Housing market 'broken' - Shelter



Property prices in England are in danger of doubling over the next decade to around £446,000 unless stronger action is taken to tackle the "broken" housing market, a report from charity Shelter warns.

The research, compiled by Shelter and KPMG, found that property prices could quadruple in 20 years if more is not done to tackle the housing shortage which is seeing 100,000 fewer homes than are needed being built each year.

The average house price is estimated to rise to more than £900,000 by 2034 if current trends continue, based on modelling using the Nationwide Building Society's house price index.

The report, titled Building The Homes We Need, maps out a programme for the next parliament that it says would help the next government turn the tide on the housing shortage by raising house building levels
to 250,000 a year by 2021, which would meet the growth in demand.

Among the suggestions to fix what Shelter describes as a "broken" market is the creation of a new "national housing investment bank", which would provide low cost, long term loans for housing providers, as part of a programme of new ways to finance affordable house building.

It said the bank could also offer special savings accounts, such as "housing Isas" to raise finance from retail deposits.

Experts have pointed to an imbalance between the supply of homes for sale and demand from would-be buyers as putting an upward pressure on house prices as the housing market recovery gathers pace.

The report said that if wage growth had kept pace with house price inflation since 1997, the average worker would be earning £29,344 more a year.

In the 1950s the average house cost just over four times the average salary, but by the peak of the property boom in 2008 it had risen to more than eight times the typical wage.

Despite Government support schemes, the housing market is "increasingly skewed" towards people who are reliant on getting cash help from their parents, the report said, with only around one third of first-time buyers in 2011 managing to get on the property ladder without needing any extra financial help.

The research estimates that more than half of all 20 to 34-year-olds could be living with their parents by 2040 due to being "priced out" of the housing market unless there is radical change.

The report said: "If nothing is done to increase the supply of homes, house prices will almost certainly continue to rise faster than wages, pricing yet more people out of home ownership."

The report also suggests empowering local authorities to create "new home zones", which could generate over 8,000 extra homes a year.

This idea would involve a local authority selling a plot of land off for a cheaper price to a developer who in return will build affordable homes, rather than the land going to a developer who might pay more for the land but wants to use it to build homes at the top end of the market.

The report also suggested that developments could be speeded up by charging council tax on homes that should have been built after a reasonable period for their construction has passed.

More garden cities should also be built in "high demand" areas, the report said. It said the next government should consult on and propose sites for up to five new garden cities comprising around 30,000 homes.

The report said more should be done to help smaller builders get back into the market by using government guarantees to improve access to their finance.

Campbell Robb, Shelter's chief executive, said: "Our chronic shortage of affordable homes means that a generation face a future of living in their childhood bedrooms into their thirties. But this report proves that the next government can turn the tide on the housing shortage within a single parliament.

"The thousands of young people and families forced to watch their dream of stable home slip further out of reach are already paying the price for successive governments' failure to build the homes we need.
With housing now a top issue for voters, politicians of all parties are rightly beginning to feel the need to act."

Housing Minister Kris Hopkins said: "This report is alarmist and takes no account of the work already well under way to get Britain building and deliver the affordable homes that families need. Since 2010 we have built 170,000 affordable homes and are set to deliver 335,000 by 2018.

"Improving the housing market is a vital part of our long-term economic plan. That's why we've cut the deficit we inherited to keep interest rates at a record low and prioritised limited financial resources for investment in housing. We are also helping hard-working people onto the property ladder with over 27,000 people helped through the Help to Buy schemes."

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