Memorandum by Adrian Britton FRICS (AH
18)
1. PERSONAL INTRODUCTION
1.1 I am a recently retired chartered surveyor
whose professional career was initially in estate agency and property
valuation and residential property management, followed by 20
years in local government service, including 14 years as an Assistant
Director of Housing and latterly Director of Housing in a London
borough. During this period I also served on the Housing Committee
of the Royal Institution of Chartered Surveyors, latterly as its
Chairman for five years. Subsequently I became an employee of
the Institution, serving as Director of Professional Services
and latterly as Executive Director of Corporate Strategy and Governance.
1.2 I have never had party political affiliations
and now have the unfettered right to express my own professional,
personal and political opinions, which I have pleasure in so doing
here in respect of the terms of reference of the Committee's new
Inquiry on the affordability and supply of housing. I am sure
that the Committee will appreciate, however, that in reaching
conclusions on the best way forward the impact of policies (and
desirable policies) in other areas, such as planning, transportation,
education and taxation, need to be taken into account.
2. ECONOMICS
2.1 House prices and private sector rents
are determined principally by the demand for the particular dwellings'
the ability of individuals to pay, their preparedness to do so
having regard to their personal circumstances, aspirations and
prospects, and the availability of other suitable dwellings. The
cost of construction of a dwelling does not affect its value pro
rata. The price of the land on which the dwelling is built is
a "residual figure" what the builder can afford to pay
in the light of his or her other costs and the expected sale price
of the dwelling when constructed. (It follows that statutory higher
environmental, space, construction, health and safety standards
could be imposed in the vast majority of cases without increasing
house prices and rents by more than any increase in the amounts
that prospective occupiers are prepared to pay for the "better
product").
2.2 As a nation we are paying much more
than we need for a basic necessity, housing, because there is
a shortage of it in the (most) places where people want and need
to live. Adopting a suitable vacancy rate and taking a defined
policy position on the "right" to purchase a second
home within the UK, the full meeting of "one home" housing
requirements would reduce the price of housing in real terms,
releasing personal resources for spending, saving (compulsorily
for pensions?), better public services, including investment in
infrastructure provision, and/or redistribution through the taxation
system. However, achieving this, in my view, highly desirable
scenario can only be attained gradually, because the assets and
mortgage liabilities of so many are principally in home ownership,
and a substantial reduction in levels of house prices, with the
creation of negative equity, is not politically feasible and is
not in the interest of the UK economy. Moreover the construction
industry has not the present capacity to achieve the "transformation"
rapidly; the need to expand of the construction industry requires
urgent attention.
2.3 Reducing housing prices (both in home
ownership and private sector renting) in real terms by fully meeting
need has other economic and social advantages additional to those
mentioned in the preceding paragraph. Some of these advantages
will be identified below.
2.4 Also, it would be desirable economically
and socially, to achieve parity of housing sector esteem, to levy
all local authority and housing association rents at assessed
market levels, thus sweeping away the terms and concepts of subsidised
and "affordable" housing. A housing allowance scheme
would be necessary for those households unable to afford the market
rents (irrespective of ownership sector) of reasonably suitable
dwellings in the particular region for households of the particular
sizes and composition. I believe that some steps in this direction
are on trial in some areas at present, with the more limited aim
of preventing rent inflation as a result of the availability of
housing benefits. The rules and tapering of the housing allowances
to balance disincentives to working and to seeking promotion in
employment would need careful consideration. Deductions from the
housing allowances otherwise payable should be made to reflect
"unacceptable' levels of under-occupation arising and maintained
after a specified period. Please see also paragraph 3.4 below.
3. POLITICS AND
SOCIAL CONSIDERATIONS
3.1 Home ownership is part of the culture
and the aspiration of the vast majority of the adult UK population.
I believe that this aspiration is not based purely on the perception
that the value of owner-occupied housing rises faster than inflation
and is therefore a good investment. (If this were so then that
perception would wane if housing demand and supply were brought
into equilibrium.) The aspiration for home ownership is based
also on the perceptions that, provided that the mortgage repayments
are maintained, home ownership brings with it security of occupancy
(with the facility to move when the occupier rather than a landlord
chooses); the opportunity to build up financial security and borrowing
power through accumulation of asset value; the prospect of reduced
housing costs when the mortgage is paid off; and the ability to
pass on the value of the property to family members on death.
Paying rent is often seen as a waste of money when owner occupation
is a realistic option.
3.2 A further benefit of owner-occupation
is seen to be the greater attention that owner-occupiers give
to the appearance and improvement of their homes and environs
than many landlords and tenants do, to maintain and improve utility
and asset value. This activity creates social pressure on other
owners to do likewise and to take steps to discourage nuisance,
vandalism and other crime.
3.3 I believe that the present lack of opportunity
of many of the young, especially the single (including those affected
by household break-up, since house purchase usually requires two
income earners) and those from less affluent families, and of
those others unable to command sufficient income from employment,
to step on to the home ownership ladder will become increasing
resented by them and their parents. In my view it is desirable
that public policies be adopted and implemented to open up home
ownership as a realistic choice for all in "permanent employment"
who aspire to it. Most graduates, and others, wish to "stand
on their own feet" and make their way in life independently,
rather than have, where possible, to ask their parents' financial
help. Governments' failure to ensure that young adults in employment
can afford home ownership without seeking their parents' financial
help is, I believe, increasingly regarded by such parents as an
implied but resented government expectation. It seems to me that
it would be much fairer to all if government policy was founded
on a stated assumption that state assistance to adults of 22 and
over will be framed on the assumption that their parents have
no further financial or other responsibilities towards them.
