Download - Credit Crunch Crisis
-
8/8/2019 Credit Crunch Crisis
1/50
1
CREDIT CRUNCH CRISIS AND ITS IMPLICATIONS ON THE UK BUY-TO-LET
MARKET
-
8/8/2019 Credit Crunch Crisis
2/50
2
AACCKKNNOOWWLLEEDDGGEEMMEENNTTSS
There are many people who have guided me during writing this dissertation and I have to
acknowledge the contribution of all of them.
First of all, I would offer my humble thanks to my supervisor ________ who consistently
provided insightful guidance and suggestions helping me tremendously to complete this
dissertation. I am really very grateful to him for his constructive comments and suggestions at
critical turning points in the progress of writing this dissertation.
My thanks go to all my professors and teachers at the university for their support.
Finally, I need to make special thanks to my family members for their motivation and support
that led me to where I am now.
-
8/8/2019 Credit Crunch Crisis
3/50
3
Dedication
I would like to dedicate this dissertation to my loving parents who have always believe in me
and supported me with unconditional love and devotion.
-
8/8/2019 Credit Crunch Crisis
4/50
4
Table of Contents
CHAPTER 1: INTRODUCTION ....................................................................................................... 6
Introduction to the Problem................................................................................................................ 6
What is unaffordable housing? ........................................................................................................... 7
Effects of unaffordable housing?........................................................................................................ 8
Existing affordable housing mechanisms............................................................................................ 9
Statement of the Problem ................................................................................................................. 12
Statement of the problem ............................................................................................................... 13
Purpose of the Study ........................................................................................................................ 15
Organization of the remaining chapters of the proposal ................ ............................... ................... 15
CHAPTER 2: LITERATURE REVIEW.......................................................................................... 16
Owner Cost of Housing .................................................................................................................... 16
HOME PRICE .................................................................................................................................... 18
Solutions for the house owners........................................................................................................ 18
Self-build .........................................................................................................................................20
Controlling the market .....................................................................................................................21
Conclusion .......................................................................................................................................24
Non-family collective living ..............................................................................................................24
Supplementary planning guidance ...................................................................................................26
Family home ................................................................................................................................26
Flat ..............................................................................................................................................26
House ..........................................................................................................................................27
House in Multiple Occupation (HMO)...........................................................................................27
Influence and pressure.................................................................................................................27
CHAPTER 3: METHODOLOGY .................................................................................................... 29
Research Design ..............................................................................................................................29
Sample ............................................................................................................................................2
9Measures .........................................................................................................................................30
Data Collection................................................................................................................................ 31
Data Analysis ...................................................................................................................................32
Validity and Reliability .....................................................................................................................32
CHAPTER 4: RESULTS................................................................................................................... 33
-
8/8/2019 Credit Crunch Crisis
5/50
5
Introduction..................................................................................................................................... 33
Discussion of Tester Treatment Variables ........................................................................................ 34
Preliminary Analysis of Differential Treatment .................................................................................36
Preliminary Analysis of Hypothesis One ...........................................................................................36
Preliminary Analysis of Hypothesis Two ...........................................................................................37
Preliminary Analysis of Hypothesis ...................................................................................................38
Logistic Regression Analysis .............................................................................................................38
Regression Analysis for Hypothesis One ...........................................................................................39
Regression Analysis for Hypothesis ..................................................................................................40
CHAPTER 5: DISCUSSION, IMPLICATIONS, RECOMMENDATIONS ...................................42
Introduction ....................................................................................................................................42
Section One: Discussion ...................................................................................................................42
Recommendations ........................................................................................................................... 43
REFERENCES .................................................................................................................................. 45
List of tables
Table 1: Eligibility Criteria for Advertising Sample ................................................................................30
Table 2: Categories of Treatment Questions ........................................................................................31Table 3: Frequency and Percent Distributions of Testers Gender, Race, Marital Status, Age, Child
Present, and Income ............................................................................................................................34
-
8/8/2019 Credit Crunch Crisis
6/50
6
CHAPTER 1: INTRODUCTION
Introduction to the Problem
In many respects, the question of affordable housing is not a new concern. Until the
second half of the twentieth century, the vast majority of ordinary people could not afford to
own their homes, and living in rented accommodation was the general social norm. Since the
1960s however, there has been a significant increase in owner occupation as the preferred
method of home ownership. Accordingly, the issue of housing being unaffordable has become a
more pressing concern, something that has been recognised by the government in its Green
Paper, published in July 2007, titledHomesfortheFuture:MoreSustainable,MoreAffordable
(Department for Communities and Local Government, 2007). Its effects are felt across Europe.
