A literature review is research into the current literature available on any given topic. A review is generally conducted prior to a theses or a dissertation, but sometimes stands on its own as an individual piece of academic work. They can be lengthy or brief (as in this case) and are often used to provide insight into a topic and reveal where additional research is required. The literature used in this review was found in a number of ways. First, an online database (EBSCO) provides access to a broad range of academic journals such as Housing and Urban Studies. Articles from both of these journals were used. Second, an Internet search for research reports on the topic was also used, alongside a review of government documents. Research and policy papers produced by the government assist in a broader understanding of the ways in which the topic is being handled (or not) at the highest levels of authority.
SUPPLY AND DEMAND
One of the key aspects of housing affordability is the direct connection between supply and demand. Lovell (2005) tackles this issue in her analysis of the current situation in the UK housing market. One of the patterns she notes is that UK consumers are becoming deeply concerned over the carbon footprint that we leave behind a- in other words, the direct environmental impact of human living and resource use. She notes there is an increasing demand for ‘sustainable housing’ and ‘eco-housing’; the types of homes that are more energy efficient and use far less resources to build and maintain. However, the availability of these houses is extremely low. Lovell points out that approximately 90% of all housing is built by the private sector and almost 75% of all housing is privately owned. In her estimation there is indeed a fairly large consumer market available for and capable of paying for low energy housing, but the market has not replied. She suggests that one of the reasons for that is:
Momentum is high in the housing sector because of the durability of the housing product, and the considerable capital cost of production. It means that innovating with new products like low energy housing is more costly and higher risk, because they do not fit easily within the existing socio-technical system (Lovell 2005, p.824).
Bramely and Leishman (2005) suggest that although England experienced a housing boom in the 1990’s, especially in southern England, there is still relatively higher demand than availability. This led to a 2004 report by the government into the issue. In tandem with the fact that there has been a boom in the south, there has been low demand in other areas and some areas have even seen housing abandonment. Their research suggests that there is no single way of analyzing the housing market in the UK. Instead, research needs to target geographical areas according to their specific needs and understand housing affordability according to distinct social, cultural and economic realities of these regions. They identified that areas of low demand are the northern England and the Midlands. London and southern England are high demand areas.
THE MORTGAGE CRISIS
According to Figueira, Glen and Nellis (2005) the mortgage crisis hit England in the 1990’s. Prior to that there was a period of rising housing prices in the early to late 1980’s. Although England’s economy in the 1990’s was strong there was an accompanying inflation in housing prices both in London and the southeast of England. These researchers identified the mortgage arrears crisis of the 1990’s as a possible pattern that could repeat itself in the 21st century. Figueira, et al. (2005) identify the fact that England has one of the highest rates of private home ownership in the world. These researchers also suggest that the Conservatives “Right to Buy” program in the 1980’s transferred almost 1.5 million properties from the rented social sector to private ownership. This results in far less housing available for persons with less income. Those individuals turned to borrowing more money than they could repay which resulted in the mortgage crisis of the 1990’s.
AREAS OF PROGRESS
A private report on the housing market in the South East of England revealed that the region has far fewer affordable housing options than it requires (Tyms 2003). Two areas the report identifies as needing more affordable housing now are Surrey and Oxfordshire, yet the government is not allocating the building of affordable housing in those areas. The report suggests that while rental units for graduates of nearby universities can provide a short-term solution, it is not a long-term answer to the problem of lack of affordable housing in these areas. One of the policies they identify as being problematic is that of ‘London weighting’. The government uses that policy to help offset the costs of living in London for many government and academic positions. Yet, this takes money away from providing for other services such as much needed housing in areas other than London. Yet, an even more serious problem may be underneath which is the lack of attention to rising housing costs by both the public and private sectors. According to Tyms’ report, they are more concerned with the ‘symptoms’ of these rising prices than the root causes. They see the problem as the lack of available, qualified labour and not the larger issues of social barriers, age, race, gender and income.
POPULATION GROWTH AND HOUSING
A 2005-2006 report by the House of Commons identified a number of salient issues with respect to housing affordability. They state at the outset that while the number of homes being built in the past fifteen years has declined, the country’s population has continued to grow.
In the North West there is a 3.4% excess of homes over households but in the South East the excess is only 1.3%, and London has 3.5% more households than homes (“Affordability” 2005-06, p.7).
