We are not building enough new properties. That is the simple fact. And if the supply of new properties is limited and demand continues to soar for a variety of reasons (ie. divorce rates, ageing population, immigration rates), the values of those existing properties will remain high and out of reach for a lot of people… especially the blue collar working families of Rotherham.
Let’s examine how affordable property is for the average working family in Rotherham.
Looking at some recent statistics released by the Government, the ratio of the lower quartile house prices to lower quartile gross annual salaries in the Rotherham Metropolitan Borough Council area has hit exactly 5 to 1.
How did we end up with this ratio?
Essentially, if we ordered every property in the Rotherham Metropolitan Borough Council area by the value of those properties, the average value of the lower quartile properties (i.e. lowest 25%) would be £95,000. If we then did the same with salary, ordering everyone’s salary, the average salary of the lowest quartile (lowest 25%) £19,000 pa. If we divide £95,000 by £19,000 we end up with a ratio of 5 to 1 – put simply, the cost of buying a home is five times the annual salary.
What does this mean for Rotherham families?
Assuming there is one wage earner in the house, the chances of a Rotherham working family being able to afford to buy their own home, when it’s five times their annual salary, is very slim indeed.
The existing affordability crisis is the unavoidable outcome of the decade on decade failure to build enough homes to keep up with demand.
Nevertheless, improving affordability is not a case of just constructing more homes. Our council needs to ensure more properties are not only built, but that they are built in the right locations and of the right type and at the right price to ensure the needs of these lower income working families are met. At the moment, they have few options apart from the private rental sector.
Looking at the historic nature of the ratio, it can clearly be seen in the graph below that this has been an issue since the early to mid 2000s.
Few council houses left – is the reintroduction of 100% mortgages the answer?
However, if you take a look at the historic data, those on the bottom rung of the ladder (those in the lower quartile of wage earners) used to be housed by the local authority instead of buying. Unfortunately, when the vast majority of council houses were sold off in the 1980s it has meant that there are few left to house this generation.
Many of the lower quartile working class families were given a lifeline to buy their own homes in middle 2000s, with 100% mortgages. Sadly, with the credit crunch in 2009, that rug (of 100% mortgages) was rudely pulled from under their feet. On the whole it is much cheaper to buy than rent… but it’s the finding of the 5% deposit that is the challenging issue for many Rotherham working class families. Unless the Government allow 100% mortgages back, there will be no improvement in this situation, which is increasing the demand for rental properties.
What can we do to help?
In the long term, to alleviate these problems, I would suggest the Rotherham community hold their local politicians to account – there are actions that the council could take to ensure the affordability of housing by working with private developers and housing associations and aggressively using the planning tools at their disposal to safeguard the local community getting the new households we need.
In addition, on the renting side of the problem, Rotherham Metropolitan Borough Council could make certain parcels of residential building land for private rented development only, eliminating the opportunity of the land being bought to develop large executive homes, which do not solve the current problem. (Although in the short term this does mean demand for rental properties will continue to grow, keeping Rotherham house prices high and Rotherham rents high.)
It’s a difficult time for those longing to own their own home in Rotherham. Let’s keep up the pressure on our local politicians to work hard to solve these problems.