Peter Girling's Blog

This week’s report from The National Housing Federation highlighted a number of serious issues blighting the UK housing industry. It stated that the UK’s ‘chronic’ undersupply of homes is reaching crisis point; and whilst the government wants to embark on a £4.5bn project to build 170,000 affordable homes over the next four years, developers are cautious, fearing that people will not be able to raise the finance for mortgages against these homes.

It is clear that the combination of high house prices and borrowing costs is making homeownership out of reach for an increasing number of people. The number of home owners is estimated to decline from 67% to 63.8% in the next 10 years – a factor which will push up rental prices up and arguably, push quality down. Things are also looking bleak in the social housing market. A recent report from the National Landlords Association claimed that over half of UK landlords plan to cut the number of properties they let to social housing tenants as a result of government cuts to Local Housing Allowance. With 1.5 million people on the waiting list for social housing already, surely this is a ticking time bomb for the government?

An obvious solution is being overlooked. 80% of elderly people in the UK are homeowners. They are sitting on property worth an estimated £3 trillion – many of which are under occupied family houses. These are the high quality family homes that are currently chronically undersupplied. If elderly people were encouraged to move into suitable, high quality retirement housing to rent or buy these homes could become available. Herein lies another problem – retirement homes are also in chronic undersupply. The government needs to work backwards to solve this Catch 22 situation. Rather than simply ‘Get Britain Building,’ it needs to first needs to think about how to solve the crisis and look first at building attractive retirement properties which might get the market moving again.

Like most people, I was shocked and saddened by the appalling scenes of riots and looting across London and other parts of the UK. One of our developments in South London was in lock down last night in expectation of the troubles, with elderly residents worried about their safety. Fortunately, the majority of our developments have house managers on site to reassure residents and all our developments are secure. We want to reassure residents in all our developments across the UK that we will do all we can to maintain their safety and security.

Whilst we felt more reassured by the presence of police reinforcements in the Capital last night and relieved that there wasn’t any trouble in Bromley, it was worrying to see copy cat rioting in both the West Midlands and Manchester. From the television images and eye witness accounts pouring in, the majority of these rioters were teenagers and even children, with no respect for authority or themselves.

But, whilst commentators and the government deliberates on the motivations behind the riots, it strikes me they are a culmination of the UK’s deep rooted social and culture problems, and the rewards of political inefficiency.

For many years, standards of education have been slipping in the UK. Youngsters are not being trained, there is a lack of apprenticeships and suitable jobs. These ‘children’ are facing a hopeless future, they have nothing to do and so think they have nothing to lose. Our society and culture reveres consumerism and instant reward – and this seems to be the only priority for these young people. But these problems and issues have not appeared overnight. They have been ignored by this government and previous governments, and arguably were bound to surface sooner or later. What is needed now is strong leadership, but equally for measures to be put in place that tackle the roots of these problems in the homes, schools and communities that have been so badly affected.

Many an ‘old fogey’ has suggested bring back National Service, which is often loudly pooh poohed. But this idea does have much merit whereby young people can be taught respect for their peers, pride in their appearance, as well as a useful trade. It does not have to be a military-based training, but a compulsory two years where young people could be trained by the State as carpenters, joiners, electricians, plumbers, decorators, carers, gardeners, mechanics, cooks and all the other trades we need etc., giving them useful qualifications and much needed self esteem. Come on Government let’s have some positive leadership and stop worrying about being re-elected in three years time.

The government announced at the end of last week the successful bidders in its ‘Affordable Homes Programme 2011-15’, with Housing Minister Grant Shapps revealing the 146 housing associations, local authorities and other providers who will be delivering 80,000 ‘affordable’ new homes through a £1.8 billion government scheme.

Of the 80,000 new homes, 29 per cent will be larger family-sized homes with three or more bedrooms, almost 10 per cent will be supported housing and 9 per cent will be homes in rural areas.

Worryingly, there has been no talk of any of these affordable homes being allocated for retired people, nor any mention of social housing being set aside for older people in serious need of more appropriate housing.

One thing is certain, if the retired community continues to be overlooked, it will be a grave mistake. There is a major shortage of suitable retirement housing for sale and rent in the UK. The government should be concentrating on developing new purpose-built homes on brownfield sites in our towns, cities and villages for retired people who live in under-occupied homes and wish to move to more appropriate housing. These under-occupied homes can then be re-furbished to house families and others in need.

