Bricking it – starting a family without a foundation

Contributing to our occasional “Vox Pop” series, Melissa Jane Knight talks housing and how the rhetoric of a government claiming to support “hard-working families” falls on deaf ears when young families are locked out of affordable home-ownership and forced into cramped, expensive rentalsIF_Blog_Vox_Pop_Retro_Mic_logo_revised

Last year, we decided we should begin trying for a baby. Many friends and family convinced us my eggs will soon be too dusty to work, and the last thing I need after choosing a career in local charity work is to spend my £11k of savings on IVF. I’m still not convinced I should whack it over to the Student Loans Company before Osborne sells my student loan debt to some profiteering loan sharks. So my partner and I talked about it and decided to start “trying”. Four weeks later, I was pregnant. Due this September, on 9/11 – a week before my 33rd birthday.

So now we need a bigger place to home our impending family. We are not yet in a position to buy. The housing market has surged into crazy, anxiety-inducing prices. Just when I think it can’t get more expensive, prices go up another 10%. And one thing I really don’t like is being in debt.

If credit is king; then debt is its bum-washing servant. You’d think. But in our lifetime, global economics has become increasingly reliant on the value of debt. Owing money has become normalised to the point where most people live their lives in some degree of debt. We accept being in debt from college/university, perhaps from buying a car, and certainly – unless you are super rich or a lotto winner – we expect to go into debt from borrowing a mortgage to buy a house.

The word “mort” means death, e.g. mortality rates. According to Michael Rowbotham, a “mortgage” literally meant “the grip of death”, “when the owner of a house pledges his or her house to another with a handshake…unto death.” Once upon another economic time, it was a great shame to have a mortgage on a property. It was seen as a death sentence for someone who should be a free man. It was in very dire circumstances that mortgages were handed out – during a business collapse, crop failure, family death, and so on.

In 1900 only 5% of home-owning Brits needed a mortgage on their home, with the vast majority of people owning them outright to reside in or lease out to tenants. One reason we have so many mortgages today is because the financial contribution from housing debt props up our economy. But the increase in house prices hasn’t been a slow and steady rise. The most dramatic changes have taken place in the last 30 years.

Short supply

In the 1960s house building in the UK peaked at 400,000 a year. Britain’s past two governments, set off by Thatcher’s era in the 1980s, decided to sell off government-owned housing stock without building enough replacements, creating a shortage of supply. This housing shortage has seen house-ownership become a luxury, only affordable to the more privileged in society. Normal people on average wages seem to only get the keys to their own home once a close relative dies.

Year Average house price Deposit needed Mortgage length % Income spent on mortgage
1930 £590 20–30 % 15 years 8%
1960 £2,530 20 years
1998 £81,774 0% 25 years 20%
2015 £250,000£514,000 (London) 30–40% 35 years 28% (recommended)48% (actual)

Worst of all, lack of supply is pushing people into real poverty. Shelter is a basic human right, right?

The Grip of Death extended

The cost of living rises faster than our wages, leaving us spending most of our money on rent, council tax, energy bills, water charges, food, and travel to and from work. With no ability to save enough, losing a job, or a car breaking down, or a medical injury, or even the happy event, like mine, of becoming a mum, requiring me to temporarily stop working, and life can quickly descend into immense struggle and stress.

Increasing house prices are a global city phenomenon – New York, San Francisco, Sydney all have house prices going through the roof (excuse the pun). Since the 1990s in Tokyo there have been grandparent mortgages where it takes more than one generation to pay off a property because of its price. I remember a friend telling me grandparent mortgages will never happen here in the UK because the public would be outraged, but as mortgages increase to 35 years (a whole life time), what’s to say there won’t be 45 or 55 or 65-year mortgages in the future?

Already, housing is unaffordable. My own experience in London is one of fury and rage turned to anguish and despair. Not solely for me as I struggle to get a toe on the property ladder, but for the teenagers I work with. Many young people aged 18–25 are exposed to worse working conditions than ever before, with many given zero-hour contracts where employers can decide on the day who is and isn’t coming in to work. Contract work alone is enough to lock people out of home ownership. Banks lend to steady incomes.

Friends on the European continent laugh at us Brits and say, “Why do you want to own your own properties anyway?” Well, in London it’s more expensive to privately rent. The rent I currently pay not only covers my landlord’s mortgage, but gives a nice profit margin on top. And while renting, it’s difficult to save money for a deposit for your own home.

Only getting worse

The UK’s newly elected Conservative government announced they will extend Right to Buy, which allows people to buy their social housing at a knocked-down cost. Sounds great – but the reality is that not enough replacement social housing is being built, meaning poor-to-average earners are pushed into the (already crowded) private renting market. I’m in this market – and I can tell you, it is ugly.

Properties that become available for rent are instantly snapped up. One agency told me that for every one property that goes on the market, there are 10 potential renters. I’ve lost out five times in a row, for being too slow. Seriously, you cannot “sleep on it”, as the person viewing at 9am the next morning beats me to it. To me, it’s a big decision to take on a rental. I have to think about the costs involved, whether the heating works, if there could be damp in the winter time. Some estate agents have wanted 6 months rent up front; with a £1,500 per month asking price for a two-bedroom flat in Peckham, that’s practically all my savings wiped out. In all cases there has been no chance to get a second viewing; the properties are snapped up instantly. I’ve now learned you have to say yes there and then, the complete opposite of my upbringing, which told me to think carefully about financial decisions, to weigh up the pros and cons, watch what I spend. Now I have to shut my eyes to leaking taps and soggy window frames and get on with it.

We recently put in an instant offer after being first to see a two-bedroom flat. The only issue was that it came part-furnished and we have our own stuff. The estate agent told us that landlords get a tax break when they let a part-furnished place, so we agreed to keep a table and some wardrobes, but the bed frames were too small for our mattresses and the leather sofa was not comfortable. We offered to drive this furniture anywhere the landlord pleases at our cost, or sell it on their behalf and give them the cash. We also offered to paint the whole place. We got an email back to say that our offer has been accepted – we can paint the place and the landlord will move the furniture on the condition that the rent is now increased by £50 per month. When I asked the estate agent the reasoning, since repainting increases value and removing furniture reduces any risk of wear and tear to the landlord’s stuff, he replied “the landlord doesn’t have to explain anything to you.” Because we asked that one question, the estate agent then retracted the offer to us. Back to square one.

The estate agent made it clear that you get what you pay for. The landlord is king and the housing tenant is the bum-washing servant, and we’re paying handsomely for the privilege of washing that bum.

It could be better

My brain is still trying to navigate its way around the housing market. To me, it’s a distorted market with no real choice or healthy competition, engineered by poor housing policy (or clever policy depending on which side of the bricks you’re standing). It seems I have some romantic view that rent prices could be regulated, as they are in Germany; or that landlords pay the energy bills, as they do in Sweden, which results in well-insulated, energy-efficient properties; or that there could be a minimum size one can call a bedroom. I’ve viewed two-bedroom properties where the second bedroom can’t even fit a bed! I really cannot see how this can go on for much longer. But if you look at my IF blogs, I’ve said this before when two-bedroom flats hit £250,000. Those same properties are now priced at £350,000.

Now you must excuse me: I need to go put a flannel on me head.