SUMMARY
I originally wrote this essay in 2018, which now seems an age away. I have amended some of the details in 2022 to make the figures up to date and the circumstances in the area have changed slightly. However the housing problem is still there. In this essay I look at my family and how we have consistently become homeowners. From this I propose that people be educated to make them “fit” to become home owners. Learning from my family’s experience I propose a system of giving people “a leg up” to become homeowners with a period of low fixed rents, followed by an option to buy a plot and use their own innovation to own a home. At the same time I propose a production line system of home building from planning all the way through to construction to speed up the process. Ultimately I aim to have people living in “fit” homes.
I own my home; my father owns his home, my grandfather owned his home, my great grandfather owned his home. Yet down my street most residents rent their homes, and some of the remainder only part own their home through a part own scheme run by the local housing association. Of those houses rented several are multiple occupancy, and some are, in my opinion, overcrowded.
I live in Spalding in the heart of the fertile farmland of the fens. Spalding is a centre for food production and distribution and as such is blessed with large numbers of available jobs. This means that local food factories are constantly recruiting and signs adorn factory fences advertising jobs. Both Brexit and Covid have increased the availability of jobs.
Abundant employment has seen Spalding’s population more than double in my fifty years of life as its resident. On the face of it, there is not a housing crisis in Spalding. A street map of Spalding in 1967 compared to one of today will see many new roads, largely the result of new housing estates. Local estate agents have plenty of properties for sale and rent. However, there is a housing crisis that is getting worse year on year and that is the availability of affordable homes. The UK enjoys cheap food. Cheap food is largely possible by having cheap employment. My home town is very successful at creating lower paid jobs. On top of this is a growing crisis of services. Overcrowding of some homes is clearly visible in the housing estates of Spalding evidenced by houses with six or more cars and bags of rubbish on bin day that are greater in volume than a family of four would generate. However, this overcrowding has reduced significantly in the last two years. On top of the permanent population is a transient population of short and medium term visitors here for the plentiful work. This population growth has seen a large increase in rents and house prices. The house I live in and bought for £32,500 in 1995, today would sell for £200,000, it has increased 20% in value in the last four years. A two bedroom house down my street currently costs £800 a month and a three bedroom house like mine currently costs £900 per month. Here lies the crux of the problem, affordability.
My annual income until recent redundancy was about £27,500, about average for the country, and above average for the area I live in which is £25,000 according to payscale.com . With my current living costs I would struggle to buy the house I live in today or even rent it. Poor public transport and shift working means that people have to have a car to maintain the necessary flexibility for employment. When I was working full time my household car and petrol expenses swallowed up 40% of my income.
Now most economists will look at housing as a supply and demand problem. Increase supply and other things being equal prices drop. Alternatively cull the population to reduce demand and the price of homes will also drop. However, a bigger challenge is to increase the proportion of property owners, as this will require the prospective home owner to acquire capital whilst at the same time meeting their living expenses.
My initial solution to this is to take inspiration from my own family. Given that the problem of shortage of housing and affordable housing is not unique to my generation I refer the reader to my opening sentence where I declared I am a homeowner and one of at least four generations of home owner.
I believe that I and my predecessors became home owners not by gift, legacy or luck, but because we all became what I call, “Fit to own,” in the same way a marathon runner becomes fit to run a marathon. I believe many aspects can make a person fit to own a home. To understand these I look to my ancestors. My great grandfather left school to work at as a clerk in a quarry near Soham, Cambridgeshire. He then became an insurance agent for The Prudential, living in rented accommodation in the post World War 1 period and enjoyed stable rent which enabled him to save. He moved with his job to Windsor with both higher income and higher levels of rent before moving back to Spalding where he bought a new house outright. Initial low level of rental income whilst he established his career and increasing his income before settling into a purchased home enabled this to happen.
My grandfather, newly married in Spalding rented a modest house in the town centre in the late 1930’s he was a self taught electrician. During the War he was conscripted to the shipyards of Newcastle as an electrician on merchant and Royal Navy ships. He enjoyed a relatively low level of rent albeit in low quality housing. Post War he returned to Spalding, but layoffs at Levertons, a local engineering firm, were frequent so he left, converted his garage front into a shop and started business doing electrical work, selling bicycles and radios and charging accumulators (batteries used to power radios as many houses in the area did not get electricity until 1952). Soon he accumulated enough capital to buy a shop with very modest living accommodation above it. Timing was perfect as by 1952 all the local villages were connected to mains electricity and people flocked to him to buy their first electrical items such as light bulbs, irons, radiograms and the new television. By the late 1950’s he built his first house in Spalding without a mortgage in a post war Spalding where housing was short, and building materials were restricted.
