Housing Need Supply And Demand Economics Essay

West Somerset is one of the smallest local authorities within England with a population of 34,675 Office for National Statistics 2012. It is largely rural in nature with two thirds of the area being within Exmoor National Park. The coastal town of Minehead is the largest settlement with a population of 12,084 (Office for National Statistics 2012).

1.3 By far the largest age group within West Somerset are those aged 60 and over making 38% of the total population (Office for National Statistics 2011). This group is well provided for within housing with a large number of sheltered and supported housing schemes and nursing homes both within the private sector and social housing sector.

1.4 Young people aged 20 to 29 make up approximately 9.5% of the total population of West Somerset (Office for National Statistics 2012) however they are one of the largest age groups registered for Social Housing within West Somerset with 23.3% of active applicants (Homefinder Somerset 2012).

1.5 The economy of West Somerset relies heavily on tourism, agriculture and the care industry with the majority of work being found within one of these areas. The largest employer is Butlins in Minehead (West Somerset Council 2011). The majority of work within tourism and agriculture are seasonal resulting in fluctuating benefit claims and relatively low wage levels within the area making affordability of housing a problem.

2 A Profile of West Somerset

2.1 The total population of West Somerset has decreased from 2001 census data to the 2011 data however the proportion of this population that is in the age range 20 to 29 has increased during this time from 7.7% to 9.5%. In England as a whole the percentage population of people aged 20 to 29 in 2011 is 13.7%, higher than in West Somerset. The largest age group within West Somerset is those over age of 60 making a total of 38% of the population in 2011 in contrast to a percentage population of 22.3% for this age group in England as a whole (Office for National Statistics 2012).

Table 1 Population of West Somerset

Age Range

2011 Population

2011 Percentage

2001 Population

2001 Percentage

19 and under

6 264

18.1%

7 225

20.6%

20 – 29

3 293

9.5%

2 687

7.7%

30 – 59

11 925

34.4%

13 442

38.3%

60 and over

13 193

38.0%

11 715

33.4%

Total Population

34 675

35 069

Source: Office for National Statistics

Table 2 Population of England

Age Range

2011 Population

2011 Percentage

2001 Population

2001 Percentage

19 and under

12 712 275

24.0%

12 327 688

24.9%

20 – 29

7 246 202

13.7%

6 307 052

12.8%

30 – 59

21 221 173

40.0%

20 584 021

41.6%

60 and over

11 832 806

22.3%

10 230 985

20.7%

Total Population

53 012 456

49 449 746

Source: Office for National Statistics

2.2 A large proportion of homes in West Somerset are owner occupied approximately 67% compared to a national average of 63% (Office National Statistics 2012) and the average price of a house in Somerset as of October 2012 is £160,349 very close to the national average for England and Wales of £161,605 (Land Registry 2012). The migration into the area by people wishing to purchase retirement homes or second homes has pushed the prices up to very close to the national average. Private rented housing makes up 16% of accommodation with social housing approximately 15% (Office National Statistics 2012).

2.3 Average earnings in West Somerset are £523.00 per week which is below the average for England of £609.50 per week (Somerset County Council 2011). The majority of work is within the tourism and agricultural industries and is seasonal in nature and hence low paid. This below average earnings coupled with high cost of housing makes home ownership very difficult for local people and especially for young people.

2.4 In West Somerset social housing is supplied by Housing Associations of which Magna West Somerset holds the largest stock. Of the 1921 properties owned by Magna West Somerset, 1439 of these are general needs properties with the rest being sheltered or supported accommodation. Of the 1439 general needs properties only 161 (11.2%) are 1 bedroom properties.

3 Housing Need, Supply and Demand

3.1 Everyone has a need for housing of some sort, the type and availability varies around the globe. In the UK the need for housing is measured by the local authority using various facts and figures available to them such as number of homeless applications or numbers registered for housing as well as the demographic profile of the area (Lazarus 2012).