The expansion of the European Union has opened new markets for property investment, with
the result that central and southern European states are viewed as highly attractive locations for
property development. House price increases are also felt on a national level with high property
prices in the cities resulting in homebuyers and property developers alike branching into new
markets. In recent years, rural areas in particular have become popular with those able to
commute, or those seeking to avoid the urban sprawl. Prices in these locations have therefore
increased more sharply than in other parts of the country (Affordable Rural Housing
Commission,Report, 2005). However, in areas characterised by low incomes and seasonal
employment, (TheRoleoftheHousingSysteminRuralWales, 2005), those who have been
brought up there and wish to remain there are unable to afford these increases in prices, and
must therefore move out of the locality. The effects of this are significant--the population
dynamic is altered, local services are adversely affected, and in areas with a fragile linguistic
community, there is an impact on the culture of the area as well.
-
8/8/2019 Credit Crunch Crisis
7/50
7
The concerns surrounding affordable housing are manifested differently in different
areas. In the larger cities, particularly London and its environs, the primary concern is that key
workers (teachers, nurses, police officers, etc.) are no longer able to afford to live in the area
where they work (Office of the Deputy Prime Minister, 2005). In rural areas, the concern is that
high prices, the growth in the second home and holiday home market, and the seasonal nature
of local employment all mean that local people who have been brought up in the area are no
longer able to afford to live there. Rural areas therefore experience the in-migration of an older,
wealthier population, coupled with the out-migration of younger, poorer people, creating an
imbalance in the population dynamic, and fragmented communities, where people no longer
live in close proximity to their friends and family. The community support network is therefore
lost. Furthermore, with properties being sold as second homes and holiday homes, communities
are made up of a number of people who will not be living in the area on a permanent basis, thus
threatening the continued existence of local amenities (schools, shops, transport services, etc.).
What is unaffordable housing?
Unaffordable housing is a nebulous term. At its furthest extreme, housing is
unaffordable for those who are rendered homeless because they cannot afford the cost of
accommodation, or for those who require state support because of unemployment or inability to
work. Increasingly, however, accommodation is becoming increasingly unaffordable for
households containing one or more persons in regular full time employment (Bramley and
Karley 2005), and statistics published in 2006 indicated that a person earning 17,000 per
annum was not be able to afford to buy a home in 68 per cent of electoral wards in England
(Bramley and Karley 2005). In other words, the housing market is no longer affordable for
those who should have but few obstacles to prevent them from buying a home, and this is why
-
8/8/2019 Credit Crunch Crisis
8/50
8
affordable housing is such an important concern.
Effects of unaffordable housing?
The essence of housing unaffordability is fairly straightforward--at its heart is the fact
that the demand for homes significantly exceeds supply (Bramley and Karley 2005). As Hickey
and Best state:
As the demand for housing has continued to grow, the number of properties supplied
has fallen All that unmet demand results in greater competition for the houses that domake it to the market, higher property prices and higher profit for the developer.
(Hickey and Best, 2005).
The causes of unaffordable housing are well documented (Best and Schucksmith, 2006),
but include from the point of view of housing demand, the increase in lone households, the
increased availability and attractiveness of the buy-to-let market, and in rural areas, the
attraction of cheaper property prices and a move away from the urban lifestyle have all been
factors that have contributed to properties in these areas being in high demand both as primary
residences, and as retirement properties, second homes and holiday cottages. Consequently,
house prices in rural areas have increased far more sharply in recent years than house prices in
urban areas (Best and Schucksmith, 2006).
The other side of the coin is that the supply of affordable housing has also decreased,
making investment in property more attractive (Barker, 2004). The curtailment of the social
rented sector, and a shortage of appropriate housing stock have led to affordable homes being in
short supply, as have the effects of tighter planning controls restricting the supply of new
housing (Barker, 2004).
A further factor is the imbalance between income and spending power. The deregulation
of mortgages during the 1980s meant that buyers were able to borrow significantly higher sums
-
8/8/2019 Credit Crunch Crisis
9/50
9
of money from mortgage lenders, with the result that house prices rose. However, in rural areas
whereby employment is largely dependent on the tourism industry and is therefore likely to be
often low paid and seasonal workers often lack the employment security required in order to
apply for a mortgage, with the result that increased borrowing is less accessible, and increased
house prices are therefore less affordable.
