Lack of Social Housing Will Force House Prices and Rents up by Lawrenson of LettingFocus

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I See Few New Houses
Imagine you are Gordon Brown. You have survived the election and its tough times. Or, if you prefer, imagine you are David Cameron, the perennially smoothly shaven new PM.
You know the dire state of public finances and you know that some government spending has simply got to be cut – but where do you cut?
Public sector pensions will be a candidate, sure, but that will take years to bear fruit in terms of lowering the burden on taxpayers.
I would guess that while all areas could come under the knife the two areas that are least likely to be cut will be health and then education.
Why? Well, health is an area where the government can arguably claim to have made some progress since 1997. Education is a big priority area too.
In both health and education I would guess that anything near the front line services will be spared anything much in the way of cuts.
So once all the many Questionable Quangos with their well paid Execs have been cut down a bit where else do the big cuts come?

Social Housing
I would guess social housing would be one area that’s very likely to see cuts because the savings could be quite big here and the government can always do what they have been doing for years – which is look to private landlords to take on the role of “Provider of Housing of Last Resort” through the Housing Benefit/ LHA system (at least until the public finances are back in shape.)
With not much new housing stock being added – whether private sector or public sector - this will only put further pressure on house prices and rents to continue their inexorable rise, at least in those parts of the country where the economy is still reasonably strong.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
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I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make money.
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I can answer most questions on letting property because I have been a landlord and property investor myself for over 25 years.

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Are Landlords Really Pricing People Out of Buying Property by Letting Focus?

I was on Radio 4’s Money Box programme on Saturday being interviewed along with Liz Overend of the pressure group Pricedout who call for action to stop people being priced out of the UK housing market.
I have a bit of sympathy with these guys because there is definitely a degree to which first time buyers are priced out by property investors.
I just disagree with them on the extent to which property investors are responsible for this.
The facts say that only approx 10% of English housing stock is in the private rented sector compared to 50% post WW2 and 90% back in the 1920s.
The rented sector in the UK is also very small compared to most other developed countries.
Also, only 10% of mortgages in 2006 were by buy to let investors compared with 28% by first time buyers and buy to let only accounts for 10% of all outstanding mortgages.
At the end of 2006, the percentage of the average first time buyer’s income that went on mortgage interest was only 16.8% which is just slightly above the long run average – stats going back to 1978 are available on the Council of Mortgage Lender’s website .

Alliance and Leicester Rearach Says Lots of People Dont Want to Buy
According to research in 2006 by the Alliance & Leicester one quarter of families either lives with parents or rents - and for over a half of these renting is a lifestyle choice.
In other words, they choose to rent even though they could afford to buy. (Another study by Abbey estimated that 6 million people could afford to buy but did not want the commitment)
So, surely, the real issue is for the government – this one and previous Administrations.
It is they who have presided over a huge fall in social housing stock and a lack of house building, all at the same time as a massive increase in population (caused mainly as a result of massive inward net migration.)

Landlords Contribution
The government knows that property investors have saved their necks by providing the finance for housing – finance which they have so miserably failed to provide – and that’s why they are being urged by their own advisers to tread carefully and not make any fiscal changes or any more legal changes that will only end up driving landlords out.
Having said all that, PricedOut and myself do agree about many things.

As I have said before in this blog, there is much that could be done to improve the rented sector and the tenants’ lot and there is much I find wrong with some property investors activities. I will be writing more about this here in the blog shortly.

ABOUT DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years. At LettingFocus we offer independent unbiased info for buy to let investors and landlords.

Property investment is largely unregulated and there are many sharks.
Unlike many in the buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.

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Copyright: David Lawrenson 2007. This blog is updated once a week.