3.2 Housing demand can be described as the desire for housing along with the ability to pay for that desire. Housing supply would be described as the amount of housing produced at a price. The demand and supply of housing can fluctuate with various factors influencing both but “in the long term, the supply of housing should equal its demand, because price will provide the equilibrating mechanism linking the two” (Harriott & Matthews1998 p23)

3.3 The demographic profile of an area along with the economic factors will have an effect on the supply and need of housing. Within the West Somerset area the population as a whole has reduced since 2001 however a larger percentage are over 60 requiring specialist housing and also young people who are looking to get onto the property ladder for the first time as homeowners or by renting in either the private or social housing sectors. The need for starter housing by young people has increased however financial pressures often mean that they are unable to own their own home or rent within the private sector.

3.4 Homefinder Somerset is a choice based lettings allocation scheme for affordable housing in Somerset. Within West Somerset in 2012 there were 1363 active applications for housing registered a total of 3.9% of the population. Of these registrations 318 are applicants aged 20-29 which is 23.3% of total number registered, a much higher proportion than those aged 20-29 of the population as a whole (Homefinder Somerset 2012).

3.5 Of the 318 registrations from applicants aged 20 to 29, 109 (33.3%) of these state that they are not living in their own property at the moment and are living with family or friends (Homefinder Somerset 2012). Increasingly young people are finding it more difficult to move out of the family home for the first time due to financial pressures so are still living with parents up to a much older age.

3.6 The Rural Housing Project in Exmoor National Park is “an independent project which seeks to help local people to remain living and working in the area” (Exmoor National Park 2012). They identify the level of housing need through conducting surveys and also holding consultation events. They then work in partnership with developers and housing associations to deliver affordable housing for local people.

3.7 After a consultation by The Rural Housing Project a need for rural housing in Exmoor National Park was identified for young people. A scheme was developed in the village of Wheddon Cross in June 2011 and consisted of a mix of affordable private housing and social housing. This scheme of 10 properties for social housing included 2 one bedroom properties. Of the 10 properties 9 of these were let to young people and of these 9, six were to young people with no children with 3 of these being let to siblings (Rural Housing Project 2012).

3.8 Funding for building of new properties by housing associations needs to be raised by either loans or from rents. Magna West Somerset, the largest housing association in the area has made a decision to not develop any new properties once those currently being built are finished. This is due to interest rates for loans being unfavourable coupled with the uncertainty of rental income with the introduction of Universal Credit in 2013 when the housing element of benefit will be paid direct to the tenant and no longer straight to the landlord. This means that very few new properties will be developed in the area in the foreseeable future.

4 Economic Factors

4.1 In 2007 the economy in the UK suffered what is known as the credit crunch where the availability of credit and mortgages was severely cut causing a crisis in the housing market and recession and an increase in the demand for social housing (Lazarus 2012). The economy still has not recovered from this completely and although this caused a fall in house prices, the demand for housing within the private sector is also not there as buyers are unable to access finance. Building firms faced financial difficulties and some went into receivership so the supply of housing has also been drastically cut.

4.2 Unemployment levels are high especially amongst young people. Job Seekers Allowance for a single young person under age of 25 is £56.25 per week and for those 25 and over it is £71 per week (gov.uk 2012). Although they can also claim housing benefit many young people struggle to finance a home on their own with the rising cost of utilities and food.

4.3 An important part of economic success for an area is the ability to retain young working people. There is a very short supply of affordable housing in rural areas for young people so they either remain at home for longer or leave to seek affordable accommodation in more urban areas (West Somerset Council 2009).

4.4 West Somerset is a predominantly rural area which adds extra expense to living costs. There is very little public transport except along the coastal corridor from Minehead to Taunton with a bus route. The nearest railway station is Taunton and the only railway running within West Somerset is a steam heritage railway. Most people therefore have the added expense of having to run a car.

