Being Duped by Affordable Homes
Don’t be duped by ‘affordable homes’ or it could cost the earth
Take a walk around some of our key towns and villages and I bet you will see more than a few mass-volume new home developments. The news is full of stories of first time buyers (FTBs) finding it difficult to get on to the property ladder due to an historic lack of ‘affordable homes’. So on the face of it, there is a clear need to increase this type of housing.
But look behind the glossy brochures and pristine new builds and you will see a picture that is far from rosy.
I wrote in March about politicians misleading the public about ‘affordable homes’. These properties are meant for people on the lowest of incomes, who genuinely struggle to afford a mortgage. Therefore, if ‘affordable homes’ were intended for this sector of society and not for FTBs generally, why are we seeing so many being built?
Currently, large scale developers are incentivised to build on greenbelt land to reinforce the political line. Not only are they quicker and easier to build, but there is no VAT payable by them, a sizeable saving. These developers expect to take home around a 25% profit on every home they build. This calculated strategy bolsters their share price, satisfies their shareholders and ensures the business continues to grow. But at whose expense?
National news stories have highlighted what is known as the Leasehold Scandal (#fleecehold on Twitter), where the freeholds on these poor quality homes are quickly sold on to investors who are more interested in making money, than making amends when developers have cut corners. We hear horror stories about shoddily-built homes without proper insulation, leaking new roofs, or ground rents being hiked once the freehold is sold on.
As I am out and about on business all over Yorkshire, I see many empty commercial units and dilapidated properties. What if the Government created an incentive to convert these into homes, rather than to build on our precious open spaces? After all, we are only an island – once the land is gone, it’s gone. I also see numerous four and five-bedroomed houses being built, but these are not what we need. We need genuinely affordable homes for FTBs and more appropriate properties for those looking to retire and downsize.
The Government tells us it is helping FTBs by increasing SDLT (stamp duty) in the upper price brackets to fund ‘affordable homes’ projects. Actually it has made the situation worse and have created a more competitive market in the low to mid value sector. By forcing purchasers to reconsider buying in the upper price brackets, they are now lowering their budgets and starting to compete with FTBs and second movers, therefore pushing prices up.
New-build homes by their nature are difficult to add value to, as the developer will have mostly maxed out the planning potential. Therefore owners are relying on market appreciation to increase their property’s value. However if the Government is trying to flood the market and bring prices down, it will create a greater two tier property market. So what is then going to happen in the long term?
Overall we have got our property policies wrong, which isn’t assisted by our fourth housing minister in the last 18 months. While I do not profess to have the answer, building the wrong types of property on our ever-decreasing open spaces in order to satisfy short term political PR, is not the way to go. The underlying problem in all of this, is that property prices have outstripped salary increases for the last 20 years. Combine that with more stringent mortgage lending criteria and various botched Government policies to patch problems, it means that overall we have a bit of a mess. It is clear we must do more to help FTBs, however the issues at stake reach far beyond this.
Alex Goldstein is an independent bespoke property consultant in Yorkshire and London (www.alexgoldstein.co.uk) 01423 788377