Affordable Family Housing

Introduction

This dissertation determines how current trends in housing in the South East will impact on the future of affordable housing for families. The dissertation is divided in to five main Chapters. Chapter 1 provides an outline of two main facets of the dissertation: i) defining the methodology to be used in the course of the dissertation, through outlining how the Literature Review, which forms the basis of the dissertation, was conducted and ii) outlining the basic objectives that will be addressed in the course of the dissertation. The basic objectives that will be addressed are i) whether enough housing units are being delivered for families; ii) what the current housing trends are, in terms of what type of housing is being developed (i.e., flats or housing) and iii) what the impact these factors will have for the future of affordable family housing in the South East.

Chapter 2 moves on from the outline of the methodology and the outlining of the basic objectives of the dissertation to provide an overview of the trends in the UK housing market over recent years, with Section 2.1 providing a summary of the findings of the Barker Report, a report that was commissioned by the Government with the explicit purpose of achieving improvements in housing affordability, creating a more stable housing market, locating housing supply to promote economic growth and providing an adequate supply of public (or social) housing for those who need it (Barker, 2004). Section 2.2 looks in detail at what factors have fuelled the recent trends in the UK housing market, looking in detail at such factors as the introduction of buy-to-let mortgages and the impact these have had on house prices and the private rental market. This section also addresses the issue of the purchasing of second homes and how this relates to new housing developments, in terms of many of the new builds in desirable areas being swept up by people purchasing second homes, and not by first time buyers, causing further problems for first-time buyers wanting to enter the housing market, in terms of pushing up prices and causing affordability problems.

Section 2.3 of Chapter 2 looks at the issue of the affordability of housing, and will show, using statistics from a number of studies to discuss the issue of how affordability of housing has changed over recent years, such that many individuals are now priced out of the market, with house price to income ratios being extremely high, higher than many mortgage lenders are prepared to lend, for example, causing problems with the ability to enter the property ladder. Section 2.4 of Chapter 2 will look at what can be done to address the lack of affordability of housing, especially in the South East of England, in terms of what policies can be implemented, both nationally, in terms of managing such factors as interest rates, and locally, in terms of how planning regulations can be used to deliver affordable housing, through such planning directives as S106 and PPS3, for example. Section 2.5 of Chapter 2 provides a summary of what factors affect how the existing housing stock is used, looking in detail at such drivers as economic, policy, sustainability and the role of changing aspirations in determining how households choose their housing.

Chapter 3 looks in detail at the specific case of the housing market in the South East of England, providing, in Section 3.1, a summary of the housing type and size in the South East of England, and, in Section 3.2, an overview of the factors that are important in increasing the demand for housing in the South East, including changing demographics and an increasing population, through migration to this area from other regions of the UK, and from abroad, and from an increase in the population through a higher birth rate. Section 3.3 looks at public views of development in the South East, to show what the public think about different development options for the South East, with Section 3.4 providing an overview of the strategic challenges for housing in the South East, as presented by the increased demand for housing in this region. Section 3.5 looks at whether the existing housing stock could be better utilized, in terms of providing more affordable housing through the improvement and subsequent re-use of the existing housing stock.

Chapter 4 looks in detail at the future for housing in the South East, in terms of, in Section 4.1, discussing future housing projections and policies for housing in the South East that will determine how many houses are needed and built in this region. Section 4.2 provides definitions for affordable housing and social rental and intermediate housing, and then looks in more detail at possible avenues for providing more of the necessary affordable housing in the South East, looking at, for example, the effects of S106 and the Planning Policy Statement 3 (PPS3) on the production of affordable housing across the region.

The dissertation ends with a Conclusions section, given in Chapter 5, which, firstly, summarises the main findings of each chapter and then looks in detail at the basic objectives that have been addressed throughout the dissertation, i.e., i) whether enough units are being delivered for families; ii) what the current housing trends are, what type of housing is being developed (i.e., flats or housing) and iii) what the impact these factors will have for the future of affordable family housing in the South East. The Conclusions section provides an assessment of each of the main objectives, with regards to the literature, information and data previously referred to throughout the course of the dissertation.

Chapter 1: Methodology

This Chapter will describe two main facets of the dissertation: firstly, the main objectives of the dissertation and, secondly, the methodology that will be utilized in order to find the relevant literature, information and data that form the dissertation. The basic objectives that will be addressed are i) whether enough housing units are being delivered for families; ii) what the current housing trends are, in terms of what type of housing is being developed (i.e., flats or housing) and iii) what the impact these factors will have for the future of affordable family housing in the South East.

