|Anglesey Shared Ownership Housing Project For The 21st Century|
I read a very interesting report the other day called 7th Annual International Housing Affordability Survey: 2011 by a group called Demographia who are apparently widely respected in this field. In the report they studied major metropolitan markets in Australia, Canada, Ireland, New Zealand, the United Kingdom, the United States and Hong Kong. The data in the survey is current to the third quarter of 2010 and covers 325 markets in the aforementioned 7 nations including 82 major metropolitan markets with populations in excess of 1 million people. The report is authored by Joel Kotkin, a Distinguished Presidential Fellow in Urban Futures at Chapman University in California.
Now without stealing the report's thunder, the basic thrust is that the cost of a median house in any given area - large or small, should be somewhere around 3.5 times the gross median household income for that area. To far beneath that level is indicative of a mix of over-supply/longterm entrenched local economic decline/lack of buyers/lack of credit/lack of well paying jobs. To far above it and it signifies a mix of local shortages/over supply of credit/wage levels to high/specific local distortions which will eventually cause a severe correction and the longer the correction is held off, the bigger the impact when it does happen.
So what does that mean here on Anglesey? Basically that our median wage levels are way to low (this we know) and just as crucially our median house price is way to high (again this we know) - in short an economic double-whammy where both have to be corrected towards each other or the local economy will collapse further. and - as in America, smash house prices through the floor. In short we need a lot of higher paying jobs to raise the median income AND lower priced housing to house the workers for the benefit of not only the workers themselves but also the local economy at large. The median household income on the island is currently hard to assess as the figures do not include the loss of Anglesey Aluminium however it would be fair to say that it certainly doesn't top £25K (probably way less than that - one figure I found was as low as 16.3K) and therefore the median cost of family housing on the island should be certainly no higher than £87.5K for a standard 3 bed semi. Obviously that is island wide and so in some areas it should be more and in others it should be less but I reckon from a quick perusal of the Holyhead estate agents that it's probably around 5 times median household income across most of the island.
This 'over-pricing' then impacts in other areas such as private sector rent levels which at £400pcm for a 2 bed terraced are at least 25% over-priced in comparison to income levels - money that should be getting spent in the local economy. It makes it difficult for workers to remain so they leave. It the makes it difficult for employers to locate/expand because the available capable workforce simply isn't there and because the jobs aren't there more people who are able to, leave. In a non-desirable area this leads to a rapid and often fatal collapse in the local economy and a proper collapse of house prices (see the figures for parts of the mid-west of USA and north east of England). In a desirable area it leads to an influx of outsiders exploiting what are low house prices in relation to their spending power thus sustaining over-pricing despite there being no underlying jobs to support those prices and driving more local workers out. It also encourages private landlords who, because they have bought overvalued property in relation to the underlying economy of where it is, charge overvalued rent to finance it. This in turn prices more workers away and slowly demographics take over and the ratio switches to low-paid workers subsidized with benefit top-ups, retirees, long-term unemployed and rents being met from the social purse. This then trickles down into reduced consumer spending due to lack of local disposable income and the subsequent decline of local retail areas and local independent tradesmen struggling for business. Starting to ring any bells?
Now the formulae used in the report are more complex than the simplistic description I have given above but I strongly recommend you read the report in full (and also visit the demographia website) and consider the long term and unavoidable implications of trying to stop housing dropping in price to realistic levels, failing to build an adequate supply aimed at the average local requirement and actually attempting to kick-start a housing boom of what is an already way over-priced essential commodity.
|Keyworker Affordable Housing Scheme Of The Future|
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