Another big issue is the fact that since 1 April 2011, LHA funding levels have reduced. This factor combined with low returns on savings has led to an increasing number of elderly people in rented property struggling to keep their homes. These problems are arising as a direct result of the funding cuts and because this government, like its predecessors, is failing to recognise the difference between those who are able or unable to work.

This situation can only get worse. By 2035, 23 per cent of the population is projected to be aged 65 and over and 18 per cent will be aged under 16. It is high time the government put the elderly before young people – they deserve more from this government. Mr Shapps, when will you and your colleagues in Parliament start to listen?

There has been a flurry of bad economic news recently. Inflation rose to 4.5% in April and the Bank of England downgraded its economic report and predicted that inflation will rise this year to 5%. The Governor of the Bank of England, Mervyn King, stressed that the UK faces uncertain and difficult times ahead and blamed the rise in inflation on the increase in VAT to 20% in January, as well as higher energy prices and increases in import prices.

For the majority of people and in particular the retired population, these economic reports will make uncomfortable and worrying reading. The elderly population has been hit already with high cost of food and rising energy prices. The continued low interest rates have also ensured that interest on any savings in recent months has been negligible. To add to the gloom, Centrica, the owner of British Gas, stated that the rising price of wholesale gas will result in price hikes in customer bills next winter.

The cost of energy is becoming an increasingly important issue for buyers and tenants. Energy Saving Trust last week criticised the government’s Energy Performance Certificates for being complex and urged Estate agents to display a property’s annual energy bill on its particulars when it is advertised. The Trust wants home energy consumption to be as transparent and easily understood as miles-per-gallon for cars so consumers can choose properties with the lowest bills. It highlighted the huge variations in energy bill prices on properties of similar sizes, depending on factors such as insulation and boiler efficiency. It said that the combined gas and electricity bill for a four-bedroom house ranged from £700 to £2,300 a year.

I agree with the Trust. There needs to be greater transparency in the housing industry about energy efficiency levels. The rising energy prices will mean that energy efficiency will inevitably become a factor in the negotiations of buyers and tenants in the future. We know this is a major issue already for our tenants. For the past few years, we have taken various steps to reduce their utility bills by making our rental properties as energy efficient as possible. A number of developments have received energy efficient makeovers with lofts and in some cases cavity walls insulated and energy efficient light bulbs and draught excluders installed. Our tenants can rest assured that we will be continuing to invest in energy efficient initiatives ahead of next winter. Let’s hope this will provide a little respite from all this bad news.

It was clear from yesterday’s budget that Mr Osborne has taken note of the urgent need to boost the UK’s stagnating property market.

Several of his announcements will bring some relief to different first time buyers, home owners with mortgages and potentially, private landlords.

The announcement of a £250m FirstBuy programme will see the government and house builders jointly offer loan help for first-time buyers purchasing newly-built homes. Buyers will need to save a deposit worth 5% of their property’s value, with the government and house builders putting up 10% each through an equity loan, enabling people to qualify for 75% loan-to-value mortgage. The equity loan would be interest-free for the first five years, with interest charged at 1.75% in year six, and at inflation plus 1% thereafter.

Whilst this is good news for first time buyers, the scheme will only help an estimated 10,000 buyers as it is focuses on new builds only, the scheme is open for a year only and most importantly, depends on the banks’ willingness to offer credit to first time buyers something which hasn’t been forthcoming in recent months.

Homeowners struggling with mortgage repayments will have some relief too as government will extend support for mortgage interest payments for another year.

There was some good news on planning with the government announcing it will pilot land auctions, which will incentivise local authorities to release land for development. But this will take time and is dependent on local authorities agreeing to release land at affordable rates.

Finally, there was an effort to improve the availability of good-quality, privately rented properties with the announcement of a reform of the process for calculating stamp duty payments. Rather than using the existing method, stamp duty on bulk purchases of multiple homes will now be based on the average cost, potentially allowing professional landlords to invest in a greater number of properties to rent out to tenants.

However, whilst these moves will undoubtedly help some people, the measures are modest and selective. The government’s housing crisis was not just caused by a market that was inaccessible for first time buyers; there is an urgent need for good quality housing in the UK for families and the retired, amongst others. Missing from the budget were any targeted measures to encourage the growth of the UK’s Private Rented Sector to accommodate these people.

Such measures might include a reduced and flat rate of stamp duty on acquisitions regardless of the size of the transaction, or a beneficial rate of CGT for individual tax payers if their investment property is available for letting for more than three years.

So whilst there were concessions to the housing industry, there weren’t enough. The Chancellor has only scratched the surface and until other problems are addressed, the housing crisis will not be solved.