This Chapter will present a description of how the methodology was developed and utilized to form the basis of the literature review that will be presented in subsequent chapters of the dissertation, in terms of providing a detailed description of how the literature was searched for and was then, subsequently, used. This explanation includes a description of how, exactly, the literature review was carried out, in terms of what was actually undertaken, in practical terms, to find the literature, information and data that has been used as the basis for this dissertation. This Chapter thus describes, in detail, the methodology that was used to find the information that was used as the basis of the analysis of the specific research questions of interest in this work, i.e., i) whether enough housing units are being delivered for families; ii) what the current housing trends are, in terms of what type of housing is being developed (i.e., flats or housing) and iii) what the impact these factors will have for the future of affordable family housing in the South East.

A literature review is, in its simplest form, a classification of, and an evaluation of, the most relevant works that have previously been published, as a result of in-depth research, on a particular subject. The literature review is usually organized, depending on the particular research objective of the current work, so that it best presents a systematic and comprehensive review of the work that has been previously published on that particular topic. On this basis, equipped with a full understanding of the previous works on the topic of interest, decisions can then be made as to what research still needs to be conducted on the specific topic of interest. A full understanding of the existing literature therefore provides not only a comprehensive review of the existing literature but can also provide the researcher with the necessary information to be able to decide what specific sub-topics need further investigation and, hence, are worthy of further research time. In this way, then, a literature review has the ability to inform not only the researcher’s current research plans but also has the power to inform any future research. In the context of this dissertation, for example, the research objectives are quite broad and wide-ranging, and future research might focus on one particular aspect of the housing market in the South East as the subject of the research, for example. The thorough literature review would reveal which aspects of the housing market are in need of further research, and would, therefore, suggest which aspects of the housing market should be concentrated on, in terms of future research time. The literature review process thus informs not only the current research but also possible research topics of potential future interest.

Within the context of this work, which aims at, firstly, gaining a general picture of housing trends in the UK, and then looking at specific aspects of this housing market in a specific area of the UK (i.e., the South East), the term ‘the literature’ means not only the ‘usual’ literature, such as textbooks, and specialist academic books, but also refers to the relevant research literature, such as that published in journal articles, policy documents and consultancy reports, for example. Policy documents and consultancy reports will be especially valuable in this dissertation in terms of providing relevant statistical data and guidance on relevant policy. Reviewing all of the relevant the literature serves, as has been seen, several main purposes, including: i) aiding with defining the current research question, in terms of understanding, precisely, how the current research question fits in with previous research; ii) providing alternate views regarding the specification of the current research topic, in order to evaluate how the proposed research should best proceed; and iii) ensuring that all of the previous relevant literature on the current research topic has been, firstly, evaluated and then fully understood, thus providing validation for the current research topic(s) through the support of the previously published literature (see Hart, 1999).

A literature review is, therefore, generally conducted as a matter of course before beginning any new piece of academic research, because, as has been seen, a thorough review of the literature provides a comprehensive overview of what research has already been performed on the topic of interest, and on related topics, and because a thorough literature review can also provide valuable further information, including how other researchers have tackled similar research topics, in terms of what methodology they used and what analyses and conclusions were drawn from the literature they found and the results they gained (Hart, 1999). A literature review is not, therefore, simply a reviewof the existing literature on a subject, but is, rather, an evaluationof all the previous work that has gone before the current research topic, and an evaluation of the relationships between all of the previously completed works (Hart, 1999).

A thorough literature review therefore allows an evaluation of the relationship between the research question(s) that is/are being proposed and the existing body of research. This process, as has been seen, gives the researcher plenty of ideas with regards to how to develop their research question further, based on what has previously been attempted, and found, and what omissions there are in the previous literature (Hart, 1999). In this sense, therefore, reviewing the literature in this manner gives the current research project a proper contextby asking relevant questions, aimed at determining what is already known about the topic, what the relationships are between the previous research, what omissions there are in the previous research/literature, what ideas already exist, in terms of developing an understanding of the topic, what further evidence is needed to provide a satisfactory conclusion to the research, providing an overall contextualization for the contribution that the proposed research objectives will make to the body of existing literature (see Hart, 1999).

The literature review thus, whilst it could be thought of as time-consuming, and of little use, is of extreme importance and value because it allows the researcher to decide, on the basis of what has gone previously, the most relevant and useful research questions and objectives and the best approach to use to satisfy these questions and objectives (Hart, 1999). A thorough literature review can also inform the researcher as to how to present the literature review once the literature review process has been completed i.e., once the literature has been searched, studied and evaluated, summarised and when a final conclusion, or set of conclusions, has been drawn from this process (Krathwohl, 1988). Undertaking a literature review can therefore act as a practical guide as to how the research that is being suggested should proceed, from prior to the research actually starting right until the research is completed and it is time to think about writing up the results of the research (Madsen, 1992).

