Thursday, 12 June 2014

Retrofitting Suburbia

This is the title of a TED talk given by Ellen Dunham-Jones about the need to re-use wasted suburban space in order to fight global warming, produce more housing and suit people’s changing need sets when it comes to their homes.

Although the talk is focussed on Atlanta in the USA, I think many of the things that the speaker says about housing problems are applicable to the UK. Her premise is that urban areas are already developed to make the maximum use of space. It would be wrong to further reduce green space in an urban environment to create more housing when suburbs have much more potential for re-fitting.

In urban areas everything is much nearer – work, shops, entertainment, leisure facilities etc. City dwellers tend to have a smaller carbon footprint because they don’t have to commute far to get to work or to the shops. In contrast, in the suburbs people tend to drive everywhere. The challenge is to make suburbia more ‘urban’ to reduce carbon emissions.

The reason people move to the suburbs is to find more affordable housing. The farther you get from the centre, the cheaper housing becomes. The case of people living farther and farther away from their workplace in order to get an affordable mortgage is applicable to the UK housing market.

Dunham-Jones points out that the saving is off-set by transport costs. She found that people living in the suburbs in Atlanta spend as much as 32% of their income on transport. And then there is the environmental cost too.

Part of the process of retro-fitting suburbia is to convert unused space into office space. And by doing so create local jobs to cut down on commuting.

She lists a variety of projects that have seen closed down shops, unused parking lots, scrub land etc. turned into buildings to serve the community such as shops, libraries, schools, social housing etc. By doing so jobs and facilities are bought into the suburbs that in effect makes them more like ‘urban’ spaces in that they are more self-contained, rather than being simply inefficient living space for city workers.

If we are to ever deal with the housing shortage in the UK we are going to have to look to academia and examples from other countries. One such source of ideas is the idea of retrofitting suburbia.

Thursday, 29 May 2014

Help to Buy Scheme

The Telegraph has just published figures relating to the Help to Buy Scheme. The numbers show that over 7,000 houses have been bought under the government guarantee scheme. Against a background of rising house prices, critics of the scheme claim it is contributing to rising house prices, and could be counterproductive.

Under the present Help to Buy Scheme the government will help people get a mortgage. Buyers have to pay a 5% deposit. The treasury will lend 15% of the value of the new build home. They retain the 15% share in the property. The loan scheme applies to homes up to the value of £600,000.

In fairness to the government scheme, 80% of the people who have received money under the system have been first-time buyers rather than those already on the property ladder.

The coverage of the scheme has been patchy in terms of geography. 13% of the completions were in Scotland, 5% in London, 14% in North West, 8% in the West Midlands, 9% in the East Midlands, 4% in the North East, 9% in the East, 8% in the South West and 14% in the South East. For the full list see

The housing shortage is most critical in London especially for lower-income families, and yet only 5% of homes were bought in London. It is interesting to note that the £600,000 limit seems prohibitively small for the capital, and also too much for certain other parts of the country.

The idea was to help lower income families buy homes- those who otherwise would not be able to afford a home – yet the high threshold encourages middle income families to get favourable terms.

Others have argued that the government money is being country-productive as it is driving up house prices. Martin Beck, senior adviser to the EY ITEM club, claims the scheme has ‘little direct role’ in the monthly raises in house values.

The fear of a housing bubble has put pressure on the government to stop the subsidies for mortgages. There are vocal calls for sanity to prevail in lending. The traditional formula of 3 times an annual salary has a strong appeal to common sense. It would appear that house prices are far more than most Brits can afford.

Finally lenders are responding by increasing the scrutiny of their due diligence – going down to minutiae of spending on leisure activities, phone bills etc. It is expected that people should live frugally if they are to be trusted with a debt of over half a million pounds.

Saturday, 24 May 2014

Service Charges

For first time buyers the key consideration is the cost of a house or flat, and the relationship between annual salary and property price. For years salary and property prices stayed more or less together. The banks would lend 3 times the annual salary and that was enough to buy. Now London properties have broken free of this constraint and new properties can cost 10 times an average salary. This has made banks jittery about risking their money for ownership dreams of normal people. They attempt to lower risk by asking for large deposits. With all this to consider people are apt to overlook service charges and ground rent fees. This can be a recipe for disaster.

