This House would make home ownership affordable.

Despite the recession, house prices are historically high. With many people lacking disposable income, houses are still as unaffordable as ever. As a result, the landscape of homeownership in Britain is changing. Since the 1920s, politicians on both sides of the spectrum have extolled the benefits of property ownership in a bid to instil responsibility, pride, and independence throughout their citizenship. Now, however, the post-war trend of owning rather than renting is on the decline. In the past six years, the amount of people renting privately owned accommodation in England has risen by 55%, demonstrating the difficulties many aspiring homeowners face trying to buy property for the first time.¹ Instead, buy-to-let landlords show signs of dominating the housing market. In the past year, the number of investors with a view to renting out their properties has increased by 42% in the United Kingdom, with nearly one in 10 of all mortgages going to private landlords². Many banks now require a deposit of one quarter of the value of the property in order to lend mortgages. As house prices are many times the average Briton’s income, it is increasingly difficult to get the capital together to put a deposit on a house, and so the average age of first-time buyers has leapt 33 to 37 over the last 3 years³.At the same time, higher mortgage costs and tighter mortgage criteria leave homeowners facing larger monthly instalments and, on top of ballooning energy prices and low real wage growth, there is a danger of more people defaulting on their mortgages in the years ahead⁴. This is particularly a problem in the United States, where rising unemployment presents an additional challenge. Although in the past, house prices in America have risen at a similar rate to rents, during the last period of the housing boom the ratio of house prices to rents grew at a rate of 78%. Similarly, the ratio of house prices to income has also increased significantly from the long term average. Whereas in 1952, the ratio of house prices relative to income was 100%, by the end of the housing boom in 2002, it had more than doubled to over 200%. As in Britain, this means that mortgage-holders are more vulnerable to any changes in the housing market⁵.

Points For	Points Against
Government can make homes affordable by increasing supply.	We cannot sustainably build more houses.
Unaffordable housing prices reduce social mobility.	We should change our attitudes on rent.
Keeping housing prices artificially high caused the global recession, and would do so again.	Lowering house prices will disincentivize good financial sense.
Without affordable housing, first-time buyers are forced into unwise relationships.

Remember to choose a winning argument!

Government can make homes affordable by increasing supply.

Point

There are several ways in which the government can make homes affordable. The most obvious is to encourage the building of cheap homes by ensuring that the newly built home can only be sold for a small profit over the cost of construction. At the moment developers prefer to build large houses or 'executive apartments' that are not affordable because they do not cost much more to build than cheap homes yet sell for a much higher price so there is more profits. Capping the amount of profit developers could make out of the biggest homes would change the incentives to it being better to build a lot of small cheap houses. In 2004 John Prescott, then Deputy Prime Minister of the UK, challenged the construction to build homes for £60,000. The construction cost was ultimately higher at £85,000 however they sold or over £200,000 because the developers could sell at the market price¹^.

¹Alvin Hall, ‘Low-cost housing plan for first-time home-buyers falls flat’, BBC Radio 4, 12/8/11, accessed 12/8/11

Counterpoint

This would simply be giving the profit to the first buyer of the property. As such while it would help a very few first time buyers it would do little to reduce the overall market price of homes.

Unaffordable housing prices reduce social mobility.

Point

Recently, Grant Shapps, the UK housing minister, headed a meeting at the Department for Communities and Local Government in order to persuade senior executives from Britain's biggest home builders, estate agents, and mortgage lenders to engineer "an age of aspiration," by helping more young people to buy their first homes.¹ This soaring rhetoric implies the government's underlying worry that, due to the current unaffordability of homes, social mobility is becoming more difficult. Such high house prices and strict lending criteria make a young person's position in society dependent on the goodwill of affluent and generous parents to help them raise a deposit. This, of course, gives children born to a higher social class a lifetime advantage over peers from a poorer background. In a vicious cycle, richer children will grow up to own capital assets, including houses, which they will be able to pass on as inheritance to their offspring. It is an injustice that artificial barriers to entry, such as extortionate mortgages, prevent poorer young people from entering the housing market and leave them with nothing to show for a lifetime of paying rent.²

¹ Harry Wallop, ''Wild West' buy-to-let investors 'force first-time buyers off the housing ladder', The Telegraph, 11/7/11
² Andrew Rawnsley, 'Thatcher's dream becomes a nightmare for a jilted generation', The Guardian, 5/6/11

