Councils and the housing crisis

A report published by the Local Government Association – Councils and the Housing Crisis – says that a series of inter-related factors and the credit crunch are creating unprecedented demand for council and housing association homes which councils are struggling to meet.

Its forword says that with 1.6 million households already on the waiting list in England, representing a total of 4 million people or one in every 13 of the population, the total is predicted to increase to 2 million households by 2010, or one in every 10 people.

It identifies the major causes as:

• House prices have risen by 156% in the last 10 years while wages have risen by 35%
• Around 40% of new mortgage offers have been withdrawn as a result of the credit crunch.
• A 16% increase in repossessions as people fall into negative equity.
• Local authority housing association new build in the last 10 years is its lowest since 1947.

The report illustrates the issues by pointing out that a first time buyer couple at the lowest 25% income mark with a combined income of £26,595 after taxes will now need to save the equivalent of 104% of their take home pay to meet the up front buying costs compare with 23% of take home pay required in 1996. That couple will also have to spend 40.3% of their income to service their mortgage.