Economies of scale also affect house prices. From the construction company's
perspective, it is advantageous to build one large property rather than two smaller homes.
Again, the consequence is that such houses are not affordable for first time buyers, and fail to
alleviate the demand for properties at the lower end of the housing market. While house prices
have increased across England and Wales, the impact is far more significant in rural areas. In
urban areas, where owner occupation is unachievable, the rental market is buoyant. In rural
areas, however, this alternative is not available as the private rented sector is very limited
(Barker, 2004). Combined together, all these factors have contributed to the current situation--
too many people wanting to buy too few homes. The result is that demand outstrips supply, and
houses become very expensive.
Existing affordable housing mechanisms
In England and Wales, affordable housing solutions have two key dimensions. On the
one hand there have been attempts to make housing affordable by limiting the impact of market
forces on certain types of accommodation. Secondly, effort have been made to make certain
types of housing available only to people defined as local, either because of their period of
residency in a locality, or because of their employment status within a locality. Both these
schemes operate broadly by separating affordable housing from the wider housing market. For
example, the Affordable Housing Commission report refers to affordable housing as being
-
8/8/2019 Credit Crunch Crisis
10/50
-
8/8/2019 Credit Crunch Crisis
11/50
11
housing for those with an identifiable housing need (CashIncentiveScheme, 2006). Similarly,
efforts are made to maintain housing association stock. Restrictive covenants are used to
compel properties acquired under affordable housing schemes to be sold either to another
eligible occupier or sold back to the housing association, thus ensuring that the supply of
affordable properties does not decline (CashIncentiveScheme, 2006). The Welsh Assembly
Government has also accepted that owner occupation does not alleviate the problem of
unaffordable housing. Therefore, it proposes a combined approach--merging owner occupation
with rental. Accordingly, public housing stock will be available either for acquisition using the
HomeBuy,R
ight to Buy orR
ight to Acquire Schemes, or for rent (TheAffordableHousing
Toolkit, 2006),
Another means to provide affordable housing is by the use of Community Land Trusts.
The aim of such trusts is to prevent land from being acquired by property developers and that it
is purchased instead in order to provide affordable housing in particular communities. Land will
be owned on a long lease, and will therefore continue to be a source of affordable housing for
the community. This has been particularly valuable in Scotland in order to safeguard the future
of agricultural land for Scotland's crofting communities. Again, however, these schemes are
dependent on loans being made to the buyer in order to make up the shortfall between what is
affordable and the market price.
Linked to the issue of affordable housing is the question of local housing, particularly in
rural areas. A desire (and indeed an obligation, in the case of Areas of Outstanding Natural
Beauty and National to preserve the countryside means that the increased demand for housing
in these areas cannot be satisfied simply by increasing the supply of homes. Therefore, many
local authorities have sought to designate certain areas as rural exception sites where housing is
-
8/8/2019 Credit Crunch Crisis
12/50
12
provided at an affordable level for people who are either living in the area, working in the area,
providing services in the area, or people who used to live in the area and wish to return. One of
the leading examples of local housing initiatives is the Yorkshire Dales National Park
Authority, where proposals for new housing developments are only accepted if they aim to
fulfil the housing needs of those classed as local. House prices are controlled, and occupiers are
prevented from selling the properties to non-local people. This model has since been adopted in
other areas, including parts of Wales. In the Welsh context, this has the effect of protecting the
critical mass of Welsh-speakers by it facilitating house buying by local people (thus protecting
against the out-migration of Welsh-speakers) while limiting the purchasing of homes by those
from outside the locality (thus restricting the in-migration of non-Welsh speakers).
Statement of the Problem
Karen Cooksley, a solicitor with Bevan Britton explains:
What the government is trying to do is deliver a large quantity of private andaffordable housing very quickly, particularly in London and the South East, and at the
same time drive up quality. But there is a tension between those two. If you're sayingyou want more housing, more densely provided on brown field sites, more quickly, but
the houses must also be beautiful--and, by the way, cheap--then you will find thosedrivers pulling in different directions (Cited in Langdon Down, 2005)
However, the biggest flaw in the concept of affordable housing is that it is kept separate
from market housing, and yet defined with reference to market housing. Under the Homebuy
scheme, housing is made affordable by the fact that the housing association pays a proportion
(usually 25 per cent) of the purchase cost. Therefore, as house prices increase, so too does the
proportion payable by the buyer. Accordingly, house prices lowered so as to be affordable very
quickly become unaffordable as house prices increase more rapidly than average incomes.
