£1bn spent housing homeless families in England

[discovolante]

Councils in England spent a record £1bn on temporary accommodation for homeless families in the past year.

This is more than 50% higher than the year before, driven by record numbers of families living in short-term housing, including over 150,000 children.

Councils spent £417m accommodating families in hostels and bed and breakfasts, a 63% increase on the year before.

The Labour government, which came into power in July, says it will tackle the growing problem by banning no-fault evictions and building 1.5 million homes over the next five years.

https://www.bbc.co.uk/news/articles/cj9l8njg2rzo

More at the link of course.

[IvanV]

The 1.5m in 5 years - 5% increase in Britain's housing stock - isn't going to be easy. A more realistic outcome, that I would be delighted to see, is if after 5 years the rate of house building went up, sustainably, to 300,000. Because it has actually been falling of late and getting it back up will be hard. It's not just planning, it's money, especially for social housing where we need to expand the stock.

Part of the problem is that the housing market isn't in a pretty state at the moment. Despite the evident shortage, the current higher interest rates make it difficult for people to take on new houses. And so the housing market is fairly slow just now. Of course prices could come down, but house prices tend to be slow to come down, as we saw in the early 90s, where it took about 6 years for the housing market finally to bottom out. The kind of price reduction that would make a difference - 20% or so - that's the kind of thing that would have huge effects. One of the reasons for sticky downwards prices is that people can't afford to sell at much lower prices, whether they are paying off a mortgage, or a housebuilder that has a target yield.

And the economic conditions rebound on house-building. Because of the large capital sums involved while houses are in construction, housebuilders rely on recyling capital as they build out a large development, or even numerous smaller developments. If sales are slower, their capital comes back slower to them, and they are slower to start on the next phases. This is true even in social housing, where the developers still need large working capital. You can see that at Barking Riverside, a large brownfield site in E London where around 10,000 dwellings are being developed, a large proportion of them social housing. It has its own new railway station. Even there, and with a social developer in L&Q Homes, that has easier capital than PLC housebuilders, it is taking a long time to roll out the building, because of the need to recycle the capital. They - and other builders such as Bellway they release sites to from time to time - have been building for over 5 years already, and it probably won't be finished for 10 years.

[TopBadger]

The 1.5m in 5 years - 5% increase in Britain's housing stock - isn't going to be easy.

I read somewhere that in the postwar rebuilding of houses (which I perhaps falsely believe to be the biggest building period in our history) that 800,000 (including many pre-fabs) were completed in the five years from 1946-51. I've no idea if doubling that number is feasible.

Those 1950's prefabs were pretty ropey by some accounts, that said, where I grew up was an entire estate of them and the families I knew that lived in them didn't complain at all.

You'd think that by now we'd have cracked modular housing and would be able to create warm good quality homes with speed and at scale. Private companies simply don't have the incentive to build quickly.

I think we'll need a public house building company to reach anywhere near this number.

[IvanV]

You'd think that by now we'd have cracked modular housing and would be able to create warm good quality homes with speed and at scale. Private companies simply don't have the incentive to build quickly.

I think we'll need a public house building company to reach anywhere near this number.

One of the stupids with housing in Britain is that mortgage companies don't like lending money on houses that aren't of traditional masonry construction. Many well-off countries have large parts of their housing stock of wood and other kinds of quick assembly panelling, and lending companies have no problem with those in those countries, where such housing is normal. It is much cheaper to construct, and can indeed be factory built in modular fashion in a way that is rather harder with brick-and-mortar. So why we are so silly about it in this country, I don't know. They do talk about opening modular housing factories in this country, but it is barely happening, probably because of these impediments. And it would also help with the issues of poor quality construction as mentioned in this recent article (and Bellway are far from the worst). But even when we do locate the impediments and clean them out, clearly it will take time for modular housing factories and methods to roll out.

We do in effect have a lot of public housing companies in this country. L&Q, Paradigm, etc, are non-profit and they build houses, and they get grants from public housing budgets to help facilitate that where what they are building will not produce a commercial return. So I think we already have them, and I'm not sure that we really need to create a new one. The issue is shortage of capital, planning. And then all the other stupids, like I just mention, that mean houses cost more to construct in this country than they should do.

[dyqik]

I suspect a combination of the insurance industry and building industry is part of the reason behind the mortgage companies reluctance. Mortgage companies need robust building insurance in place, because they care about the lifetime TCO of the building in order to price the risks of default.

