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Why the housing market is in a mess

By Western Daily Press  |  Posted: December 12, 2013

Despite the obvious need, the clear demand and the huge economic benefits, we still fail to invest in housing, argues David Orr, chief executive of the National Housing Association

Despite the obvious need, the clear demand and the huge economic benefits, we still fail to invest in housing, argues David Orr, chief executive of the National Housing Association

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How on earth did it come to this? We already knew that we are not building nearly enough new homes to keep pace with population growth and changing demography.

In 2012/13 we managed around 107,000 new homes despite common acceptance that our minimum requirement is 240,000. But what is more worrying is that this is fewer even than in 2009, the year after the financial crash, when pretty much everything ground to a halt. This ought to be the time that these numbers are really taking off. They're not.

The National Housing Federation's Home Truths report into the housing market shows with disturbing clarity just how tough things are.

We already knew that an entire generation of hard working people on average, and usually even above average income, is unlikely to be able to buy a home, especially in some areas like London and the South East. The news that house prices look set to climb by a further 35 per cent by 2020 is profoundly bad news for those who still aspire to buy their own home. And we also knew already that this means that more and more people are turning to the private rented sector to rent their home, even though rents are rising there even more quickly, by an increase of 39 per cent in rent by 2020.

What we perhaps did not know, or not fully realise, is what this means in practice for the millions of people directly affected. It means that people privately renting are now typically paying 50 per cent of their disposable income in rent. In 10 years that will have risen to 57 per cent. It also means that more and more people are relying on the state to support their rent as costs rise and wages fail to keep pace.

Shockingly, over the past fours years an extra 310 working people have been making a claim for housing benefit every single day. That's one more person every five minutes. Ministers are right when they say spending on housing benefit is out of control. This is why. The housing market is a mess. Imagine if we were spending £24billion a year building new homes that people could afford rather than spending it bailing people out on rapidly rising rents.

It is all incredibly frustrating. We know that building a new home creates 2.3 new jobs. Build 1,000 and you put 2,300 people into productive work, paying tax and spending money in the local economy. You create new homes which support the growth of our best businesses and industries. Each £1 generates £2.41 in the wider economy, thereby stimulating further growth and economic activity.

Yet despite the obvious need, the clear demand and the huge economic benefits we still fail to invest in housing. We still have the hysterical reaction of the well-heeled and well housed to the idea of new homes being built. We limit our own economic recovery and social well-being. We appear content to leave hundreds of thousands of young people with no realistic prospect of finding work. This makes no sense.

With the right support in a nation that really wants to say yes to homes, they could do a huge amount more. For all our sakes it is critical that they can.

CRISIS AT A GLANCE

England is already extremely short of housing and the gap between supply and demand is widening. As a country we need 240,000 homes a year just to meet demand but house building numbers are falling. In 2012/13 107,000 new homes were built, 10 per cent less than in 20094.

Rents are soaring out of the reach of many. Currently rents take up an average of half of people's disposable income but in a decade's time that figure will have rocketed to 57.5%.

House prices will increase by another 35 per cent by 2020, leaving a huge swathe of the population locked out of home ownership for life.

One working person every five minutes is turning to housing benefit to help make ends meet, with the number of employed claimants up 104 per cent since 2009. As a result, Government spending on housing benefit has risen to £24billion, but most of this money is going to private landlords rather than building the new homes which would stem rising housing costs.

THE NHF

The National Housing Federation is the trade body for housing associations in England and the voice of affordable housing.

The federation believes that everyone should have the home they need at a price they can afford. That's why the federation represents the work of housing associations and campaigns for better housing.

Housing associations provide two and a half million homes for more than five million people.

Each year housing associations invest in a range of neighbourhood projects that help create strong communities. For more information, please visit: www.housing.org.uk

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