This was originally a reply I wrote in response to a series of postings on a financial discussion website. Afterwards I expanded on it slightly but ended up not submitting it to anyone.
It is often stated that in order to get the economy going again we need to build more houses. This would stimulate the building industry again and provide homes for the many thousand presently on waiting lists for housing, we are told. I disagree though.
The country doesn't really need many more houses - the simplistic solution that building more houses is the answer to all our economic and social woes is trotted out far too often, but it's not really true - there are literally millions of empty houses already. It is true that building houses would provide short term economic gain for building firms but this tends to ignore the fact that construction is only a relatively small part of our economy. What the country really needs is a set of serious policies on the part of government to halt the inexorable pull of the population towards London and the South East by creating or encouraging suitable economic conditions in the Midlands and particularly the North to encourage companies to relocate and new businesses to start up, thus creating the job opportunities and resultant domestic spending power which too many areas outside London are presently so lacking in. Reinvigorating the Northern economy would bring many houses which are presently empty back into use and would substantially relieve the pressure in the south.
There are other factors though in the apparent scarcity of houses and high asking prices.
There are not really that many more people here than there were twenty years ago. It is true that many people have come here from overseas but it is also true that many people have left Britain for other places as well. Many of those who come here also return home again a few years later.
One thing that has really changed though, is the number of families which have broken up, meaning that two houses are often needed for the same number of people. As economic factors are often a strong driver of family breakdown, more needs to be done to create better economic conditions for families. Tax credits are all very well, but why not tax them less in the first place, which would also be less of a drain on the public purse?
Next we have the continued existence of the housing bubble, because it has been prevented by government action from deflating as it naturally would have done. There was a period of madness in the late nineties and early years of the last decade, when people, duped into thinking that property prices would rise forever and never fall, were often prepared to pay ridiculously high asking prices for houses which were really not worth what was being asked. The banks encouraged this with apparently limitless credit (temporarily paid for by a greedy trade in increasingly worthless assets), and irresponsible television programming encouraged the idea that buying and selling property as a commodity to be traded was a surefire way to get rich. Estate agents (who make their money by charging a percentage of the sale price and therefore have an interest in overestimating values) also encouraged sellers to ask stupidly inflated prices for houses. The couple next to me at the time put their house on the market for forty thousand pounds more than the previous house on the street had sold for. The house needed some work but they couldn't understand why no-one was showing an interest when I spoke with them a month later. They were asking what an estate agent had told them they would easily get. Predictably though, a London based buyer bought it sight unseen for the price they were asking in order to add it to his 'portfolio'.
When the economic crisis hit, many of us had been seeing the bubble for what it was for years. It was difficult to understand though, when the true nature of much of the credit which had been available had been exposed, why more people did not then see the bubble for what it was. The government, afraid that tens of thousands might be sent into negative equity of have their homes repossessed, put measures in place which sought to prevent this happening, thus keeping the bubble inflated. This should not have happened though. Prices for commodities go up and they go down - that is the nature of things. Houses, when treated as commodities, are no different. Negative equity is a terrible experience but many who happily paid far too much for properties which were never worth it should have only themselves to blame. The ban on repossessions has also helped keep the bubble inflated. There are thousands of houses which are months or even years behind on their mortgage payments but are still permitted to be seen as assets worth huge sums by their occupants. In the harsh world of the natural economy, many thousands of repossessions would have taken place by now, which would have helped the bubble to deflate naturally.
If the bubble were to deflate back to where the natural economy would have it (as well as the Bank of England allowing interest rates to rise to what they naturally should be), asking prices and thus deposit amounts would naturally drop to the level that the real market (the people who have been properly checked and found worthy of sensible mortgage credit) can afford.
Then there is the culture of entitlement which afflicts our society. There are huge numbers of people in this country who could rent a house privately but instead feel that it is their right to be granted a council house with subsidised rent. Councils often do not help matters here by allowing people to make choices over their accommodation options which leave many buildings, particularly high-rises only partially occupied, while at the same time allowing thousands to clog up their housing waiting lists who should be being told that they are already earning enough to rent privately. Despite the continual talk of rising rents, this is not true everywhere. There are many places where rents have only risen in line with inflation for years. Yet thousands of people with stable incomes insist that they would never rent privately and must instead be given a council property, thus falsely skewing the overall numbers of people apparently in need of housing in the statistics.
I know landlords who are desperate to rent out houses which are lying empty. I also know people who got onto the housing list years ago and say they can't get a house but will not consider private rental despite the fact that they are now working.
Finally, of course, there are the second home owners. As far as I am concerned there is nothing wrong with owning a number of properties which are then rented out to tenants. We will always need landlords after all. However, far too often over the last two decades, people with good city incomes have bought up houses in rural areas to use as weekend retreats. This has had the twin results of reducing the availability of housing for local people and inflating prices to suit the spending power of wealthy individuals, as well as leaving many villages denuded of people during weekdays. This in turn has led to the loss of shops, post offices and bus services from many villages. I am not sure what the solution to this problem is, but it is definitely a problem. We need people in government to take it seriously and come up with a solution which rectifies it properly.
So yes, some houses will always need to be built, but in many ways, the apparent housing shortage and the inflated prices are symptomatic of deeper problems which need urgently to be addressed and overcome.
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