The main aims of a thorough review of the literature, as outlined in this Chapter, is, therefore, to find the most relevant literature, to then read and analyse the information contained within the literature that has been found, and to evaluate this information, in terms of positioning the previous literature within the framework of the current research questions and objectives (Muskal, 2000). This process requires many skills, including knowing how to search bibliographic databases to find the necessary information, knowing how to gather and organize the information that has been found, and knowing how to appraise previous work and how to develop further research questions from the information that has been gathered (see Fink, 2004). In addition to providing information of importance to the research questions and objectives, a literature review can thus teach the researcher new, and valuable, skills (see Fink, 2004).

In terms of how a literature review is carried out, in practical terms, standard bibliographic databases can be searched in order to find the relevant literature (Hart, 1999). If, for example, one wishes to find out about trends in the UK housing market and the effects these have had on housing in the South East of England, the researcher would first need to know something about the UK housing market, and recent trends in this market, in addition to knowing something about the housing market in the South East of England and how national trends have impacted on this region. Terms such as these would, therefore, be entered as search terms in to the bibliographic database, which would then return the details of any relevant, existing, literature.

Using extremely general search terms in the database searching would, however, provide potentially millions of rather unspecific articles, and it is recommended that, if this happens, the search terms are narrowed by entering more specific search terms. The usual procedure, for searching bibliographic databases whilst conducting a comprehensive literature review, is to provide narrower and narrower search terms until the database only returns entries that contain information specifically relevant to the research question and objectives. These entries would then be looked at in detail, and, if useful, could, for example, be used as the basis of other searches and/or as the basis of the literature review that the researcher is intending to present as part of the write-up of their research (see Hart, 1999).

A ‘citation’ search can be run in order to find other, potentially relevant, literature from the articles of interest that have already been found. This type of search highlights the literature that has cited the original article as a reference and can, for example, show the researcher how other researchers have interpreted the results of previous research and what other directions the research topic has been taken in (see Hart, 1999). Once a thorough search of the bibliographic databases has been completed, the results should then be collected together in one place, and should then be recorded, evaluated and analysed, according to the process previously described, as this literature will form the basis of the literature review that will be presented as part of the research project. Searching bibliographic databases for literature and information is a well-recognised and accepted, ethical, research tool (Anson and Schwegler, 2000).

In terms of how the literature used later in this dissertation was sought out, ‘UK housing market’, ‘affordability of housing’, ‘housing in the South East’ and ‘affordable housing’, amongst others, where used as search terms when searching the bibliographic database, Web of Science. The Web of Science database contains references to most articles published in the last century, covering the fields of economics and finance, amongst other subjects. In terms of deciding which literature to utilize, following the database search, several inclusion criteria were decided upon and then used, including the age of the literature (with nothing older than 10 years being consulted, due to the fast-moving pace of the UK housing market, and relevant policies) and the quality of the literature (with peer-reviewed articles, newspaper articles, consultancy reports and official policy documents being preferred to information from non-official websites).

The literature that was found following the database search was consulted if it was of general interest to the subject, for example, if it contained information on the UK housing market over recent years, and if the literature was recent (i.e., published within the last ten years) because only literature published within this timeframe would have any understanding of recent trends in the UK housing market and how these trends affect housing availability and affordability in the South East of England. This literature, which was considered to be background literature, was useful, in terms of putting the research question and objectives in to context. The literature that was, eventually, included in this work was selected if it included information on recent trends in the UK housing market, or if it had a direct relevance to discerning trends in the UK housing market and affordable housing in the South East of England. The References section at the end of the work, in addition to in-text citations, gives the full list of literature that was used for the purposes of this dissertation.

Finally, as has been seen, for research to proceed, it is necessary to build upon the work of other researchers. This process, of building on the work of other researchers, makes the research process more efficient, and this is the way in which research tends to proceed in this way, by using the work of other researchers as a starting point for one’s own research, so that research is not repeated (Krathwohl, 1988). This ensures that research moves in a positive direction, building constructively on the work of others and not unnecessarily repeating research, allowing time to be devoted to other, less researched, aspects of a research topic (Krathwohl, 1988).

In terms of how the work of other researchers can be, ethically, incorporated in to the research one has conducted, using the work of others – through the development of a literature-based work, for example – is entirely ethical, on the condition that the previous work is referenced and cited correctly within the subsequent work, using whatever citation style is most appropriate (Madsen, 1992). On this basis, then, the use of existing literature of interest as the basis for subsequent research on a topic is a valid research protocol, one that has been employed in the course of this dissertation to provide support for the research objectives and also to provide literature, information and data to address, evaluate and analyse these research questions and objectives.

