7th February 2006

A look into the future of housing in Britain shows that a heavily increasing number of smaller households, and two dangerous extremes, will drive the need for buy to let investment in the private rented sector and for social housing.

Speakers at the annual conference of the Association of Residential Letting Agents, ARLA, in London today (Tuesday, 7th February) said that the rate of growth in actual households will exceed population growth. More disturbing, the majority of the elderly will fail to provide for their own housing needs and a growing number of children, living in unfit housing, will face a blighted future.

This bleak outlook for British housing need was forecast in a joint presentation given by a leading mortgage lender and a major property services group, active in social housing.

John Heron, Managing Director of specialist buy to let lender Paragon Mortgages, told delegates that already a high proportion of non-homeowners felt that not owning a property by the age of 30 was no cause for concern. He pointed out that half of these households choose not to buy so as to enable them to make different lifestyle choices.

Mr. Heron said that housing completions are at historic lows relative to need, social housing completions are woefully inadequate and the housing stock is aging.

"This is in the face of growing demand, caused by net immigration of an estimated 145,000 a year, smaller household sizes leading to proportionally more households than population growth would have required in the past. Other demographic forces driving up household growth include later marriage, more divorce, more students and increased labour mobility."

"Housing will become an even more scarce resource and owning your own home will be much less common than it is today," John Heron predicted.

"This will require a much greater role for a private rented sector that has grown up and moved on. Long term strategic planning in the rental market will be vital to the future provision of housing in the UK.

"It will lead to sustained growth in buy to let as housing policies neutralise the balance between home ownership and renting, social housing policies decline and other assets perform more variably," he added.

Looking at the future from the social perspective: "The growth in the number of single person households will force increasing numbers of the elderly into rented social housing," forecast Nick Medhurst, Chief Executive of property services group Orchard & Shipman plc. The company supplies and manages two of Europe's largest private sector leasing schemes for local authorities in west London and Edinburgh.

Mr. Medhurst pointed out that projections show that nearly four million new dwellings will be needed in the next fifteen years. More dramatically still, in three quarters of all these homes, the head of the household will be over 55.

"With the inadequacy of pension provision and increasing life expectancy we are going to experience far more older people - many of them single - dependent on the welfare state and social housing," he said.

He expected solutions to include retirement homes for rent, equity release schemes, social housing, PFI-type joint venture initiatives and real estate investment trusts. "These are all activities where letting agents and buy to let investors could and should be involved," he told the audience of letting and residential managing agents.

These ARLA delegates were reminded that Shelter reports that over 140,000 children in the south east alone are having their futures blighted by cramped, unfit and emergency housing that damages their health and education and blights their future. The UK ranks 11 out of 15 European states for child poverty.

"Currently," Nick Medhurst observed, "Social housing is the pariah of residential property investment. This is despite the fact that investment in social housing, particularly to house the young and the old, can achieve better returns than most buy to let investors are achieving and, at the same time, contribute to the social good."

 

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