The most essential document is the lease. All new buyers are well advised to carefully read and re-read a lease before committing to a purchase. The first thing to find is how long the service charges are set at a fixed rate. New buyers are sometimes faced with leases that allow service charges to rise every year. If such a lease is signed then unscrupulous owners can use this to personally profit.

The next thing to read is the definition of the demised premises (the parts that are for the exclusive use of the leaseholder) and the reserved premises (the parts that the landlord retains ownership of). Service charges are used to maintain reserved premises. A new flat in a run-down development can incur large payments for the maintenance of reserved premises such as corridors, lifts, windows and garden areas. The lease will list these costs.

Some buyers move into a property and are immediately presented with a large service charge bill for work that occurred prior to occupation. Another common complaint is that the landlord is using service charge money to ‘improve’ their property rather than ‘maintain’ it. This increases the value of their property and leaves the leaseholder out of pocket. This is an issue that can be challenged in the law.

If you have a grievance with a high service charge the first thing to do is get some free advice. The only website I have found that provides this service is It is a list of emails and replies that provides an invaluable resource for people who want to challenge their service charges. They will also answer any question for free. All they ask for is a small donation.

The next step is often to take a landlord to a Leasehold Valuation Tribunal (LVT). It is not too expensive or complicated to do this without legal representation. Often the threat of legal action will make a landlord more open to discussion about costs. The court has the power to over-turn service charge costs, and in extreme cases to award court costs.

Above it all, it is the lease document that stands at the centre of any dispute. Paying for a solicitor to look at it and explain the ramifications of the document is a good idea. The right lease document gives you security against outrageous service charge costs.

Thursday, 22 May 2014

Housing, Population and the Environment

The main media channels in the UK focus primarily on the story of rising house prices in the UK, the large demand for housing and the social impact this situation has. It is interesting to note that the potential danger to the environment caused by increased house and tower block construction rarely enters the debate. The topic of population appears to be almost taboo.

The housing bubble is the sexiest story it seems for the newspapers. It does two things: it gives a secret thrill to home owners and those with a ‘property portfolio’; and, it infuriates those hardworking people who feel excluded from the property market. There is also the danger and uncertainty of the bubble popping; perhaps any day now.

The people who benefit the most are of course the estate agents. They don’t risk anything and for every sale they take out a commission in cold hard cash. The larger the final sum, the bigger the commission payment if it is based on a percentage of the sale price.

The banks risk money with defaulters. The buyers risk being left with negative equity if the market suddenly changes.

Day in and day out this is the outline for the ‘property story’. This is the narrative that politicians respond to. They are not keen to regulate the workings of the free market, but they can make promises to bring down prices by building more houses. Labour has recently flirted with the idea of putting a freeze on some rental prices. It was also the last labour government that introduced social housing and affordable housing quotas for new developments.

What is given very little credence is the environmental problems of more house building. Since government has decreed that green sites are off-limits there has become more pressure on brown land sites, often in urban areas. The result is often greater population density and the sacrifice of other amenities such as parks. Brown fill sites while well intentioned are degrading the urban environment.

Those sites that are green but not protected by zonal laws also become potential targets for development. The story of schools selling their playing fields to developers is a good example of this.

The reality is that more houses anywhere put more pressure on the environment; use more resources; and invariably encroach on natural habitat.

And to take another step back from the problem – it becomes clear that the reason for the need for more housing is an increasing population.

The UK population is currently at about 52 million. It is increasing by 2 or 3% a year. 33% of this increase is accounted for by immigration. Not only are new families being made all the time but also a net surplus of people coming to the UK is also creating a growing need for new housing, especially affordable housing.

