Jump-starting housing supply

CIH Harrogate Conference20 June 2011

Nigel HugillExecutive Chairman, Urban&Civic

and Chair, Centre for Cities

Five minutes of statistics and assertions

Lending to UK consumers secured against their homes and financing our Housing Associations is amongst the safest banking business in the world

“House repossessions to rise in 2012. CML warns”

Source: Council for Mortgage Lenders

Repossessions

Mortgage arrears

BBC, June 2011N

o. of repossessions on m

ortgaged properties (000s)M

ortg

age

arre

ars

(% o

f mor

tgag

e lo

ans

outs

tand

ing)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0.5

1.5

2.5

3.5

4.5

5.5

6.5

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

CML estimates for 2011/2012 (my money is on both being a little lower)

Ownedoutright Buying with mortgage Total

% ownedoutright % buying mortgage

1996/97 5,161 8,434 13,594 38% 62%1997/98 5,305 8,599 13,904 38% 62%1998/99 5,337 8,612 13,949 38% 62%1999/00 5,527 8,665 14,192 39% 61%2000/01 5,579 8,858 14,417 39% 61%2001/02 5,830 8,456 14,286 41% 59%2002/03 5,882 8,504 14,386 41% 59%2003/04 6,022 8,523 14,545 41% 59%2004/05 6,221 8,300 14,520 43% 57%2005/06 6,411 8,144 14,555 44% 56%2006/07 6,331 8,072 14,403 44% 56%2007/08 6,576 7,888 14,464 45% 55%2008/09 6,751 7,851 14,602 46% 54%

Source: Survey of English Housing

Flat national house price statistics obscure genuinely fundamental underlying trends

Trends in owner occupation in England – 1996 to 2009

A decade like never before: low interest rates have impacted more inexpediting repayments than in staving off repossessions

Homeowners less indebted but also appreciably older

Source: Deputy for Communities and Local Government

Owner occupation (and housing wealth) is increasingly concentrated into the hands of the over 45’s (and they all have votes)

38.3%

38.5%

37.2%

36.1%

35.2%

35.0%

33.5%

33.0%

32.5%

30.7%

37.3%

37.5%

37.8%

38.4%

38.7%

38.8%

39.8%

40.1%

40.0%

40.2%

24.4%

24.0%

25.0%

25.6%

26.1%

26.1%

26.7%

26.9%

27.5%

29.1%

0% 20% 40% 60% 80% 100%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

under 44 45 to 64 over 65UK homeowners:

WarwickCambridge

London

Southampton

Bristol

1 job

Centre for Cities identifies two more divisions

Source: Nomis 2010, Centre for Cities

Net private sector job creation 1998 to 2008

Over an apparently expansive decade, 10 private sector jobs were created in a southern pentagon for every 1 in the rest of England

10 jobs

Source: Halifax HPI, Q1 1994 = 100 and Q1 2002 = 100

1994 1995 1996 1997 1998 1999 2000 2001 200250

100

150

200

250

2002 2003 2004 2005 2006 2007 2008 20090

50

100

150

200

250

300

Sharply differentiated regional house price dynamics under Ken Clark and Gordon Brown

1994 to 2002 – regional dividesouth outperforms north

2002 to 2008 – the gap narrows as outperforms reverses

North

South East (excluding London)

North

South East (excluding London)

Unequivocal signs that the cycle has reversed once more, both in terms of prices and housing transactions

Not a fair world: access to capital accentuates investment performance

Source: Hometrack

Percentage of year-on-year change as proportion of house purchases

Housing advantage has accrued disproportionately to 45+ year olds in the south of the country with better access to capital

Kate Barker’s aspiration to build into affordability has absolutely not taken place

Source: Hometrack

Affordable

Private

New houses are not getting cheaper: they are just not getting built

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

02000 2001 2002 2003 2004 2005 2006 2007 20092008

PrivateAffordable

2010 2011

Rolling 12 month UK housing statistics

Private

Affordable

Estimated £5bn of first time buyer deposits in both 2009 and 2010 benefited from Royal Bank of Parents. Similarly, private landlords invested £15bn (equity and debt) in 2010 buy to let investment.

Figures dwarf institutional investment (say, £4bn of pipeline PRSI).

Maybe we have been looking in the wrong place (JC Flowers). Regional dynamics limit private sector capacity to provide affordable contribution.

Clear conflict with new localism; southern pentagon residents unlikely to prioritise social housing.

Large scale institutional investment in affordable more likely to come from ownership, unless HA’s elect for new index linked funding.

HA management expertise, rather than access to capital, may carry greater competitive advantage in current cycle.

Sector to own less and manage more.

To prompt debate . . .