Counterpoint

A high house price is a just reward for property-owners' labour, it is therefore the product of social mobility. Existing homeowners have often worked hard to secure a job with a high wage and saved prudently in order to pay for a deposit on a house. Often, these people have worked hard to afford a house in order to provide a nest-egg for their children. It seems unfair that homeowners should be forced to leave a lesser inheritance to their heirs, by reducing house prices, making it harder for their own children to remain in the class to which they were born. Furthermore, in most countries, those who own valuable properties already pay higher taxation, some of which goes to programs to encourage social mobility; it seems unfair that people in this higher tax bracket should be hit twice.

Keeping housing prices artificially high caused the global recession, and would do so again.

Point

Before the financial crisis, housing prices were rising fast. Rather than stopping this trend, governments and financial institutions tried to adapt to and profit from it. To sustain soaring house prices, banks lent mortgages to people who couldn't afford them, through so-called "innovations," such as interest-only mortgages, 100% mortgages and lending to people with poor credit histories. A subsequent rise in mortgage defaults left banks less willing to lend money. So, as mortgages have become more expensive, many people have been priced out of the market.¹ It is unfair that first, homes became so unaffordable because of bad decisions by banks and, that second, the same banks are now lending mortgages to buy-to-let landlords, who are buying up houses to rent out to young people who, otherwise, would have been first-time buyers. Therefore, banks should be forced to lend money to young people trying to enter into the property market.

¹ T Pettinger, 'Who is to blame for credit crunch', Economics Help, 11/8/08,

Counterpoint

Banks' willingness to give mortgages to people who couldn't afford homes, and then to hide the risk, caused the recession. The mentality that homes should be affordable to people who can't buy them in the open market is exactly the mentality that allowed the US sub-prime market to bring down the economy. Relaxing financial legislation in an attempt to force banks to lend to first-time buyers will simply cause another recession. This is because lower house prices will leave many homeowners in negative equity as the reduction in house prices will result in banks being owed money, which the sale of the house cannot recover.¹ As negative equity was a major cause of the country's economic downturn, it is imperative that house prices remain at their natural level—not artificially low.

Without affordable housing, first-time buyers are forced into unwise relationships.

Point

To buy a house in England, you need to earn £31,000 per year. If you wish to buy a house in London, you need to earn £50,000. These figures are much higher than the average income per person. In England the average annual wage is £20,000, whilst in London it is £26,000. This means that most young people will not be able to enter the housing market^1.As house prices are high compared to income, most young people will not be able to buy a property unless they have a partner. This will force people into pragmatic—but artificial—relationships, and compel people to stay in these relationships for financial reasons, and this cannot be socially ideal.

¹Ben Chu, ‘Why UK house prices have further to fall’, The Independent, 9/11/10, accessed 13/7/11.

Counterpoint

Instead of trying to manipulate housing prices, societies need to re-examine their views of the proper stage of life when it is necessary and advisable to purchase a house. There is no reason why friends cannot come together to sign mortgages together, such as the "Share to Buy" mortgages offered by Britannia, in order to move out of their parents' houses.¹ It is simply sensible to wait to raise a family until parents are a little older, have two strong incomes and are in an economically stable position. In this way, prudence and good financial sense will continue along the family line, leading to a more economically stable society.

¹ Jennifer Francis, 'Are joint mortgages really the answer?', Financial Times, 13/7/11,

We cannot sustainably build more houses.

Point

Houses are not valued at the amount they cost to build, but what people are willing to pay for them. It is often said that in order to reduce property prices, while ensuring banks lend safely and keep interest rates low, governments needs to build more houses. This solution, however, is also unsustainable. House building is at its lowest level since World War II, with about 65,000 houses too few being built per year.¹ This is because there are many necessary constraints on the building of houses. In the most popular areas, there is a shortage of supply, as it is difficult to find new land around big cities. In more rural parts of the country, housing development is blocked because increasing the supply of houses would lead to crowded amenities, more congestion, and a loss of greenbelt land.² Rightly, people want to protect the beauty and value of their local area, and the property price they have worked so hard to invest in.

