House prices across the East of England unaffordable, says TUC
House prices in every East of England local authority area are now over five times the average local salary, according to new analysis published by the TUC.
The TUC analysis of average salaries and house prices by local authority area shows that in 1997 only Three Rivers, Epping Forest, Uttlesford and St Albans had prices more than five times the average salary.
However, by 2013 every local authority area in the East of England had an affordability ratio above five – a level which the TUC believes puts home ownership out of reach for local people.
The affordability ratio of five is particularly significant, says the TUC, as the Bank of England has recently instructed banks to limit the proportion of mortgages they offer that are more than 4.5 times applicants’ salaries.
In Cambridge the ration of house prices to earnings has gone from 4.36 in 1997 to 10.02 in 2013; Peterborough’s has gone from 2.82 to 5.25; Norwich’s from 2.65 to 5.67; Ipswich from 3 to 5.37; Fenland from 2.72 to 5.37.
By last year St Albans was the most unaffordable area with an affordability ratio of 13.3 (compared to 5.8 in 1997). Great Yarmouth had the lowest ratio of house prices to earnings in 2013 and 1997.
In 1997 seven areas – Great Yarmouth, Peterborough, Ipswich, Fenland, Norwich, Luton and Thurrock – were ‘easily affordable’. Now these areas are out of reach for many local people.
The TUC believes that the combination of soaring house prices, stagnating pay in the run-up to the crash and the longest real wage squeeze in over a century will leave house prices more out of reach than ever before.
Whilst average house prices may have yet to reach their pre-recession peak in some parts of the East of England, falling real wages mean that homes are increasingly out of reach for local people, says the TUC. Recent analysis by the TUC found that pay packets in the East of England fell by around £41 a week in real terms between 2010 and 2013 – a fall of 7.6 per cent.
Southern and Eastern TUC Regional Secretary Megan Dobney said: “Over the last 16 years, the increase in house price rises in the East of England has outstripped the peoples’ pay packets. There is now not a single local authority area in the region in which housing can be regarded as being affordable for those on an average salary.
“This has a massive impact on families and communities, and also on the transport system, congestion and our environment, as more and more people can no longer live near to where they work.
“We need to build more homes to get house prices under control. With interest rates low, now is the perfect time for an ambitious programme of home-building. And a programme of building public sector housing would increase local employment opportunities, decrease the housing benefit bill and increase revenues to the government from income tax and national insurance.
“But as more people have no choice but to give up the hope of buying a home, we also need a better deal for those who rent so that they don’t get ripped-off by soaring rents and by those landlords who fail to meet their responsibilities.
“To secure housing affordability in the long term we need stable house prices and decent wages, with above-inflation pay rises over a sustained period of time. Only then can the economy be said to be delivering for those who live and work in the East of England.”
• PHOTOGRAPH SHOWS: Megan Dobney