-
8/8/2019 Credit Crunch Crisis
13/50
13
A further difficulty caused by defining affordable housing with reference to market
prices is that because of the obligation to repay the loan made by the housing association, the
buyer cannot sell his home for the full market value. While acquiring affordable housing is
straightforward, leaving affordable housing is therefore more difficult. The buyer cannot realise
the full market price of the house, and cannot therefore buy a house on the open market. He or
she must therefore remain in the affordable housing sector, thus denying another person the
opportunity to acquire an affordable house. On the other hand, without being able to recover its
loan, the housing association cannot use that money to provide a HomeBuy loan for the second
generation of homebuyers. Consequently, the existing affordable housing schemes are therefore
little more than a short-term solution that enables a first cohort of potential homebuyers to
acquire a home, but does not create a sustainable affordable housing system.
There are also insufficient incentives for landowners to apply land for affordable
housing schemes. Because the developer is seeking to offset the cost of providing affordable
housing, for example by buying the land at a reduced price, the landowner is in the situation
where he may gain a better price by refusing to sell the land for affordable housing, and only
agreeing to sell it for market housing. Similarly, where land is leased for the purposes of
providing affordable housing, rather than sold, a number of disincentives are again encountered,
as the landowner is likely to be obliged to bay either capital gains tax or inheritance tax on the
reversion. Therefore, there are insufficient incentives both for the landowner and the developer
to apply land for affordable housing purposes (Satsangi and Dunmore, 2003).
Statement of the problem
The recent credit crunch in the buy-to-let market has exposed many flaws in terms of
macroeconomic policies and strategies. The researchers main concern in this study is to
-
8/8/2019 Credit Crunch Crisis
14/50
14
examine the different dimensions of the buy-to-let market in detail in the context of the recent
credit crunch in the UK.
Owning its residence (i.e. investing in housing asset) yields cash flows and these cash
flows and opportunity costs matter in decision of owning its house. Cash flows relevant to
owning a house are partly periodic (annual) flows and partly occasional flows which incurred at
the beginning or end of the housing tenure. The periodic cash flows are usually referred to as
user costs and which include mortgage payment, maintaining cost, and tax deduction. The
opportunity costs are mainly from holding home equity and renting.
A general formula for the net periodic user cost of homeowner at tis:
Equation 1
In equation (1), is net periodic user cost of homeowner, rmis the mortgage interest
rate, Mtis the mortgage outstanding balance, tis marginal income tax rate of homeowners, and
r tis the real estate tax rate. utis the proportional maintaining cost including depreciation, ptis
a unit price of house, b is expected appreciation rate of price of house, and htis size of the
house. The first term is interest payment of mortgage outstanding balance and real estate tax
payment after deducting from income tax. The second term is maintaining cost of owner
occupied house and Mis a principal change on mortgage (Since Mis non positive,Mis
non negative.). The last term means expected capital gain from housing tenure. Equation (1)
reflects the special tax status of homeowners. Since interest payment and real estate taxes are
deductible, the household who faces higher marginal income tax rate has more incentive to own
its house and the homeowners also have incentive to keep high mortgage principal.
-
8/8/2019 Credit Crunch Crisis
15/50
15
The occasional cash flows such as transaction and moving costs should be considered in
this cash flows and these occasional cost are depending on current housing tenure. The current
renters need to take account moving costs and transaction costs for purchasing a house in
addition to net periodic costs of home owner. Transaction cost for renters include a mortgage
initiate fees. To current homeowners, moving costs and transaction costs will apply to the
opportunity cost for renting. Transaction costs for homeowners include the cost for clearing
mortgage balances and time cost for selling the house as well.
Purpose of the Study
The purpose of this study is to examine the impact of the recent credit crunch especially
in the mortgage market and its implications on the buy-to-let market in the UK. For this
purpose, this study has taken two approaches. First, the researcher will examine the mortgage
market trends from a theoretical perspective. Second, the researcher will analyze the impact of
credit crunch on the buy-to-let market statistically.
Organization of the remaining chapters of the proposal
1. Chapter 2 will identify the previous researches surrounding the credit crunch and themortgage market after which this chapter will outline specific areas of the research
related to this study.