4.5 A large section of West Somerset is also not served by mains gas, including a great number of social housing properties in Minehead. This means that heating costs are higher due to using either electric or oil heating. According to figures published in 2010 by the Department of Energy and Climate Change 21.5% of households in West Somerset are in fuel poverty (Department of Energy and Climate Change 2010). “A household is said to be in fuel poverty if it needs to spend more than 10% of its income on fuel to maintain a satisfactory heating regime” (Department of Energy and Climate Change 2012).

4.6 These increased expenses of travel and utilities experienced within rural locations mean that affording housing in these areas is almost impossible for young single people on a low wage or not working.

5 Legislation

5.1 The Welfare Reform Act 2012 will bring in many changes to benefits. One of the main things that will affect young people is from April 2013 any person of working age under occupying a property and claiming housing benefit will have their benefit cut by 14% for one spare bedroom or 25% for two spare bedrooms commonly known as the “bedroom tax” (national Housing Federation 2012). This is already causing a strain on the demand for one bedroom properties by people who will be affected by this cut wanting to downsize which is causing more competition for these properties with young people wanting to get their first home.

5.2 The Local Government Finance Act 2012 removes council tax benefit and instead puts the responsibility on councils to develop their own scheme called Council Tax Support (Turn2Us 2012). The new scheme will be different in every council area however the government funding for each scheme has been cut which means that each council will have to find savings. Elderly and vulnerable people will be protected so working age people will probably have to pay council tax whether they are in work or not.

5.3 In West Somerset proposals have been put forward which include all working age people who are not working and so claiming Council Tax Support to pay 20% of their council tax bill and also for higher rates of non depended deductions. This will probably preclude young single people who are out of work from being able to afford to have their own home. Those that stay at home or with friends and family if the household is claiming council tax benefit will also find that there is a larger non dependent deduction charged to the household they are staying with (West Somerset Council 2012).

5.4 The government in the Chancellors Autumn Statement announced that benefits will only rise by 1%, a below inflation rise (Brown 2012). This means that benefits for unemployed young people will stay at a low level and with the cost of housing and living increasing the chance of obtaining and sustaining a tenancy is getting harder for them.

5.5 The Localism Act 2011 gives new rights and powers to local authorities with regard to a variety of issues including housing. Before the act “almost anyone could apply to live in social housing, whether they need it or not” (Department Communities and Local Government 2011 p15). Social housing however is now more than ever in greater demand due to the economic climate within the country. This act gives local councils the ability to agree on policy that can restrict who can qualify for social housing in the area. At this time, Homefinder Somerset the choice based lettings system used by West Somerset has not made any changes to its letting policy with regard to the Localism Act to restrict applications for housing.

5.6 Young people who wish to rent privately within West Somerset if they are on a low wage would be entitled to claim assistance with their rent through Local Housing Allowance. Since January 2012 any single person up to the age of 35 can only claim local housing allowance for a room in shared accommodation rather than a self contained 1 bedroom property. At present this rate is £66.50 per week in West Somerset. From April 2013 the Local Housing Allowance will only be increased by the Consumer Price Index rather than market rent as previously (South Somerset District Council 2012) so a lower increase will happen each year so making it harder for young people on a low wage to rent privately. In his Autumn Statement the Chancellor then announced that after next April the Local Housing Allowance will only rise by 1% for the next two years (Brown 2012). This will make many private rental properties out of the price range of people on benefits and also those on low wages.

6 Conclusion

6.1 The issues surrounding housing of young people in West Somerset are mainly of affordability and availability.

6.2 The availability of 1 bedroom properties for young people without children is not good especially as these properties are now also in demand from other people wishing to downsize due to welfare reform changes and very little new building taking place.

6.3 Affordability due to low wages or unemployment and of high costs of living due to rising utility costs and food.

6.4 West Somerset Housing Strategy recognises the need to keep young people within the area for a sustainable community however more needs to be done to assist with the low wage base and affordability of housing.

6.5 More affordable housing needs to be provided for young people that is near to employment so that travel costs are kept to a minimum and also that is low cost to run with regard to utilities by using new technology.

6.6 Strategies to assist with training for work and also attracting new business into the area to help increase the number of people in work and the average wage for the area should also be looked at.