It is obvious that if this trend continues England will face a serious housing shortage. Some of the reasons for an increase in households are a rising divorce rate, the increase in human longevity, increased international migration and an increase in the number of people who live on their own. The regions projected to experience the highest growth of households are the South West and South East of England with London next. The area of lowest growth in Northern England.
In many ways, the British government has responded with the same approach as governments in other countries – they are attempting to influence housing prices and increase the number of affordable housing units. Still, the House of Commons report states that over 200,000 new homes are needed each year between now and 2021 to keep up with demand. The report agrees with the Tyms’ report that there is no ‘national solution’ that can be applied to England’s problem. Rather, a regional solution must be developed in order to address the specific needs of various geographical areas and their social needs. They also point out the fact that some 300,000 households have a second home and a possible need for the government to discourage the purchase of second homes given the housing shortage.
In meeting the demands for increased housing, the government cannot simply ‘build homes’. Homes are purchased by families of varying sizes and needs. There is no such thing as the ‘generic home’, but rather the need of individuals and families who want to purchase a home that fits their specific needs. People also have widely varying incomes and as such, they have to be able to afford the home, or England could risk entering into another mortgage crisis, similar to the one which has enveloped the US. In line with these concerns there will likely always be the need for social housing and rental units. Therefore, any housing plan must take these broad range of needs into consideration.
ISSUE OF AFFORDABILITY
A more recent report by the National Housing and Planning Advice Unit – NHPAU (2007) focused entirely on the issue of affordability. The report outlines the current problem in a succinct fashion. If the availability of supply cannot meet the demands for housing then of course the price of housing rises relative to this problem. This makes it increasingly difficult for those who seek to purchase their first home and thus the demand for private renting increases. This increases the price of rental units and social housing. The number of people living in these latter conditions rises exponentially.
The aforementioned report notes that housing prices over the past ten years have increased much more so than peoples’ earnings or the growth of the economy. The report also identifies the following as significant factors:
As house prices have risen, first time buyers have needed increasingly larger deposits to be able to enter the market. In order to manage risk, lenders will tie mortgages to fixed income multiples, limit loan to value ratios, and increasingly use affordability models based on residual incomes (“Affordability Matters” 2008, p.8).
Another problem related to affordability is the quality of life for those who cannot afford private housing. They are forced into rentals and perhaps even areas that are less than desirable. They may end up in a high crime area, less green space and other negative ramifications of living in low-end housing. Also, if incomes will not rise in relationship to the housing market prices then fewer people will be able to afford the quality of housing they seek.
Whitehead, et al (2008) published a report late last year on affordability and the housing market. They state that availability is not simply a matter of supply and demand. At any given moment only a certain percentage of rental units are available as are a specific number of homes being built. This suggestion concurs with the NHPAU report that there are always a certain number of people seeking affordable housing but only a portion of them can actually afford what they’re looking for. Whitehead, et al. state that income is always one of the key components of demand. As people are able to afford specific types of housing, then that is what they seek. This too drives the supply of specific kinds of housing built by the private sector. The accessibility factor is also important – access to schools, shopping, entertainment, transportation, and other key services will drive supply and demand.
THE GLOBAL ECONOMIC CRISIS
Most recently, the global economic crisis has come into play as a factor in the housing market. There has been a world-wide loss of confidence in the banking system and this has affected the availability of mortgage credit. The ways in which this will play out for the future have yet to be fully understood or analyzed. As the housing crisis builds, there has been more consumer involvement. Many are not content to sit back and leave it to the government to enforce their own solutions on the situation. Hickman (2006) notes that since the crisis of the 1990’s there has been a market increase in consumer involvement in the housing issues. Tenant participation in the housing issue has been especially important with respect to conditions in rental units. Authorities have also recognized the importance of the consumer voice and the rights of tenants (Hickman 2006). Their voices will become even more crucial as the number of people seeking rental units increases relative to the number of spaces available.
GAPS IN THE RESEARCH
Some of the issues that will need to be addressed in the near future are: the ways in which people of diverse cultures are affected by the housing shortage – will people of specific cultures be left behind due to chronically low incomes? There is also the concern over persons with disabilities and their ability to maintain stable employment and thus reduce the amount of social housing they use but increase the number of rental units or homes they require. There is also the need to study the environmental impact of building 200,000 plus homes in England over the next twelve years. That represents a significant impact on resources and therefore the need for more sustainable and eco-housing which is how this review began. In the long term, sustainable and low-energy housing may be one of the keys to England’s growing housing needs.