2. Chapter 3 will offer hypotheses, the research design and the sampling method.3. Chapter 4 will offer results of chapter 3.4. Chapter 5 will offer discussion of results from chapter 4.
-
8/8/2019 Credit Crunch Crisis
16/50
16
CHAPTER 2: LITERATURE REVIEW
Owner Cost of Housing
Owning its residence (i.e. investing in housing asset) yields cash flows and these cash
flows and opportunity costs matter in decision of owning its house. Cash flows relevant to
owning a house are partly periodic (annual) flows and partly occasional flows which incurred at
the beginning or end of the housing tenure. The periodic cash flows are usually referred to as
user costs and which include mortgage payment, maintaining cost, and tax deduction. The
opportunity costs are mainly from holding home equity and renting.
A general formula for the net periodic user cost of homeowner at t is
Equation 2
In equation (1), is net periodic user cost of homeowner, rm is the mortgage interest
rate, Mt is the mortgage outstanding balance, tis marginal income tax rate of homeowners, and
tris the real estate tax rate. ut is the proportional maintaining cost including depreciation, pt is a
unit price of house, b is expected appreciation rate of price of house, and ht is size of the house.
The first term is interest payment of mortgage outstanding balance and real estate tax payment
after deducting from income tax. The second term is maintaining cost of owner occupied house
and Mt is a principal change on mortgage (Since Mt is non positive, -Mt is non negative.).
The last term means expected capital gain from housing tenure. Equation (1) reflects the special
tax status of homeowners. Since interest payment and real estate taxes are deductible, the
household who faces higher marginal income tax rate has more incentive to own its house and
the homeowners also have incentive to keep high mortgage principal. The opportunity costs for
-
8/8/2019 Credit Crunch Crisis
17/50
17
home owners are costs for renters since only alternative choice of owning a house is renting. A
general formula for the opportunity cost is:
Equation 3
Crt stands for opportunity cash flow for the homeowner. at is a proportional rental rate
on house value and the size of rental house may not be the same as the size of owner-occupied
house. (ptht -Mt) is net home equity of the homeowner. is therefore, expected return
from alternative investments. The expected return can be a risk free interest rate, a market
portfolio return or any other return in financial market depending on homeowners portfolio.
Also, it can be calculated as a utility loss from distorting consumption when borrowing from
market is constrained. Especially for the young household who does not have enough labor
income or financial assets, the utility loss from depressing other consumption will be major
opportunity cost for owning a house.
The occasional cash flows such as transaction and moving costs should be considered in
this cash flows and these occasional cost are depending on current housing tenure. The current
renters need to take account moving costs and transaction costs for purchasing a house in
addition to net periodic costs of home owner. Transaction cost for renters include a mortgage
initiate fees. To current homeowners, moving costs and transaction costs will apply to the
opportunity cost for renting. Transaction costs for homeowners include the cost for clearing
mortgage balances and time cost for selling the house as well.
The equation (2) and (3) suggest the factors which affect to the costs of owning a house
such as expected housing return, rental cost, interest rate, stock market return, and marginal
income tax rate. Those factors can be classified into economic factors and demographic factors.
The economic factors are common for all household in that economy such as unit price of
-
8/8/2019 Credit Crunch Crisis
18/50
18
house, mortgage interest rate, maintaining cost, and proportional rent rate at t. These factors can
be calculated from aggregate level. The demographic factors are applied variously to each
cohort of household such as demand for housing size. These factors are strongly related
households income and age and it cannot be explained in aggregate level. Affordability of
home must be more important to the young household who has relative less income and expects
increasing income with long horizon of life rather than to retired household. Also demand of
housing service- demands of house size- is considered compliment with other consumptions.
Government policies and financial innovations are important factors to increase
homeownership as well.
The government has long had a policy of promoting homeownership including tax code
which skewed to favor homeowners. Financial innovation also has contributed to the ability of
younger households to buy homes with little down payment. This section is exploring how
these factors can explain the recent changes in homeownership rate.
HOME PRICE
The first economic factor I consider is unit price of house. The higher appreciation rate
of home price can lead the higher cost of dwelling for both renters (if proportional rental rate is
constant) and owners rent cost and maintaining cost increase. However, the higher
appreciation rate of home price means the higher return from the housing investments so that
the user cost of homeowner decreases. To the homeowners who have relatively net home equity
level, higher appreciation rate of home price forces them to adjust their home equity to reduce
opportunity cost from investment in other asset.
