Guy Brandon Posted: 21 November 2011
Keywords: Finance & the Economy,
The government has unveiled plans to address the lack of affordable homes and increase the number of first-time buyers. A £400 million fund will be used to restart stalled building schemes, and buyers will be able to borrow 95 percent of the new home's value, with the government underwriting part of the risk. 'Right to buy' will be made available once again, with the money from sales of social housing going back into the building industry to create more affordable homes.
Biblically, this idea has a lot to commend it. Private ownership of property was an ideal that early Israel took very seriously, with each family receiving a permanent stake in the Promised Land (Lev. 25). This maintained rootedness and community cohesion, and gave families a shared economic stake. Along with the debt cancellation laws, the land laws meant that no family would be reduced to a state of long-term poverty.
The government's initiative has the joint aim of stimulating one sector of the economy and reducing the housing crisis: 'It is hoped that about 450,000 mainly affordable homes will be built by 2015.' It is impossible that either aim will be met solely by the new policy. Demand for housing far outstrips supply, and will continue to do so for the foreseeable future - 4.5 million people were on housing waiting lists in 2010. As well as an increasing population, average occupancy rates have been steadily falling for the past 50 years.
In 1961 the average UK household size was 3.1; in 1971 it was 2.9 and by 2009 it was 2.4 (National Statistics). The proportion of single-person households doubled from 14 percent in 1961 to 29 percent in 2009, driven by three categories of people: mobile and single young professionals, middle-aged divorcees, and older people who live alone.
There will be a predicted 27.8 million households in England by 2031, with an average of 2.13 people living in each. If average household size could just be maintained at current levels, that would save building over 3 million houses. For every 0.1 people it can further be reduced by, another 1 million houses would be saved.
Although the government's homebuilding initiative is a step in the right direction, without addressing the underlying factors that drive fragmentation it will be a drop in the bucket. Conversely, increasing family cohesion and rootedness could have an enormous impact on the housing gap. This might be partially achieved through tax breaks for families (nuclear and extended) who support dependants living under the same roof, and with council tax rebates for joint occupancies.
One question that remains is where that money might come from - and whether it would represent a better long-term investment than the £400 million about to be spent on building houses?