Today, UK housing and homeless charity Shelter published a report about the shocking lack of affordable homes in London.
The charity said that just '86' London homes for sale could be classed as 'affordable'.
This is a timely report in my view, particularly as despite decades of opposing the policy of right to buy, I recently came to the conclusion that it just might solve our housing supply needs. We could build the next generation of right to buy housing within a national housing strategy.
I recently spoke at the Henry Stewart Property Finance Conference about opportunities for funding and how to involve institutional investors. The obvious elephant in the room was that the sector rather than growing has shrunk and is still underperforming. The numbers say it all; in 1970 there were 287,310 new houses built in England while during 2013-2014 only 133,650 new homes were completed.
As you drill down into the numbers you see local authority builds down from 128,880 in 1970 to a paltry 1910 in 2013/2014 and this accounts for a large part of the drop. However private building, although up on the previous two years, are down from the 1970 level of 148,000 to 106,000 in 2013/14.
The UK's housing associations, charged with the role of supplying housing traditionally fulfilled by local authorities only built 24,000 new homes last year and have never met the same build levels achieved by local authorities during the 70s and 80s.
So we have had a long standing under supply of housing which has been further diluted by Margaret Thatcher's right to buy social housing policy that was never matched with a means of replenishing the housing stock. This is a situation overseen by governments of all parties.
The result is massive shortages of housing and rising prices with those on the lowest incomes hit hardest. The bottom quartile house prices to lower quartile earnings range from 6-10 times income but the most worrying aspect is that a problem we are told affects London the most is actually prevalent nationwide. Apart from pockets, mainly in the North east, housing across the country stands at eight times earnings with substantial areas in the South and South west suffering similar levels of affordability to the Capital.
Until very recently, there seemed to be no end to it. House prices were destined to rise in perpetuity excluding ever more people from home ownership and forcing them into increasingly unacceptable rental arrangements with private landlords which afforded no security and an increasing rent bill.
However, common sense is at last beginning to prevail as the Bank of England is given new weapons to limit mortgage lending. This is the only way we can control a demand-led but supply strangled dysfunctional market. There is now an absolute ceiling on house prices.
Improving the supply of housing
So how do we increase housing supply to people that cannot raise a mortgage? Perhaps the best way forward is to build right to buy housing.
In this context right to buy is in its purest form; building houses that people can afford, with social housing rents, and secure tenancies. However, enshrined in the tenancy should be a right to buy and a fair formula to establish the price.
There is nothing wrong with the principle of people buying the homes that they have previously lived in for a fair rent, so long as the resources are recycled into new housing supply.
The most efficient method of recycling receipts from right to buy into new housing supply is to do so within a national framework. This is not to be disrespectful about the localism agenda but recognition of basic facts. Housing is a dynamic feature of our economy and society. It is funded over decades and we want it to continue to meet the needs of the nation as demographics and other factors change our housing requirements. It may well be the case that new housing is not required in an area where a right to buy sale takes place but a further need is identified elsewhere. Only a national framework can ensure that the right to buy receipts are reemployed.
Of course, our government has no money to plough into the massive house building program this country requires and the very last thing we should do is borrow.
So back at the conference in London, I explained to delegates about institutional involvement in funding housing. I was there because Houses for Homes' was created to bridge the gap between housing and institutional investment.
We have run the numbers and concluded we can make this work. While it is complicated and requires a sound knowledge of housing demand and its resultant policy; bringing institutional investment into funding housing supply is the product of a whole range of socio economic and technical demands.
Our strategy provides what institutions crave most; scale and visibility and on that basis I know I am not alone in saying we would build and fund the next generation of right to buy houses.