Solutions for the house owners
One effective solution considering the recent credit crunch is to make greater use of
-
8/8/2019 Credit Crunch Crisis
19/50
19
leaseholds and leasehold enfranchisement. Although home ownership is seen as the goal in
terms of home acquisition, it may be that such an approach is too restrictive. Accordingly,
increasingly unaffordable house prices may mean that the time is ripe to reconsider whether a
means of home acquisition. Certainly, this method of home acquisition has been prevalent in
mainland Europe long after home acquisition became the norm in England and Wales.
Furthermore, it has become increasingly popular in the context of commercial property, where
the arrangement has perceived advantages for both the leaseholder and the owner of the
reversion. Such an approach could be used more extensively in the residential context, with a
long lease likely to be cheaper than buying the freehold. In the context of affordable housing for
local people, the system of leasehold enfranchisement may be a useful way of overcoming the
difficulties encountered by those who wish to climb onto the first rung of the property ladder. In
essence, leasehold enfranchisement gives leaseholders a right to buy the leasehold property
when the lease expires.2
A variation on this model is proposed by Hickey and Best (2005). The landlord, a lets a
house to a prospective homebuyer, who pays rent to the landlord. Meanwhile the landlord is
involved in building affordable housing developments. When the affordable housing
development is complete, the tenant purchases a property on this development. However,
during his period as a public sector tenant, the buyer acquires a stake in the equity of the rental
property, which he is allowed to transfer to the purchase of the affordable housing development
property. Hickey and Best argue that this has potential benefits for both the landlord and the
tenant. The landlord is able to avoid capital gains tax on the increase in the value of the land he
has used for development. Furthermore, he has a guaranteed buyer for one of the houses on the
2As provided by the Leasehold Reform Act 1967 (1967, c.88), the Landlord and Tenant Act 1987 (1987, c.31), the Leasehold
Reform and Urban Development Act 1993 (1993, c.28) and the Commonhold and Leasehold Reform Act 2002 (2002, c.15).
-
8/8/2019 Credit Crunch Crisis
20/50
20
development, and a consequent avoidance of estate agents' fees. From the tenant's perspective,
he has the advantage of being able to treat rent payments as a contribution towards the equity of
his future home, and consequently acquires a larger share of his new home than would
ordinarily be the case.
For landlords, however, there is very little incentive to this system--the main advantage
of the lease for the landlord is, after all, the interest he has in the reversion, which will enable
him to grant a new lease or to take possession of the property. Similarly, Hickey and Best's
variation on this scheme may operate well where the supply of properties outstrips demand.
However, as is currently the case, and one of the key reasons for house prices being
unaffordable, there are few incentives to such a scheme where the demand for properties
outstrips supply. From the landlord's point of view, he is in a financially stronger position if
rental payments are merely that, and do not represent a contribution to the acquisition of land,
and if he is able to sell the developed land on the open market. Accordingly, where the market
favours the seller, the scheme proposed by Hickey and Best provides very little incentive for
the landlord to participate.
Self-build
Another solution put forward by Hickey and Best (2005) is to encourage homebuyers to
undertake self-build projects. Hickey and Best propose two variations on this method, namely
self-build to own (whereby the homebuyer builds his own home), and self-build to rent (where
the homebuyer builds his own home, but pays rent to a public sector body such as a housing
association). However, it is clear that while such schemes may appear to be cost effective on a
small scale, this may not be as valid a proposal on a larger scale. The individual homebuyer
may lack the expertise to design and build his own home, especially where it is also necessary
-
8/8/2019 Credit Crunch Crisis
21/50
21
to maximise energy efficiency, and cannot take advantage of the economies of scale available
to the property developer. Furthermore, even though land sold for self-build projects is sold at a
considerably cheaper cost than developed land, this does not mean that it is affordable without a
dual income. This being the case, the self-build project will take significantly longer to
complete than property being developed by a development company, simply because the
homebuyer must continue with his ordinary employment alongside the self-build project.
During this period, the homebuyer is likely to have to make repayments on a mortgage loan
used to acquire the self-build land, and also to make rent payments to a landlord until the
project is completed. Widespread use of the self-build method will also require strict planning
regulation--as those embarking on self-build projects are less likely to wish to build their homes
in the levels of density and uniformity encountered in larger-scale developments. Accordingly,
while this solution may be appropriate in individual cases, it is unlikely to resolve the more
general issue of demand outstripping supply, and is unlikely to be a feasible or suitable solution
for the vast majority of first time buyers.