3.4 The extension to owner occupation of
the housing allowance scheme advocated in paragraph 2.4 above
on the same formula, pitched to fund a 100% mortgage on a "deemed
suitable for the household" dwelling in the particular area,
would give all in full-time employment but in need of financial
assistance to afford their own homes a real choice of tenure and
the ability to change that choice when they wished. I believe
that giving all the employed the opportunity of a "stake
in society" could reduce substantially the extent of disaffection
which many younger people with low incomes harbour, and which
stimulates crime. Further, it seems to me quite wrong that special
schemes are apparently required with ring-fenced funding to enable
teachers and other "key workers" to buy homes, presumably
effectively locking them into employment in this sector and detracting
from their housing mobility. What does this say about the level
of salary and status deemed appropriate for such vocations? And
surely these factors must deter some of the best suited to these
jobs from seeking careers in these sectors, foregoing some of
the advantages described in the paragraph 3.1? Transitional arrangements
for extension of the suggested housing allowance scheme to the
owner-occupied sector might be necessary to prevent unnecessary
house price inflation through a lack of supply dwellings for sale.
Ideally the supply of dwellings for sale in the particular region
would be increased before the expansion of the purchasing power
which the housing allowances would provide. A temporary right
to buy their existing home might be accorded to those previously
paying rents below market levels, to mitigate demand for private
sector dwellings.
3.5 I confess to not having computed the
gross cost a housing allowance scheme on the above lines, but
point out that there would be other public sector savings/income
resulting from ceasing to subsidise the cost of some dwellings,
the economic growth that more housing would stimulate, reduced
unemployment from a larger construction industry, higher employment
resulting from the incentive to work to gain a housing allowance
entitlement to support house purchase, and a reduction in the
costs of crime and ill-health. Moreover meeting reasonable housing
requirements is a matter of priorities' a higher one in my submission
than foregoing income tax on ISAs from those able to invest £7,000
a year and paying £200 fuel allowances to pensioners paying
higher rate income tax, and windfall gains in land values going
largely untaxed. Also, I suspect that more, younger households
in their own self-contained housing would increase the birth rate,
a longer term economic advantage.
3.6 I see two dangers of making home-ownership
an option for all employed households:
(1) People may be tempted to buy relatively
cheap dwellings which have environments and disadvantages which
make them very difficult to sell, especially in weaker market
conditions. I suggest that there should be a specific obligation
on the proposed home condition inspectors to identify such properties
in their reports. Lenders should be obliged to reflect this matter
in the loan to value ratio they adopted.
(2) Notwithstanding what I have said
about home ownership instilling pride in dwellings, there would
be some young people who would be entitled to the envisaged housing
allowances facilitating home ownership whose life styles would
cause substantial annoyance to their property-owning neighbours.
The nation would be "trading off' some street nuisance from
youngsters who are inclined to go out more to be away from the
parents with whom they are lodging, for more neighbour disputes.
3.7 I do not favour the active promotion
of greater homeownership as a matter of public policy. I believe
that would be socially divisive. I believe it is better for government
to provide a level economic and tenure-neutral financial and planning
framework, and thereafter let the market decide the balance of
home ownership and rented occupation.
3.8 The expansion of new housing supply
to meet all requirements upon it is a politically difficult matter.
Because it is thought to devalue existing property and change
environmental character, the "not in my back yard" syndrome
is rife and makes it very difficult for local councillors to support
suburban and green field housing land allocation and development.
I regard attempts at the introduction of regional government and
planning authorities as an attempt to circumvent such problems.
In my view central government has an over-riding duty (to which
it is paying increasingly courageous but still inadequate attention)
to ensure that the nation is suitably housed, and I really do
wonder whether the retention of planning powers within democratic
local government is in the public interest.
3.9 Fly over the United Kingdom and any
objective person should conclude that there is plenty of room
in this country for enough housing for everyone without causing
an unacceptable amount of environmental detriment, but that is
not to say that I favour "green field" housing development
wherever there is a market for it. In particular, London and the
South East is under particular pressure and it does seem to me
that more needs to be done to encourage location of new employment
and housing outside this region. This ought not to be so difficult
as it was, having regard to the extent to which communication
can now be carried out electronically.
3.10 In my view not enough attention has
been given to the need to redevelop large, older urban areas incapable
of piecemeal renewal, and creating new environments and schools
acceptable to households of all income levels. The scope for higher
densities in such areas is often substantial, but the amount of
existing owner occupation dictates that compulsory purchase is
almost inevitable.
4. CONCLUDING
COMMENT
4.1 Over the last forty years the effectiveness
of UK housing policy has been dogged by a lack of political consensus.
The removal of mortgage interest tax relief has reduced the housing
political temperature substantially. I do urge the political parties
to find common ground on the matters of the full meeting of housing
demand; where that demand should be located; and the provision
of adequate financial support to households who need it (rather
than to the cost of housing provision), to remove unnecessary
uncertainty for the private and corporate sectors in taking housing
investment decisions. In the longer term, this approach would
minimise the need for public financial support for housing provision
and households' occupancy costs, and reduce public sector costs
related to ill-health, social discontent and consequential crime
stimulated by insufficient and environmentally unsatisfactory
housing.
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