***Originally posted 14/11/2014***
The UK economy is inextricably linked to the housing market, this is played out with the ever inflating house prices of the nation somehow saying that our economy is growing thereby promoting confidence in the global markets for the benefits of national investment, funding, employment etc etc. I recognise that such global forces are important and here to stay, however I am very uncomfortable with the fact that house prices are becoming exponentially higher than can be considered affordable, that is, beyond the reasonable reach of the general population. The average monthly private rent in the UK (excluding London) is now £728, and £1,466 in London, it said. Despite the falls in areas such as Scotland, the south-east and east Midlands, overall rents have risen by 8.2% across the country in the last year, said HomeLet, part of the Barbon Insurance Group. Even excluding London from the figure brings rental inflation to an annual 4.6%. (LINK)
The above referenced article states that house prices around the South East are rising so fast that they are outstripping London’s. The majority of people who live and work outside of the capital are therefore in direct and untenable competition for housing stock with three main groups :
1 – London workers (who tend to earn a capital weighted wage) looking for a commutable home
2 – Students – Houses in Multiple Occupancy are a fast rising housing category (and business venture) which reduces the availability of family sized homes
3 – Oversees investors looking for financial returns from the UK housing market rather than a home to live in
The capitalist and conservative mantra “competition is good for business” hangs heavy here. FOR BUSINESS. When did people’s ability to afford decent housing become an issue of business? Housing is a commodity just like everything else these days, therefore why should we – the general public, the citizens of this country – consider ourselves to have any kind of right to affordable housing? We are expected to compete, just like the businesses (private landlords included) who own, rent or build our houses. Let’s have a look at the 5 reasons why capitalism is good for business (according to Forbes anyway) and analyse what this actually means for the housing market and the provision of affordable and decent quality homes.
Competition leads to innovation
“Competition leads to innovation. If you’re the only player in your field, it can be difficult to improve. And if you’re working in a crowded market, you won’t succeed by doing what everyone else does. Healthy competition encourages change which will distinguish your company from others.”
I am struggling to see areas where innovation is taking place in the housing market. Whilst we regularly see architects and designers coming up with exciting homes for wealthy clients or compact and modular concepts for social housing how often do they come to market? The only idea that I can think of that has actually made it to the market place in the last decade is the utilisation of shipping containers for housing, (LINK) and that’s nothing new given that people have been utilising them for housing for decades all over the world. One of the biggest reasons why innovative ideas don’t make it to the market is because of the associated requirements that go along with the material product itself, namely insurance and finance. New products are risky, this means that both lenders and insurers are reluctant to lend on them, if people can’t access security to acquire an innovative home then they can’t have an innovative home. Competition is squashed enabling the businesses to control the market. The notion of the market controlling itself is a lie.
Compete for customers
“As one of several companies offering a similar product, you are forced to compete for customers. Improving your customer service will garner loyal followers.”
In both the rental and purchase sector estate agents are considered to be one of the most loathed professions within our western society. (LINK) After interacting with many different agents within the housing market over many years I am yet to find an agent that offers good customer service from a genuine care for their customers. A combination of arrogance, greed and intentional confusion creates a smokescreen that enables agents to hold onto their market without having to be better than their competitors.
Competition shakes off complacency
“Competition shakes off complacency. If your company is consistently trying to innovate and better itself, your employees will be encouraged to push themselves.”
We’ve already addressed the idea of innovation in the housing market and noted that the lack of products (both tangible and financial etc) however the issue of complacency is one that reaches further into the ideas surrounding new products and their ‘need’. An industry that does not bring new products to market demonstrates it’s underlying sense that there is no need for innovation. Clearly this ‘sense’ demonstrates a complacency within the industry, one that is reducing options for people and one that does not seek to encourage it’s employees to ‘push themselves’.
If the market is stale and has no determination to push into new ground then it will either atrophy or it will embed itself. Presently we witness a housing industry which has embedded itself in our economy, political arena, society and culture with a root that goes down very deep. Estate agents, landlords, property managers, housing officers all the way up to politicians are not pushing the industry forward, they are actively seeking to maintain a system that presents strong figures on a balance sheet rather than one that seeks to serve it’s citizens with divers, affordable, accessible and innovative housing solutions.
Targeting your core audience
“Competition forces you to focus on your core audience. If you are targeting a specific geographic location or demographic, market challengers in that setting will encourage you to pay attention to your target group. In doing so, you will be able to better provide for your customers.”
