Question 1.(618/2/j82)

 

A. Housing tenure describes the different forms of how houses can be possessed. The main tenure form is owner occupied houses. It is followed by renting from local authorities or from new town. There are also some other forms of tenure, e.g. renting from private owners.

Most of the houses are owned by their actual owners. This figure has grown between years 1968 and 1974 from 48,7% to 52,6% being  9090 houses in 1968 and  10600 houses in 1974. The growth rate contracted a bit between 1974 and 1980 but still 55,2% of the all houses (11900 houses altogether).

The second popular house owning form, renting from local authorities, has also become more popular being 29,6% of the total houses in 1968, 31,0% in 1974 and 31,8% in 1980. The growth in renting the houses from authorities has not been as many percent more in year compared to owner occupied ones.

As two main tenures are becoming more popular the renting from private owners and other tenure forms are getting less popular. In 1968 21,7% of the houses were rented from private owners. In 1974, 16,4% and in 1980 only 13,0% of the total houses.

The figures from 1980 were not exact, but estimations.

B.1. People's incomes have risen, so they can afford to buy houses rather than just rent them. Usually 25% of the house price are paid from savings.

2. As one of the main factor, which determines the decision is the availability of mortgages and their interest rate, then the changes in that may have occurred. Mortgage is the long-term loan (over 10 years), which is taken to buy a house.

3. More and more new houses have been built, people usually rent old houses and buy new ones, so that may be one of the reasons.

4. Government policy may have come more socialistic, they may have given more and more houses for rent to poorer people with lower rent.

5. Everything has gone more expensive, so that the exploitation of the houses has gone up. The private owners renting their house must raise the rent, which means fewer customers for them.

6. One very important aspect is that the crude surplus of housing over households have risen over 2 times between 1968 and 1980. So there are lots of empty new houses. So the prices for new houses have dropped, which means more people can afford to buy one.

7. Every year less houses are built, that means that there are shortage of new houses, so many people buy an used one instead. That means that the prices of old houses have increased. The people do not want to rent their houses anymore, because it is now more profitable to sell them.

8. Authorities' house rent do not move so freely as the market price for houses and the rent, what private owners ask. So if the prices were growing at an accelerated rate, then private owned houses' rent did so as well. But the rent of state houses grew at usual rate, so it became more profitable to rent a house from local authorities.

9. There may have been an economic comedown, which concerned more poor people, who are usually renting the house. So they had to sell their house to come over from this problem.

10. England have a positive net migration-more people are leaving, than coming in. The people, who are leaving and previously rented their own house out, will sell then have to sell it. So every year the number of owner occupied houses will increase.

c. The crude surplus shows the % of house stock being not occupied. So if the figure increases, more houses are staying empty.

The crude surplus figure have increased over two times between years 1968 and 1980. So more than 2 times more houses are now empty. It seems, that England does not have a housing problem. That was relatively true in 1980, but the figures show, that it is likely to change in the future.

The number of houses being built more than dismantled during 1968 to 1974 was 1430 thousand, so in 1974  the total stock was 20,1 million houses. But during 1974 to 1980 the number of houses being built contracted to 1410 thousand, that means 2% less than during pervious 6 year. If same trend continues in the future England will face the housing problem again.

The other thing, which determines the number of houses available, is the number of households. As population grows, so does the number of households. There was 18290 thousand households in 1968. The increase of households has been less and less each year. So during 1968 to 1974 1170 thousand households were formed, during the following 6 years only 1070 thousand. That means 8,6% less than pervious year. If this figure is compared to the decrease in houses being built, a remarkable difference could be found.

There can be several factors influencing this big decrease in households. One of them can be a temporary low living standard, so e.g. young people are poor and can't afford themselves to buy a house and have to stay with their parents. Another reason might be the makeup of the population. After the 1st baby-boom in England, the second baby-boom occurred in 1960's. Those people had not probably bought their houses yet on 1980, so less new households were formed.

In both cases above the demand has fallen. So suppliers will lower their output more(they did it already in 1980). So in 1980 maybe 8% fewer houses will be built. To built a house takes usually a couple of years. So either if the living standard rises and more people can afford to buy a house, or people born in 1960's will become old enough to buy their own house, the demand will increase rapidly. The producers in the other hand have decreased their production earlier because of the crude surplus and they cannot increase their output immediately.

So there might be a big housing shortage soon as there is a surplus now. This is explained by the cobweb theorem, because factors of production of houses are hard to remove, so any sudden change in demand (baby-boom etc.) will cause surplus-shortage waves, which continue for several years, usually  until government intervenes.