My father left school in 1955 and served an apprentiship at Pyes factory in Cambridge where he learned about the latest electronics including transistors and television. He returned to Spalding and joined the family business adding his skills to enable the business to sell and repair the latest electrical items, especially television. By the age of 24 he was married and bought his first house outright at an auction. At the time it was only one of three houses available to buy in Spalding.
I left school at age 18 and worked for an accountant before working for a Bank. Moving to the Bank I doubled my pay from £2000 per annum to £4000 per annum. I lived with my parents, effectively cheap housing. In my youth I made sound financial decisions and saved at least half my income and did not borrow money. When I was 27 a crash in the housing market resulted in many repossessions of homes with them being sold on relatively cheaply by the Banks and Building Societies. As a no chain buyer I exploited this and bought my house with a small mortgage.
If you look at my family we all had financial prudence, were organised in our employment and acquisition of ability to work, and saved money with low levels of borrowing if any at all. My point is that we had essential skills that enabled us to be “Fit for homes” and become homeowners.
I believe this is key in increasing homeownership and these factors need to be taught in schools to young people and to adults through accessible media and public information. I also believe those leaving the armed forces should benefit from a simple course. I believe the following should be learned:
- How to manage work including basic job application skills and negotiation skills. For employment brings income.
- How to manage time and assess the worth of your time. This is an essential skill as it can determine whether you should employ someone to do a task or do it yourself.
- Basic understanding of contract law, especially the principle of “caveat emptor”, “buyer beware”.
- Basic household management, the paperwork of home ownership and the practical day to day responsibilities such as cleaning, insurances, and how to spot and prioritise maintenance, repairs and renewals.
- Finally, how to manage money. How to budget. How to save and invest. How to borrow money, and most important of all to understand that when you borrow money it reduces the choices of what you can do with your money in the future as at the very least you have to pay interest and ultimately repay the debt.
I believe these simple lessons will empower people to become home owners and such simple knowledge will prevent a boom and bust housing market as people learn prudence.
However, education does not help with the short supply of affordable housing to either rent or buy. To increase the supply of housing I do not wish to see a target culture. Targets create the wrong behaviours. I have seen this in my own industry of Banking with miss-sold derivatives and PPI being the symptom of a target culture. Indeed the economist the late Jane Jacobs touched upon this in her book “Systems of Survival”. In this she argued that there were two distinct streams – a commercial stream which values honesty, fair play and fair pay, but is not concerned with social effects; and a community scheme that looks after people, governs the country and so on. She believed you got into trouble if you mix the two. As an example she cited a scheme for getting police to capture more crooks by paying by results. More people were caught, but not all of them were criminals! So too housing has its examples. The 1960’s saw the UK peak of house building at just over 400,000 per annum, but this was achieved at a price. The most extreme example of the price paid was Ronan Point in East London where a newly occupied tower block suffered a gas explosion on the 18th floor that caused an entire corner of the tower block to collapse, killing 4 and injuring 17 people. The disaster was caused by poor design and poor construction. In my home town of Spalding we saw both timber and steel framed prefabricated bungalows constructed poorly with asbestos and low quality materials. Many of these were designed for a ten year life span, but in the 1980’s, still occupied, the local authority upgraded these properties with brick cladding and solid roofs and removal of asbestos making them more durable long term homes (pictured below).
Also built in Spalding in the 1960’s were a number of prefabricated houses built out of precast concrete sections bolted together. They were intended to have a 25 year lifespan. Many of these houses had inferior steel reinforcement in the concrete and inferior steel bolts that as they rusted caused dramatic cracks to appear and threatened the structure. In the 1980’s they were all reinforced and improved with brick cladding making them a durable long term structure. A few had to be demolished. These temporary design prefabricated homes met a house building target, but in reality deferred the problem to future generations.
In London we saw Grenfell Tower as a tragic example of poor housing and construction. Here we touch upon the second part of my title, “ Homes fit for people.” Indeed this view was foremost in the London Mayoral candidate Andrew Boff as he wished to create streets with houses and gardens such as that enjoyed by myself. I share his vision.