The next Chapter, Chapter 2, provides an overview of the trends in the UK housing market over recent years, with Section 2.1 providing a summary of the findings of the Barker Report. Subsequent sections of Chapter 2 provide details of what factors have fuelled the UK housing market in recent years, how affordable (or not) housing has become in the UK, what can be done to address the lack of affordability in UK housing and what factors affect how the current housing stock is used.

Chapter 2: Background to the UK housing market

This Chapter provides an overview of the trends in the UK housing market over recent years. Section 2.1 providing a summary of the findings of the Barker Report. Subsequent sections of Chapter 2 provide details of what factors have fuelled the UK housing market in recent years (Section 2.2), how affordable (or not) housing has become in the UK (Section 2.3), what can be done to address the lack of affordability in UK housing (Section 2.4) and what factors affect how the current housing stock is used (Section 2.5).

Section 2.1: The Barker Review

The Government commissioned a report from Kate Barker, with the explicit purpose of achieving improvements in housing affordability, creating a more stable housing market, locating housing supply to promote economic growth and providing an adequate supply of public (or social) housing for those who need it (Barker, 2004). Essentially, the 2004 Barker Review found that there are several major problems with regards to the supply of housing in the UK, in that, in many parts of the country, house prices have increased rapidly, far out of line with any increases in salaries, mainly because the supply of housing has not kept up with the demand for this housing, and because there has been an increase in the number of people needing housing, due to an increase in the population and an increase in the amount of one-person occupancy of existing housing stock (see Department for Communities and Local Government, 2006 and Barker, 2004).

In practical terms, Barker (2004) predicted a need for 209,000 more households in the UK each year, from the date of the report until 2026, with recommendations also being made as to how the house-building sector and the planning system should respond to this need (see Department for Communities and Local Government, 2006). Not only did Barker (2004) recommend an increase in the number of private dwellings, of the magnitude already suggested, but also an increase in the amount of social rented housing in order to deal with the increase in the need for such housing and the loss of stock of such housing through the Right to Buy scheme (see Department for Communities and Local Government, 2006 and Reeves, 2005).

The Government responded to the Barker review (see Office of the Deputy Prime Minister, 2004) by outlining three main goals of their house building strategy: providing a step on the housing ladder for future generations, providing quality and choice for those who rent and ensuring that mixed, sustainable communities are encouraged in any new developments. Key announcements from the Government included a commitment to increase house building from 150,000 per year today to 200,000 in the year 2016, to increase the amount of affordable housing for ownership and rent and to make planning more responsive to local housing needs by encouraging the development of regional and local plans to release more land for building, for example (see Office of the Deputy Prime Minister, 2004). The remainder of the dissertation will look in more detail at these aims and how they can be achieved.

Section 2.2: What factors have fuelled the recent trends in the UK housing market?

Sprigings et al. (2006) look at the role of investors in the housing market, arguing that since the late 1980s, there has been an overall growth in private rental in the UK, when financial and mortgage markets were liberalised and when banks began introducing new financial products to capture those customers with money to invest in property. Since the mid-1990s, it has become fashionable to ‘buy-to-let’ with many individual investors owning several properties they rent out, often in towns with high numbers of students. The Council of Mortgage Lenders (2006) provides data showing that the number of buy-to-let mortgages increased from 44,400 in 1999 to 223,800 in 2005, with the number of buy-to-let mortgages increasing from 3.5% of the total number of mortgages lent to 22% of the total number of mortgages lent (Sprigings et al., 2006; see, also, Wilcox, 2006). In addition to buy-to-let mortgages, many individuals who own buy-to-let properties have taken money out of other investments in order to buy more properties, with the general impression being that property is a safer investment than stocks and shares, for example.

The overall effect of this influx of investment in to a market that has a restricted supply of housing (because not enough new housing, of the correct types, is built) has been to create a high inflationary effect (see, for example, Schiller, 2005), meaning that poorer individuals have great difficulty in getting on the property market in such a climate (Sprigings et al., 2006 and Danekshu, 2007). Indeed, the number of first time buyers has been decreasing year-on-year recently; with first time buyers staying longer in the rental market than previously and taking loans from parents in order to be able to afford the high deposits necessary to enter the property market (see Danekshu, 2007 and Sprigings et al., 2006). The long-term effect of such a process will be to create long-term wealth inequalities in the UK, with those who cannot afford to get on the property ladder being forced in to renting for longer, if not indefinitely, creating a wealth divide between those who own property and those who do not; it is also being increasingly realised that this process is having an amplifying effect (Danekshu, 2007). Many people who own property in the South East and who have high equity in this property are now investing in second (or third) properties in other areas of the UK, forcing prices up in these areas, and creating a ripple effect of the vicious circle of high property prices that many first time buyers find it difficult to overcome (Sprigings et al., 2006 and Wilcox, 2003 and 2006).

