This week we have a Newsround Special focusing on:

The problem with our housing – not enough and too expensive

Home ownership and the affordability problem

The first news item I want to look at is here – a report on housing affordability which shows that houses on average cost 8.4 times income.

This is a huge amount to pay, and the report states that only the top 10% of households can afford it. The problem is even greater in London, where the average property is 13.9 times the average income.

This sort of thing was affordable while mortgage interest rates were low but is totally unaffordable to most families now that rates are going up.

Plus when a household spends 25% of its after-tax income on the mortgage, it is considered to be a risk of failing to pay.  It looks as if in the coming year, some 26% of people will be in this position.  Which is frightening.

This means that for many people renting is the only option.  So what is happening with rented property?

Are landlords selling up?

When reading the news items, it is sometimes difficult to tell whether landlords are selling up or not as over the past few months, I have seen stories for both sides.   However, on the whole, the stories seem to agree that landlords are selling up.

For example, in this post, headed ‘buy to let landlords plan to exit the market in their droves‘ from a London law firm.

There is a big shortage of housing

This is shown by numerous news items.  For example

• There are now apparently up to 20 applicants or more for each property
• Manchester students have been offered accommodation in Liverpool and Huddersfield.
• At least one London Council has paid a landlords rent and legal costs in order to avoid an eviction, as they have a statutory duty to rehouse but no available accommodation

This sort of shortage indicates that

• Landlords are selling up and moving out of the sector, and/or
• More people are looking for rented accommodation

Its probably both, taking into account

• Fewer people can afford to buy, and
• Higher numbers of immigrants are coming to this country and needing somewhere to live

Increasing costs for landlords and tenants

Landlords:

Most landlords (or a large proportion) own their properties with a buy-to-let mortgage.  However, many already have higher mortgage costs due to the increase in the interest rates, and this is set to continue.  Bank base rate, at the time of writing, is 5% and is expected to rise to 5.25% in August.

This means that the many landlords whose mortgages will need renegotiating going forward will have no alternative but to raise rents or sell, as renting at their current rents will be unaffordable for them.  Those who rent on a ‘bills included’ basis will have extra pressures.  Some consider that the problems will just get worse.

Tenants:

However, increasing rents are causing massive problems for tenants, combined as it is with a general cost of living crisis.

Many tenants who had planned to buy say they will no longer be able to afford this. Some are illegally subletting to raise some money – which puts them at risk of eviction and negative references making it hard for them to find a future home.  Some are even choosing their partners based on their housing situation.

Other problems for tenants are that with so many tenants chasing fewer and fewer properties, landlords and agents are becoming more discerning and are asking intrusive questions and very high rents for often sub-standard properties.

Applicants with pets and children are finding it increasingly difficult.  Although landlords can’t ‘ban’ them in their advertisements, nothing can force them to accept, say, a single parent on benefit if there are several single professionals with high salaries chasing the property too.

What about social housing?

As we have discussed many times on this blog, much Local Authority social housing has been sold off under the right to buy, meaning there is far fewer of it – leaving millions on waiting lists, waiting for years to be housed.

When they do get a property, some are lucky, but others find themselves in sub-standard property with complaints ignored.

Such as in housing rented by social landlord L&Q which has recently been ordered to pay over £140,000 compensation for their appalling service to their tenants.  New laws have now been passed for social housing after the shocking death of the toddler Awaab Ishak in 2020 so let us hope that this makes a difference.

However, this is not going to change the chronic shortage of property which prompted Brent to pay a landlords costs and rent to avoid having to rehouse a tenant.

What about house building?

Housing building has declined since Rishi Sunak scrapped the housebuilding targets last year.  Which is tragic as housing can now be built quickly and efficiently using modular housing methods.  However, modular housing firms are in problems – Urban Splash as gone into administration and  Legal and General are to stop making modular homes as planning delays has rendered their factory unable to make a profit.

It may be worth mentioning here that in the past builders contributed some 20% of Tory funding but it looks as if this has now changed.

Local Authorities would build if they could but do not have sufficient funding. There are also massive problems with planning which Labour has promised to ‘fix’ if it gets in to power.

Rishi Sunak does appear to be taking some steps but it is all too little too late.

Fed up landlords

So it looks as if for the immediate future, until such time as more houses are built or become available, substantial sections of the population are dependant on the private rented sector.  However, many in the private rented sector have had enough and want out.

• Their mortgages have gone up and they are finding it hard to increase rents to allow them to operate in profit – because tenants can’t afford them
• Regulation has increased massively since many landlords first entered the sector, and they are at risk of massive fines if they fail to comply
• The tax burden is significantly larger than it was, and landlords consider the basis of taxation for landlords is unfair
• The loss of section 21 will inevitably make it more difficult for them to recover possession as the section 8 procedures will take longer and require a court hearing, and
• Good landlords (who are in the majority) are fed up with being demonised by the media when all they are doing is trying to provide a good service to their tenants.

It’s all summed up by this post from Paul Shamplina, who warns tenant groups that they should be careful what they wish for.

So, the big question is:

If landlords leave the sector – bearing in mind the lack of social housing and the fact that many families cannot afford to buy – where will low-income families live?

Something politicians should reflect on.  After all, it is not going to look good if thousands of families are without housing next year in the middle of an election.

Snippets

Young renters most likely to sub-let their properties – research
Smoke Alarms – almost no one tests them as much as they should, study shows
How clean is clean enough at the end of a tenancy?
Renters Reform Bill to cost letting agents millions, analysis shows
Over half of homes in the PRS need upgrading to meet proposed regulations

Newsround will be back next week.