To achieve this the whole basis of how housing is created needs to evolve into an efficient production line. From planning to construction of a housing estate in my area typically takes 10 to 15 years. Part of this is caused by land being “banked” as an asset to hold onto for future development. The hope value of this land is realised the day plans are passed and the land value can increase from say £8000 per acre to £800,000 an acre. To maintain that planning consent all that has to be done is for groundworks and footings to be established and then the project can be mothballed as it grows in value. I believe that such mothballed land should incur a tax on the uplifted value of the land that is paid each year until it is occupied. This will provide an incentive to develop and provide a source of funds for my “Homes fit for people” project below.
Another issue is, at little extra cost, if you build a four bedroom house instead of more two and three bedroom houses you get more income from your investment. The result of this is seen in the government statistics that show in 1991/2 22% of new build homes had four or more bedrooms and by2017/18 this had grown to 30%. This, by its very nature, reduces the availability of affordable homes. In 2022 the nearby village of Gedney Hill has some rather nice new build larger homes that are outside the affordability of the majority of local people. Perhaps the worst offending town in Lincolnshire for affordable homes is Grantham, where the average pay is lower than Spalding at £23,000 per annum and we see many more larger high value homes being built taking advantage of the A1 and Northern Line railway routes.
The following is a broad outline of my “Homes Fit for People” proposal.
To resolve this I believe it requires local government to go into partnership with commercial house developers. However, what I propose is a total transformation of the process by setting up a production line that Henry Ford would be proud of. At the same time I wish to see the developer maintain or improve his income not by building larger value added dwellings, but by reducing his cost with production line management techniques. This joint venture will focus on two and three bedroom houses, plus one bedroom low rise flats (no more than say five or six stories), and one bedroom courtyard bungalows for elderly and disabled people. The local authority will work as a joint venture with the developer. Initial planning and consent will be fast tracked on a production line basis. This must get down to a process of less than six months. If necessary the law should be changed to achieve this process, however I believe that common sense and wise interpretation of existing rules would help cut through delays. Once the plans are passed the developer immediately constructs all groundworks, roadways and establishes the building plots with services ready to hook up. The building plots should favour three bedroom house construction. At this point the plots should be sold to the end purchaser, with some plots retained for the developer to construct and sell. The person buying the plot will have the choice of either employing the developer for a preapproved construction, doing his own self build to an approved standard or purchase and install an off the shelf prefabricated construction. A condition of sale that the home be constructed and occupied within 18 months. If this is not achieved it has to be valued as is and bought back at 10% discount of valuation by the joint venture company to complete the build and sell completed. Thus the flow of construction and occupancy is maintained. Within the development the developer will be allowed to construct some houses of its own development with the proviso that they are constructed and available to sell to homeowners within three years of plans being passed. All aspects of this development should be overseen by a quality control officer.
Prefabrication is key to rapid home building. I know of a farmer near Newark that imported a prefabricated bungalow from Scandinavia and it was constructed and lived in by his father within a matter of weeks. Such constructions are durable and long standing using tried and tested techniques combined with modern technology to create a home that can survive centuries. They are also low cost. It is with great joy I have discovered that Legal and General are developing a large scale prefabricated home factory near Selby. Such factory based prefabrication also gets around a potential skills shortage and efficiency of scale and automation are able to increase efficiency.
To get people in a position to purchase plots will require an element of subsidized rents for some. This means that these new estates will have some joint venture owned rented properties. The rent should be fixed for say five years at a level appropriate to income and to give the ability to save. I would suggest £400 a month a reasonable rent. After the period of fixed rent expires the rent should revert to market rate. The idea behind this is to provide a period of fixed rents that will enable the tenant to save for a deposit and set themselves up to become home owners. Such tenants that demonstrate five years saving should be given first option to buy the building plots on my new scheme. Referencing back to my family experience a factor that helped my predecessors to purchase homes was a period of stable and relatively low rents. In this way I hope that such a scheme, with a period of fixed low rents will enable social mobility.
The idea of these plots is to allow for the innovation of the individual to develop their own home. In such a way we will avoid the blight of many identical houses on identical streets with little or no character or individualism. Also the individual can budget the design and cost to suite his resources and borrowing ability. To assist with the borrowing I would like to see fixed rate mortgages available at affordable rates, possibly funded by and underpinned by a bond issue. This provides stability for the homeowner.
Overall this will enable people to be fit to live in homes fit for people.