In many countries, including the UK, parts of Australia, Canada, USA and New Zealand, the housing crisis supply continues to keep those in power perplexed or at least that’s the message we’re receiving. More of the same blame-game, i.e. greedy landlords cause housing crisis.
In politics, pointing the finger at property investors, and promising tougher measures on them may win over naive voters. Still, eventually, real solutions are required to deal with the ‘real’ causes, i.e. lack of affordable homes for low-income earners and first home buyers.
Housing Plan A Win For Boris Johnson
In the UK, Boris hit a nerve and spoke the right language to the disenfranchised north, to secure their votes with his party’s election manifesto for housing. The Tories commitment to do more to solve the housing crisis starting in the north of England to get people in homes proved a winner.
The election was history in the making with many new blue-collar conservatives on board for the first time and Boris says he will reward their loyalty.
The Conservatives manifesto’s housing initiatives of long term fixed-rate mortgages and discounted starter homes are perfect incentives for first home buyers that have their home deposit. But what can be done to get more renters saving a deposit, so they also grab these deals?
Hard To Build Up A Deposit
Lenders require home buyers to put some of their own money in, and it’s called a deposit.
Average median house price
Statista.com reports the average median house price in July 2019 was just under £233,000. With a 5 per cent deposit, required, the total amount is £11,650. Most lenders will require up to 20 per cent deposit so which using our example of the average median home; the home buyer needs an eye-watering £46,600.
Average disposable income
The average annual disposable income for the FYE 2019 was £29,400. How long would it take you to save your deposit on a similar income?
Living at home with mum and dad, you’re likely to be onto a good thing with low or no accommodation costs. However, if you’re renting a room or house, achieving your full deposit amount may take you ten years or longer as annual rents and cost of living rises faster for low-income earners.
Increase Supply Of Affordable Rental Accommodation
So what’s the solution to get more prospective first home buyers into their own home using either or both the fixed-rate mortgages and home starter package?
Reduce demand for or increase the supply of affordable rental accommodation or a combination of both initiatives, as what we’ve learned over the years of our housing woes, there is never just one cause and never just one solution.
Reduce Demand In Private Sector
Getting first home buyers into their own homes is one way to reduce demand on rental accommodation, but as we’ve worked out, it takes time and lots of it, to save a healthy home deposit. Living costs have to come down, so renters have surplus disposable income they can save.
When rental property demand is less than the supply of available rental properties, the weekly rent is adjusted accordingly, and landlords lose money when their rental is vacant.
Reducing the pool of renters in the private sector takes the heat out of it and in time rents will stabilise and drop which lowers the cost of living for tenants and in theory, the savings can then go towards their first home deposit. The apartment boom in Sydney is an example of months of stagnant sales prices and weekly rents at the same levels as 2015.
Build Social Housing For Worst Off Renters
Another Government initiative is needed to reduce demand, and what you’re about to read won’t please everyone. 🙂
When Governments invest in social housing for the worst-off renters, they are no longer in the private sector, and with less demand, the renters in the private sector get a better deal.
Private sector renters can then save for their deposit and if they’re in the UK use Boris’s housing initiatives all the while those in society who are most in need are put up in purpose-built and fit for purpose rental accommodation.
So can the combination of all three initiatives work to solve the housing crises around the world? Well only if this third part comes to fruition.
Investing at home in your own country to stimulate the economy and at the same time, solve the housing crisis should be win-win. So with any luck, this will happen in the UK, post-Brexit and Commonwealth nations of Australia, Canada and New Zealand also take up the mantle to solve their housing woes.
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