The hottest political potato at the moment is Europe. Parties adopting an anti-Europe stance are proliferating. I don’t believe this is entirely due to racism, but more to do with a strong intuition that we are ‘full’ and don’t need any more people coming into the country. Of course, many immigrants are coming from outside the EU. These immigrants are also competing in the housing and rental markets. Their perceived willingness to work for minimum wage at unsociable hours and live in crowded houses and flats is both welcome by business and viewed suspiciously by many UK citizens.

Again, the story is about society and politics. The damage to the environment doesn’t get much a mention. While some commentators suggest a zero immigration/ emigration policy (where the number of people leaving is equal to the number coming) what is not suggested is that we try and maintain the current population level, or even decrease it.  A sustainable population dovetails with a sustainable housing situation.

Tuesday, 20 May 2014

Affordable Housing

The above video makes interesting viewing. The introductory piece makes the valid point that housing in London between the wars cost about £18,000 pounds (with adjustments for inflation). The same property is now on sale for over £300,000.

Between the wars the government instigated a building boom that made homes ‘affordable’ for large sections of the UK population. The same type of people that nowadays are living with their parents because they can’t raise a £50,000 deposit.

One solution put forward in the video is restrictive covenants that would prevent people from buying property that they don’t intend to live in. This would stop the speculation in the UK housing sector. The other interesting solution is for government to buy land and to take a more direct, hands-on approach to house building to keep costs low.

The government could also regulate the prices developers could charge for such housing. Finally, in the brief debate that follows the introductory piece one guest makes the important observation that in fact ‘affordable housing’ actually means ‘shared ownership’ for many.

Monday, 19 May 2014

Gentrification in London

The UK economy in the last quarter showed growth in output and job creation. Analysts believe the UK economy might have reached the turn-around point after the recession years since the financial meltdown of 2008. A significant part of the reason for the turn-around has been the housing market in the UK. House prices, estate agents claim are going up by over £1,000 a month. However, if you take London out of the equation the rise in house prices would be much more modest, indeed not worthy of column inches in newspapers. London is now busy re-inventing itself, and making vast sums of money by taking over large council estates and gentrifying them.

Since the right to buy scheme council houses have been on the decline. Local authorities have been replaced by housing associations in managing the huge property portfolios held by London authorities.  This has led to a flurry of public-private partnerships. The private sector get to build flats they can sell for millions on the open market and in return they have to build a percentage of social housing for ‘key workers’.

The recent article about Woodberry Down in the Guardian (link) makes interesting reading. The journalists Aditya Chakrabortty and Sophie Robinson-Tillett spent several months researching a piece about the new flagship enterprise of Berkeley Homes and its chairman Tony Pidgley. The journalists interviewed several of the residents on the estate that was opened in the 1960s. It is a symbolic place as it was hailed as a ground-breaking estate embodying the great belief of 60s socialism to rectify the problems of poverty.

The estate looks grey and grim, but it is home to hundreds of low income families. Some of the affordable housing will be offered to these people. Some will be kicked out near the beginning. The others will slowly be driven out by rising service charge bills for the development. Since this is making a fortune for Berkeley Homes and apparently the economy as a whole their protests will not be heeded. The new development boosts the macro figures for the economy but does not help the residents of Woodberry Down.

Gentrification means moving in the upper middle class and saddling them with massive mortgages.  The high end units will be snapped up by investors who will sit on the property leaving it empty until they sell for a return of 3% to 5%.  Other units will go to buy to let landlords who will raise rental prices as quickly as possible.

Is there a connection between the housing shortage in the UK and the emphasis on new developments producing expensive property? If the new or refurbished houses and flats are not used by people living and working in the city then the problem just gets worse.

Moreover the gentrification process might lower crime figures (which are already very low according to official figures) and provide better amenities but the social consequences are extreme. The poor council tenants will move on to other areas. They will end up getting worse housing for more money. Many of these will include key workers – those who keep London functioning. It is demoralising and the offer of affordable housing doesn’t compensate for the breaking up of communities and the keeping of strategic housing for working class people in the capital.

If Labour win the next General Election will they do anything about these huge gentrification projects in London? Will they pass laws to halt or reverse the cost of living in London?