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Is The Uk Housing Shortage Crisis A Myth?

By Author: Bradley Weiss
Total Articles: 159

Yes, there are many empty homes in London and elsewhere. But affordable, middle-class homes are lacking - something the private investment sector is correcting.

A columnist for The Guardian, Simon Jenkins, caused a bit of a stir in May 2014 by writing a contrarian viewpoint regarding housing in the UK. In his opinion piece "Housing crisis? No, just a very British sickness," Jenkins did a fair job of dissecting the economics and geography of homes in the country – including how many thousands stand empty in the midst of a housing shortage.

So, there is no housing shortage? Well, not exactly. Jenkins' point is that the wrong homes are in the wrong places, and that Government programmes favour some of these misplaced portions of real estate. As private investors (such as those in alternative investment funds) in middle class housing will point out, those homes are sold and occupied by owners in relatively short order, disproving any notions of a glut. Rather, location and price points for housing are what matter.

Jenkins references others who share or at least inform his unorthodox position:

Neil Monnery (author, "Safe as Houses"), who notes that the relative wealth of Germany comes from its middle aged citizens investing in industry and less in housing (only 43 per cent of them own their residences, even if comfortably middle class). The country does not have the rapid home price and rental inflation found in the UK.

Danny Dorling (author, "All That is Solid"), where the author compares rooms per person statistics of today versus 1971. Formerly the number was 1.5, now it is 2.5, which Dorling says illustrates longer occupation in larger homes by families after children are grown.

Rebecca Tunstall, an economist who writes on income inequality, cites how the top 10 per cent of Britons had three times as many rooms as the poorest in 1981. Today that number is five times as much - suggesting that it's largely about growing income inequality (a point made emphatically in the Thomas Piketty book, "Capital in the 21st Century").

Other writers have noted the well-known fact that rich foreigners - mostly from Russia, China and the oil-rich Middle East countries - have bought up stately residences in the most expensive neighbourhoods of London as investment homes (example: One Hyde Park in the City of Westminster, where 34 of 83 luxury residences qualified for second home council tax discounts). This phenomenon largely support’s Dorling and Tunstall's points, that increasing wealth at the upper end of the spectrum skews the numbers. Which somewhat undermines Jenkins' point, that there is no housing shortage. The lack of affordable housing, where working and middle class people can live in relative close proximity to their jobs, is the real housing problem in England.

It bears noting that under-occupied homes, many falling into disuse, are all over Europe, particularly in Spain, where a 2011 census shows 3.4 million empty built properties, mostly in resort areas. In Italy it is at least 2 million, in Portugal 735,000, in Ireland 400,000 and the UK, 700,000 (source: Lea Data collated by the Empty Homes Campaign).

Gavin Smart, director of policy at the Chartered Institute of Housing, attributes these vacancies to houses in regions that lack jobs. Which underscores an interesting point: Local Planning Authorities in UK towns and boroughs are tasked with supervising sustainable development. This includes giving planning permission to the construction of homes that help bolster the local economy. When employers look for places to locate their workplaces, they want to be near a ready supply of labour. The organic means by which private capital through real asset funds investors build homes are within this construct.

Investors in real estate generally fare well with putting their money to work at building homes. But any individual who wishes to participate in this sector should always do so with the counsel of an independent financial advisor.

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