This process has been invoked in the United States, to explain the differences in wealth creation, and net wealth, of individuals of different races, with Friedrickson (2005) stating, “Arguably the most important source of the current economic gulf between the races in the USA is the vast difference in average net worth or property ownership. Although black incomes may be around two-thirds those of whites, their average net worth is only about one tenth. Much of this difference is explained by the fact that whites own far more homes than blacks and therefore their net worth’s are higher…By 1984, seven out of ten whites owned their own homes, worth, on average, $52,000 but only one in four blacks owned a home worth, on average, less than $30,000” (see Sprigings et al., 2006).

Whilst the UK does not have such explicit racial divisions in terms of wealth, there are signs that a similar process could be underway in the UK, as the housing market segregates the population in to those who can afford to buy a house and those who cannot with low salaried individuals in low affordability areas already being priced out of the market for housing in the lower quartile price brackets, for example (see Wilcox, 2006). This process is exacerbated by the fact that accidence of residence often determines how equity (i.e., unearned income) is generated, with some areas of the UK (such as the South East) generating equity at far higher rates than other areas of the UK, leading to unequal equity accretion, contributing further to the process in which some home owners can afford to purchase second homes whereas others are prevented from entering the property ladder (Sprigings et al., 2006; see, also, Danekshu, 2007). As Sprigings et al. (2006) suggest, the UK property market is now based on a property being seen as an investment rather than a unit of consumption, which has, and will continue to, alter the way in which the housing market functions (see, also, Heywood, 2005), having grave consequences for those who are unable to afford to enter the property market.

Section 2.3: Affordability of housing

Households with workers aged between 29 and 39 face significant difficulties in terms of home ownership in every area of the UK, based on local prices for 2/3 bedroom houses (see Wilcox, 2003). As Wilcox (2003) shows, the ratio of mortgage advance to household gross earned income rarely exceeds 3.5 to 1, but house prices run to a ratio of 5.0 to 1 in thirty three local authority areas of the UK, with this figure exceeding 6.0 to 1 in Westminster and some other areas of London, such that fewer than one in five households can afford to buy properties at the lower quartile of house prices in nineteen UK authorities. Outside London, the same problem persists, with ratios being lower than 4.0 to 1 in only four areas of the UK, with average ratios being 4.61 to 1 in South East England (Wilcox, 2003). This, as Wilcox (2003) states, reinforces the need for an urgent review of plans for increased funding for affordable housing in the South East of England.

As Monk et al. (2008) state, there are a number of indicators that can be used to judge the opportunities for first time buyers, including the lower price quartile of housing and the percentage of sales involving properties costing under £120,000. As Monk et al. (2008) show, in the South East of England, in the first quartile of 2001, the lower quartile price for housing was £65,000 but, by the first quarter of 2006, this had doubled to £130,000 (see EERA AMR, 2006). Thus, housing affordability has worsened in the South East of England over the past decade, with the average house costing £114,300 in the first quarter of 2001, increasing, on average, 76% to £201,000 by the first quarter of 2006, although some regions of the South East saw even greater increases in average house prices, up to 118% (Monk et al., 2008).

In terms of affordability of housing in rural areas, these areas have been adversely affected by the increase in house prices in the UK, with demand for private housing in these areas, migration to these areas and the purchasing of second homes in these areas by people who have their first homes outside these areas, having fuelled large price increases which means that, in these areas, any extra house building is unlikely to affect affordability, such that the provision of social housing and affordable housing in these areas should be a priority (House of Commons, 2006).

Whitehead and Gaus (2007) look at the issue of affordability, showing that owner occupation costs have moved out of line with social and private rents, essentially worsening the affordability gap, with high house prices forcing individuals in to the rental market (see, for example, Andrew, 2006). The decline of the social rental sector, coupled with the decrease in affordability of housing has meant that the private rented sector has increased it’s market share, fuelling the buy-to-let market and further increasing house prices as a result of this (see Whitehead and Gaus, 2007). As Whitehead and Gaus (2007) discuss, if the housing market continues as it is, the number of adults aged 30-34 who are able to afford a home is expected to dr