In recent years there has been a strong push towards provided people with the means to purchase property. This has come through several means; government backed schemes to provide affordable housing (homes priced at 80% of ‘market value’ – market value is an issue that I will address in due course), key worker loan schemes, social housing schemes are a few of them. The purchase of property is seen in this country to be a badge of success, something that defines an individual or family as being somehow successful. There is still an unwritten and unspoken stigma attached to renting a home. Part of this stems from the fact that there is a sense of stability associated with owning your own home, especially where there is little security for those in the private rental market to ensure long term tenancies where required or requested.
The core audience for the housing market is therefore those who do not own a home, the targeting of this demographic demonstrates that housing (as an industry) is being driven by economics rather than the needs of people and their constraints. There is no no driver for the industry to better provide for it’s customers as the are no market challengers, there is no alternative to the current system of mortgage or rent.
”Seeing what your competitors do well can teach you about your business. Their practices will provide you with valuable insight into the state of the market, and help show you what works – and what doesn’t.”
As we’ve already discussed the housing market is restricted to only a few traditional products and services, it is maintained by companies, firms, agents who have little drive to deliver innovation or offer alternatives and is underpinned by a financial and insurance sector reluctant to enable change or development. With that somewhat damning conclusion already compiled it is difficult to see how any of these actants in the field might compare themselves to their competitors to gain any valuable insight. The practices observed would likely only serve to galvanise the existing system and further hold onto the industry.
So, doom and gloom, what can be done? A pessimist will say that’s it, there is nothing anyone can do. A cynic will claim that surely something could be done, but it won’t happen because there is too much investment in the existing system to see any real change. A sceptic will think that this is yet another conspiracy theory that seeks to make us think that we don’t have the control we think we should in our democracy. An optimist will look at all the innovative schemes being presented by designers, architects, free-thinkers, activists and writers who have presented ideas and concepts – some of which have become reality for a while – and see them as signs of hope. A pragmatist might analyse some of these options and argue how they might fit into the existing system somehow, somehow shoe-horning finance, policy andconstruction issues into the shiny-black shoe of the status quo. I’m sure there are many more positions I could set out, where do I sit though? I sit somewhere between the pessimist and the pragmatist. As an Architect I choose to innovate and design, I expect and welcome change and I hope for good results. As an introvert thinker I despair that we live in a country with such heavily engrained systems that changing anything as fundamental and primary as housing is a mountain too high. I do however have a tendency to be git. That is, I have a tendency to be a little like a dog with a bone, once I’ve started working on something I don’t like to let it go. I want to find a way to begin changing the way we design, finance, build and live in our housing, I want to challenge the market.
So I started out looking at the inextricable rise in the cost of housing in the South East of the UK, by looking at the fundamental ideas behind our capitalist approach to the housing market it’s clear that there are several findings that come out of that.
1 – The housing industry requires a fundamental overhaul; from it’s under-pinning finance, means of delivery, practical outcomes and methods of maintenance. Unless alternative options become widely available and well supported by the financial and insurance sector the existing system will continue to increase in it’s rigidity and top down approach to access.
2 – The housing market is the main driver for our economy being in ‘growth’. Our entire economy is being lauded on the activity of a sector that is tightly controlled, uncompetitive, un-innovative and forcing people into insecure housing situations and in some cases poverty. When set against the financial backdrop of the constantly rising price of energy, fuel, food, transport and the stagnation in the rise in wages amongst the majority of the population the economic picture becomes less rosy and more rose-tinted.
3 – The existing housing market is designed to maximise profits, not prioritise people. As a result the systems in place seek to inflate prices wherever possible and restrict any such instabilities such as competition or innovation which tend to cause prices of conventional options to fall to maintain their position in the market. Clearly this is not so much a free market as a carefully controlled market, and one which through it’s methodology and practices demonstrates that when it comes to housing in the UK people are not the priority, profit is.
So what comes next? Let me tell you what I am working on in my home city of Brighton. It’s probably better if I cover it in more detail in another post however the headlines are:
- City-wide Community Land Trust that ‘looks after’ Local Authority land in perpetuity for community benefit. This is arranged through peppercorn leaseholds, gifting or sale at ‘best consideration’ utilising quality of life and offsetting other costs as value rather than just money.
- Land trust acts as interface between communities and the Local Authority to enable appropriate and beneficial development of that land for said communities rather than the usual profit led approach to development.
- Land costs are eliminated from housing development equation enabling genuinely affordable homes to be built with mutual finance options available
- Any housing is protected from the open market through the Land Trust ensuring that the homes remain affordable with prices (both purchase or rental options) pegged to local wages rather than perceived market value / estate agent’s whims.
- Utilisation of local contractors and provision of on the job training / apprenticeships to benefit local people, the local economy and the local employment market.
- Lower housing costs results in greater expendable income which again ultimately benefits the local economy ensuring higher quality of life for more than just those who live in the CLT developments.