Controlling the market
Therefore, while the solutions that have been proposed thus far have considerable merit,
and may be appropriate in certain situations, their weaknesses mean that they do not offer a
large-scale solution to the problem--the main flaw being the fact that affordable housing and
local housing are both defined with reference to the housing market, but are kept separate from
it. This is something that is set to continue, if the government's latest proposals to expand
shared equity schemes, while simultaneously allowing further borrowing, become law.
Accordingly, it may be appropriate to consider that more drastic action needs to be taken--
namely for the state to exercise stricter control over the housing market. Although this is a
-
8/8/2019 Credit Crunch Crisis
22/50
22
solution is one that will require the government to make decisions that may be unpopular with
landowners and existing homeowners, it does provide a means of ensuring that housing remains
affordable. One way in which the housing market may be used to ensure affordable housing is
as follows. First, it is necessary to identify what is affordable for different groups of people. In
order to do this, it is necessary to survey the income of different types of household groupings.
Some households may have low levels of income, for example where a household consists of a
single person living alone, or where a household consists of one wage earner and dependants.
Similarly, some households may find housing to be unaffordable because of a dual, but low-
waged income. Other households may define affordability at a slightly higher level, by virtue of
having either two well-paid earners, or one well-paid single income supplemented by a second
lower income. Accordingly, by surveying the different types of household, it would be possible
to band different groups together based on household income. This is something that we already
encounter with housing needs analysis in the social rented sector, but in order to be meaningful,
this needs to occur on a much broader scale. Having identified different levels of affordability,
it would then be possible to identify what level of affordability is appropriate for different
household groups, and to calculate what is affordable for different bands of income.
The second step is to identify the type of housing that each different household group
requires. For example, the housing needs of a young single person are likely to be very different
from the housing needs of a young family, or the housing needs of an elderly couple.
Accordingly, it is necessary to identify the type of housing that would be appropriate for
different households and different levels of affordability. Factors such as the type of dwelling,
the number of bedrooms, the number of storeys, will all be relevant in determining what is
appropriate. While new properties on affordable housing developments are currently being
-
8/8/2019 Credit Crunch Crisis
23/50
23
identified in this way, it should also be possible to apply the same or similar criteria to existing
housing stock. In this way it would be possible to categorise properties within an area as being
within different bands of affordability, from the smaller home suitable for a single person or a
couple, to a larger property better suited for a family, to the premium properties categorised
because of their extensive size or uniqueness of location or features.
In this way it would be then possible to set housing price bands for different types of
property based on what is affordable for different household groups. A further dimension is that
affordability needs to be defined according to locality (Costello and Watkins, 2002). The
definition of housing as affordable for a particular group should be developed with reference to
local affordability indicators, having regard to local wages and local household patterns. Not
only will housing therefore be affordable on the open market, this will also ensure that people
are not priced out of the local housing market by external factors pushing house prices up
(Costello and Watkins, 2002). Defining affordability at a local level must then be supplemented
by requirements that give housing priority to those who meet local occupancy criteria--which
are likely to be broadly similar to those encountered under the existing schemes. This would
have the effect of preventing a property from being bought by those from outside the area who
are able to command a higher price because they earn a higher average wage. As with the
existing rural affordability schemes, this wider market could be restricted to those in
neighbouring areas initially, and then widened further if no prospective buyers emerge. Further
controls may be applied, such as extending the local occupancy requirement to include a larger
proportion of property sales, and imposing tighter restrictions in order to ensure that new
developments of housing estates focus on building a larger number of smaller homes suitable
for the first time buyer, rather than four and five bedroom developments catering for the
-
8/8/2019 Credit Crunch Crisis
24/50
24
premium market. A combination of these methods would ensure that housing remains
affordable and locally focused, but would also ensure that new housing developments improve
the supply of housing at the lower levels of affordability, rather than the highest levels of
affordability.
