Musings on the house price to earnings dataset 2022

Roisin Murphy once sang the somewhat confusing lyrics ‘Never ever enough, it's never enough, is it ever enough when it's just enough?’ back in the heady days of 2001/2 as I recall.

Bit of a banger that’s difficult not to tap your foot to…… 

Back then, if you were on the median wage and lived in Malvern or Bromsgrove it only took just over 6 times your salary to be able to afford the median house price. Heady days indeed.

Well, as of this week we now know for sure that the median wage is never going to be enough for the median house price in what used to be fairly affordable places to live in England. 

The latest set of the house price to earnings data has been released by the ONS (March 2022) and it makes sobering reading. Every March this dataset is released and it’s an important bellwether for housing demand and supply (and calculating future requirements). What we see time and time again is a worsening picture for many of the authority areas we work in. The median house price to earnings ratio is often seen as a good measure of affordability. You can look at the house prices all day long and we know where the ‘hot spots’ are, but if those prices are supported by good wage rates then it can ‘balance’ itself. However, the ratio figure tells us a lot about the widening gap in house prices relative to earnings. We know wage inflation has not kept pace with house price growth, and certainly not over the course of the pandemic, but this dataset really shows the sharp contrasts between the two factors, as well as within the different geographies of the country.  

Within the West Midlands, we note that Malvern Hills District has held its ‘top position’ as the least affordable authority area in the region. This is also stark in the Cotswolds (15.75 times!!!) and popular coastal areas such as Devon, Cornwall and Norfolk have all got worse in affordability terms. This is not something to be proud of. It is now the case that for someone to afford the median house price in Malvern Hills, they now require a multiplier of 11.90 times the median salary for the district. This puts most homes in the district out of their reach. The same applies to other areas in the West Midlands such as Warwick, Stratford, Bromsgrove, Wychavon and Bromsgrove – all unaffordable areas. The common factor with many of these places is the constrained housing supply. 

Many will say that the supply of homes has nothing to do with rising house prices and that bank lending rates being at an all-time low, albeit climbing again now, have encouraged landlords and others to buy up homes to rent, which undermines supply. However, this is simply not the case: the fiscal disincentives to landlords have dampened buy to let transactions in many areas, where the government added the 3% surcharge in stamp duty in 2016 to second homes and buy to let properties, as well as reducing mortgage rate relief in 2017. The main problem is that we have persistently not been building sufficient new homes in this country for decades. We have never reached the 300,000 new homes per annum which were part of Boris Johnson’s election pledge and yet the government persists in citing it as an achievable target. In their recently published research paper, ‘Tackling the under-supply of housing in England’ (Wilson and Barton, Feb 2022, House of Commons Library), it opens by stating clearly that, ‘When people are unable to access suitable housing it can result in overcrowding, more young people living with their parents for longer, impaired labour mobility, which makes it harder for businesses to recruit staff, and increased levels of homelessness.’

We are holding ourselves back economically and socially by continuing to work within a system that is set up to stymie development and hinder the development of new homes. The research paper identifies the main barriers remain as follows: a slow planning system; the need for more public land to be released; a focus on strategic infrastructure to free up new housing sites; unlocking the potential for councils and registered providers to deliver more homes; encouraging and helping small to medium-sized developers to deliver housing and the need to address the acute labour/skills shortage in the construction industry. 

All of that makes perfect sense to me, but as a planner who has experienced the loss of the regional spatial strategies (which delivered a consensus on housing and employment land distribution within a region together with the necessary strategic infrastructure delivery) and of course Brexit (which, irrespective of the way you might have voted clearly has affected our pool of labour and skills in construction). These have been arguably two of the most damaging changes to affect the delivery of housing, it is clear to me that this problem will not be solved quickly, if at all during the rest of my career.

Worsening affordability is nothing to be proud of or take comfort from unless you have paid off your mortgage and are not in housing need. However, millions of people in this country are without a suitable home, whether because it is unsafe or overcrowded. Indeed, 1 in 10 homes pose a risk to residents’ health or safety (Good Homes for All, September 2021), and more than 8 million people, equivalent to the population of London, are living in unsuitable housing in England (according to a study by Professor Glen Bramley of Herriott Watt University for Crisis and the National Housing Federation, 2018). There are of course massive ramifications for all of those having to live in such poor accommodation including worsening educational outcomes; poor quality of life and mental health outcomes. These are often experienced at the ‘worst-case scenario’ level by children, the elderly and the disabled.

Until this government realises that holding back housing delivery (whether deliberate or otherwise) is holding back the country’s prosperity then nothing will change and the persistent unwillingness of many local authorities to really be positive about development will be allowed to continue. Finally, the government have themselves got a duty to convey how new development brings substantial benefits at a time when public spending continues to fall: development brings money for education, transport, play areas, sports facilities and biodiversity as well as creating a substantial number of jobs, or we will continue to have our work cut out. 

RCA specialise in planning applications and appeals for residential development throughout the country and we are able to provide expert witness services on planning, housing land supply and development viability. Please give us a call for a chat about the above or any of our other services.