¹ Peter Antonioni, 'The uncomfortable truth about the housing market', The Guardian, 3/5/11,
² Tejvan R Pettinger, 'Why are house prices so expensive in the UK', Mortgage Guide UK, 9/8/07,

Counterpoint

Only 150 years ago, more houses were affordable, because more houses were built. In the United Kingdom and other developed countries, ever tighter land regulations, enforced by a property-owning class both in government and big business bent on maintaining their privileged position in society, led to a steady supply of housing being competed over by an ever-increasing population. This has led to higher mortgage payments and rents. It is unfair that young people, at the age of 21 and already saddled with high levels of student debt, must take out a 50-year contract, exchanging many years of hard-won earnings to pay over the odds for what is essentially £50,000 worth of brick and mortar. Currently, land for house building is far too restricted by planning laws. The government should change the country's local authority planning system to make it easier for house builders to get planning permission in areas where people want to live¹. Housing can be built sustainably but artificial barriers to entry are in place in order to protect the vested interests of homeowners, as increased supply reduces the value of their properties.

¹Ian Pollock, ‘Why is it so expensive to buy a house?’, BBC News, 24/11/06, accessed 13/7/11.

We should change our attitudes on rent.

Point

It is not true to say that homes are unaffordable; while homes are unaffordable to buy, they are comparatively cheap to rent. Instead of interfering with the price of people's houses, it is easier to change our attitude towards renting property. If more people saw renting as a long-term decision, and abandoned the belief that owning one's own home is an important life goal, we could stimulate the economy without artificially lowering house prices. It is unfeasible to think that everybody can own their own home and, for some people's economic position, it simply makes more sense to rent. There are clear benefits, such as having landlords to make repairs, as well as more flexibility in changing your house or partner.¹ There should be no rush to make the life-long commitment of owning a house. In fact, the rising age of first-time buyers is a good thing for economic stability. More mature homeowners with more stable relationships, better employment prospects, and a bigger bank of savings built up throughout years of renting, will benefit the economy in the long term.

¹ Matthew Paulson, The benefits of renting forever and not buying a home', Associated Content, 18/1/08,

Counterpoint

In most European capitalist countries, buying a house is seen as a major stage in adulthood, as indicated by the Halifax survey "Generation Rent" which found that three-quarters of those who don't own a property would like to, though nearly two-thirds believed that they would never be able to.¹ The lack of affordable housing cannot be made up by more people accepting rent as a long-term life choice. In countries with high levels of youth unemployment, such as Spain and America, today's generation of university graduates, already faced with high levels of student debt and unemployment, feel infantilized; many are still living with their parents unable to find work and the shortage of affordable housing is another obstacle to adulthood.

¹ Andrew Rawnsley, 'Thatcher's dream becomes a nightmare for a jilted generation', The Guardian, 5/6/11

Lowering house prices will disincentivize good financial sense.

Point

In real terms, homeowners have already lost money, as inflation has risen while house prices have fallen or remained static. This has eroded many people's housing wealth, much of which has been invested or saved in order to subsidize their children's inheritance or their own long-term care.¹ Homeowners who planned to use equity release mortgages to help pay for retirement have been particularly affected, as the interest charges on these loans doubles the size of the debt approximately every 12 years.² Those who have worked hard and saved prudently in order to buy their own homes are already being punished by losing money through inflation. If good citizens are not duly rewarded for their wise financial sense with high property prices, to provide a decent inheritance for their children, and enough money for old-age care, then young people will lose an important incentive to work hard and build their futures.

¹ Rosie Murray-West, 'House prices: inflation wipes thousands off property values', The Telegraph, 9/11/11,

² Rosie Murray-West, 'Older people hit by falling house prices', The Telegraph, 9/11/11,

Counterpoint

High house prices—not low ones—would disincentivize young people from entering the housing market and even from seeking employment in the first place. Learning to budget in order to save up for a deposit on a house is a useful skill, which most young people will never learn because they will never be able to afford a home. The idea that hard work now will result in long-term benefit fuels countries’ economies, and that idea will be lost if housing prices remain high. Today’s middle-aged people, who signed mortgage contracts while property was affordable, will own the houses and keep the jobs, which will leave the next generation disillusioned and unmotivated. It is no coincidence that Germany, where house prices are currently at approximately the same levels as in 1970, has the most stable economy in the Eurozone.