Without a demonstrated national capability for maintaining and repairing non-masonry construction, then insurance costs will be high, because damage is costly to repair in a timely fashion. Without proven building standards and enforcement thereof, then insurers will assess the risks of non-traditional construction as higher risk.

You could import the building standards pretty directly from Europe and North America. But that wouldn't train builders and building inspectors to work to them and to spot problems.

You can pretty quickly get "build from scratch" up and running for non-traditional construction with large companies, but the handyman/joining builder repair and maintenance infrastructure won't be there immediately.

With e.g. cheap modular wooden construction, the threshold for tearing it down and starting again after damage or neglect is much lower, but that's a bigger step for insurers of an occupied dwelling.

[TopBadger]

One of the stupids with housing in Britain is that mortgage companies don't like lending money on houses that aren't of traditional masonry construction.

Buildings insurance is the rebuild cost of a house though right? A £650k house might be insured for a £180k rebuild cost because most of the value of a house is the land it sits on rather than masonry.

On that basis I can't see the issue, on a default the bank still owns the most valuable thing (the land) and the rebuild cost of a modular house should be less than that of a masonry one, meaning reduced risk for the insurer (and reduced premiums for the home owner)

To me these are just further indications of a market that isn't working.

[dyqik]

One of the stupids with housing in Britain is that mortgage companies don't like lending money on houses that aren't of traditional masonry construction.

Buildings insurance is the rebuild cost of a house though right? A £650k house might be insured for a £180k rebuild cost because most of the value of a house is the land it sits on rather than masonry.

On that basis I can't see the issue, on a default the bank still owns the most valuable thing (the land) and the rebuild cost of a modular house should be less than that of a masonry one, meaning reduced risk for the insurer (and reduced premiums for the home owner)

To me these are just further indications of a market that isn't working.

The bank wants all its money back, not just the land value.

There's also the problem that non-traditional buildings will likely have lower resale value* than traditional buildings, which means that it's harder for a mortgage company to recoup the loan principal in case of default.

* Or take longer to sell. Time that the loaned principal isn't returning interest is lost profits.

[IvanV]

There's also the problem that non-traditional buildings will likely have lower resale value* than traditional buildings, which means that it's harder for a mortgage company to recoup the loan principal in case of default.

* Or take longer to sell. Time that the loaned principal isn't returning interest is lost profits.

I think that's a temporary situation, which the mortgage companies have turned into a chicken and egg problem. Once the British get used to houses of, what is to the British, non-traditional construction, they won't be hard to sell. Obviously they will have a price consistent with their value, and may possibly depreciate a little faster than masonry houses. Though even masonry houses tend to get torn down eventually, when they become impracticable to maintain. Until about 200 years ago, the British themselves also largely lived in houses that were not of masonry, though not many of these survive outside museums of country life and the like.

[TopBadger]

I find this traditional / non-traditional building construction barrier argument to be codswallop.

In my next of the woods are several ancient villages with numerous 400+ year old dwellings of oak and lime plaster construction*. The banks and insurers cope just fine with mortgaging and insuring them, and these "chocolate box" cottages sell for a premium over bricks and mortar in many cases and get snapped up right quick.

*Public Service Announcement - don't buy one if you prefer wallpapered decor

[noggins]

Yes and if nontrad really is a prob why nut just knock 10% of the max LtV and bung 0.5% on the APR to pay for the “risk”.

Seems like the market is stuck and lenders and insurerrs are too chicken to be the first.

[dyqik]

Yes and if nontrad really is a prob why nut just knock 10% of the max LtV and bung 0.5% on the APR to pay for the “risk”.

Seems like the market is stuck and lenders and insurerrs are too chicken to be the first.

That what is meant by "hard to get"/"don't like lending", particular for buyers currently priced out of the housing market, where getting the deposit together is the major obstacle to buying.

Mortgagers doing that is the barrier to non-traditional construction methods

[IvanV]

Barratt will build even fewer homes this year, after a reduction last year, because of lower profits per house built. Vicious circle.

Even if house prices come down a few percent, they are still a lot higher than just a few years ago and the rest of history. If there was money in building houses 5 years ago, there should be money in building houses today. But then the land transaction is on the expectation of higher house prices. And that is also aggravated by the rise in construction costs. We need it to feed back into land transactions to restore the profits. The land will still be, say, 150 rather than 200 times its value in any alternative use.

[TopBadger]

Scarcity drives / props up prices. That's good for housebuilders profits, and also good for banks profits.

All the builders work on the same model, so there is little if any competition to shake this up.

I don't see anything changing anytime soon.