the importance of large cities in England become larger than before. Lots of multinational corporation sets up their regional quarter in London, Manchester, Birmingham. It creates lot of highly-paid and business career opportunities. Therefore, it attracts lots of fresh undergraduate relocate to above locations to searching similar type of career positions. With increasing number of working labours working in urban areas, the demand of private housing also arises. However, the supply of affordable housing cannot meet the demand from labour therefore, it leads private rentals and housing prices have increased since 2000.
More high-rise buildings in urban area can provide more housing supply with well-connected transport and infrastructure. It will attract working labour or young household move in. However, white paper suggests that the size of new housing could shrink even further. It implies that the birth rate decreases in next decades. Because there is positive relationship between fertility intentions and housing security (Hawley, 2016). To deal with shortage of private housing, central government and local authorities introduce more high-rise buildings in urban areas to attract young working labour or household moving in. The characteristics of housing in high rise building is usually smaller than traditional terrace house, it may affect the birth rate in United Kingdom in next few generations The risk of deepening ageing problems and increasing medical and financial burden become a pressing need to central government.
It is essential for central government deal with above society problems in short term and long term, rational market interventions such as marketisation of social housing, regulate mortgage market, stock transfer and Right to buy are solutions to the broken housing market.
Marketisation of Social Housing
Currently, there is about 9 millions of residents live in the social rented sector in England, social housing programme is part of welfare scheme, its rental normally below the standard market level rents and right to buy scheme such as shared ownership. Social housing application open to those unavailable to buy or rent a dwelling in private housing sector and its rental level consider. Their monthly or household income usually meets the requirement of median or below level. The highest number of social properties is in London, because of its high rental in London, the demand of social housing is more than South East and South West where rental is comparatively lower than Greater London (Secretary of State for Housing, Communities and Local Government by Command of Her Majesty,2018). There is 58 per cent of working age social tenants are in work, social housing gives them an affordable and secure living places. It provides a stable base that satisfy lower class or young household in the society. Social housing can be a solution to support social mobility.
Following the end of the first world war, the social housing was introduced by Housing and Town Planning Act 1919 to tackle the challenges of shortage in private housing. It encourages local authorities enable their land to build social housing to those lower and middle class to provide a comfortable and secure living place to them (Taylor, 2017). Following the end of the second world war, the programme of social housing provided about 5 million homes during 1945-1980. In 1979, Conservative government introduced programme of privatisation by enforcing Right to Buy and transferring of social housing from local authorities to independent landlords (ibid). During twentieth century, there are over one million state owned public houses were sold (ibid). This marketisation of social housing programme was symbolized the most successful privatisation by the Conservative administration with 1.3 million sales between 1980-1997. In overall performance of social rented sector between 1980-2011, there has been in decline from over 30% of the total dwelling stock in 1981 to 20% in 2005 and by 2012 stood at 18% in England (Secretary of State for Housing, Communities and Local Government by Command of Her Majesty 2018). This is evident that marketization of social housing has impacted significantly on social housing and housing market under the influence of neoliberalism. It is an ideology encourages decreasing the government intervention to the housing market because the housing price will regulate automatically itself under free trade. There is around two-thirds of social tenants would prefer to acquire ownership of the social housing because residents can gain more control over their home and access to a valuable asset. It illustrates that the demand of private rented sector decreases as the supply of affordable housing increase. It can attract young household becomes homeowner instead of being a renter.
To achieve more social homes built, central government, housing association, private associations could stand together to increase the number homes built subsequently. It will help local authorities build by allowing them to mortgage, increasing supply through community land trusts and local housing corporations.
To increase incentives to local authorities, build more social homes to society, the central government have raised the housing borrowing cap. This is because the overall housing borrowing cap for local authorities is only at £29.8 billion and there is currently £3.6 billion of borrowing headroom available to local authorities in total (ibid). However, this borrowing cap is not always sufficient for local authorities ready and able to build. It is evident to demonstrates that there are 47 local authorities only get less than 5 per cent of their borrowing cap available. Therefore, it limited the development of any new council homes.
To tackle with the challenge of inadequate borrowing cap to local authorities, government adopted a brand new £1 billion borrowing programmed. It will evaluate the project effectiveness on solving housing challenges and drive down public sector debt (ibid). By increasing revenue to maintain long term development for social housing therefore government gave lots of confidence to reburnish and resell abandoned terraced house in their residential areas. Reburnished housing can sell a higher housing price and it can make an ideal income to local authority to boost housing development project.
Community-led Housing
Community-led housing is a project to give locals a leading and lasting role in dealing with housing surrounding their community, creating a sustainable and cohesive community. This project grasp success especially in rural areas and small town in England, where lots of dilapidated vacant housing located. Government have spent about £60 million to 148 local authorities which affected by local affordability issues (Pawson & Mullins,2009). The funding is used to improve surrounding area infrastructure such as tunnel, footbridge, maintenance fee for road, and capital for substantially housebuilding projects.
Right to Buy
Right to buy is also one of the most widely known and researched example of housing policy, which adopted in 1980. Over 30 years, it led to over 2 million homes transferring to waiting tenants, as changing to permanent houses for them. Right to buy gives a right for tenants to buy their property at a discount of 32 percent of the market value for terraced housing or 44 per cent for a flat (Jones & Murie, 2006). Right to buy also pull over the properties control from local authorities, there are 70 per cent of the properties were inhabited by owner-occupiers, where increase in 15 per cent over two decades. During period between 1979 and 1995, there is 2.1 million properties were transferred from the local authorites under Right to Buy (ibid).
To deal with broken housing market nowadays, the new purpose of R2B being tackle the shortage of housing, boost the local economy, creating surrounding jobs opportunity and chance for tenants to become owner instead (King, 2010). This is evident that R2B is an all-round government policy not only giving an ideal living place to tenant but also care about social scope of employment and economy. The new R2B will increase discount from 40% to 50% of the value of property, the social tenants are given more affordable choices by R2B. However, someone argued that R2B is a financial burden to councils because they were forced to sell their properties at below market price. Also, because of the ownership was not belong with local authority anymore, it is a challenge for them adopt maintenance and improvement projects on the community. On the contrary, the revenue driven under new R2B scheme will used to support future housing development project, aims at increasing supply of affordable housing to society. Under ‘one for one’ basis, R2B is expected increase 100,000 new homes and 200,000 jobs to United Kingdom (Jones & Murie, 2006).