Conclusion
In essence, the cost of house prices is increasing more quickly than can be offset by
affordable housing, and the existing mechanisms merely offer short-term solutions which do
not preserve housing at an affordable level in the longer term. Neither do they enable people to
remain in rural communities. More drastic measures are therefore needed in order to maintain
affordability and local accessibility. Market-led affordable housing would ensure that house
prices are affordable on a more general level than is currently the case. Controlling the housing
market would also ensure that the effects of population shifts do not alter the population
dynamic, and in the Welsh context, the linguistic dynamic of the community. Such a change in
the law would also bring about other benefits. First, it would ensure that communities are
sustainable. Homes would be occupied by those living in the community and participating in
the community, rather than by commuters or those who purchase property as holiday homes or
second homes, thus ensuring that a network of community support is sustained. Also, it ensures
that people are better able to live close to where they work--something that is likely to bring
significant environmental benefits. Its key advantage however is to create a sustainable pattern
of affordability, which ensures that housing affordability is maintained, communities are
maintained, and in Wales, a minority language is maintained.
Non-family collective living
A lot of people, particularly young people, live together not as a family but sharing
-
8/8/2019 Credit Crunch Crisis
25/50
25
facilities, such as bathroom, toilet, kitchen, sitting room. This is a household, a single
household, and although the building requires planning permission, the creation of the
household, whether by new build or conversion, does not require planning permission if six or
fewer persons are involved as it qualifies as a dwelling house class C3(b). This represents a
huge gap in planning control and requires simple amendment of the use classes order. Such a
household is not in planning law strictly a house in multiple occupation (HMO); an HMO is
anything not within the definition of a dwelling house, though it is regularly described in
society as an HMO. Paradoxically for the purposes of housing law an HMO is where there is no
family (defined in s.258), irrespective of the numbers of residents. A simple statutory definition
of HMO for all purposes would greatly assist,7
though would involve extra work for the
planning officers. In Northern Ireland planning permission is required where three or more
people living together come from different families.
Concern has been expressed recently at the substantial growth in the number of small
so-called bail hostels, some 150 or so to begin with, catering among others for prisoners on
early release, some of whom are under home detention curfew (HDC) and tagged.
Commissioned by the Ministry of Justice, as these hostels contain not more than six persons
they do not require planning permission. Sex, child, violence and race offenders are supposed to
be excluded, though a released prisoner, Anthony Rice, murdered a victim while on early
release.
The local planning authority will sometimes place a condition upon planning permission
for a group or estate of houses, family houses, that they be retained for family use and not
converted to non-family use. The reasonableness or indeed the validity of such a condition may
be open to challenge where it seeks to restrict conversion to a non-family use, i.e. household not
-
8/8/2019 Credit Crunch Crisis
26/50
26
exceeding six, still a dwelling house, which does not require planning permission anyway,
unless some cogent reason can be found to justify the condition. A non-dwelling house use
would involve a change of use and require planning permission anyway.
Supplementary planning guidance
One approach is by way of supplementary guidance, and Southampton City Council has
produced a draft document Supplementary planning document: Family homes , February
2008, seeking to promote family housing. This is based upon a housing mix and a type of
policy in the core strategy, which has yet to be examined, which seeks to secure a balance of
housing types and more sustainable and balanced communities through the provision of at least
30 per cent family homes on sites of more than 10 dwellings or which exceed 0.5 hectares. In
this supplementary planning document an attempt is made to offer definitions, and the
suggested essence of a family home is the number of bedrooms and a private amenity space or
garden.
Family home
A family home has the following characteristics:
Two or more bedrooms.
Direct access to a useable area of private amenity space or garden for the sole use of
the household of at least 20 sq m in area.
Flat
A flat means a separate and self-contained set of premises constructed or adapted for
use for the purpose of a dwelling and forming part of a building from some other part of which
it is divided horizontally (see General Permitted Development Order Article 1). This type of
dwelling can be on two or more floors e.g. a maisonette.
-
8/8/2019 Credit Crunch Crisis
27/50
27
House
A house for the purposes of this document includes a bungalow or town house and will
normally have its own garden or amenity area but excludes a flat, maisonette or a building
containing separate flats or maisonettes.
House in Multiple Occupation (HMO)
For the purposes of this document and the interpretation of the Core Strategy this refers
to a house or flat where the residents share one or more basic amenities such as toilet,
bathroom/shower room or cooking facilities but do not live together as a single household. It
does not include a house divided into self-contained flats and does not include hostels.
Influence and pressure
The need for Government to amend the use classes order so as to encompass all non-
family occupation has become overwhelming. The Minister for Housing and Planning has in
April 2008 at least announced a review of the management of HMOs.
The local plan might indicate family housing zones or areas of restraint with a threshold
beyond which certain forms of development would threaten existing family housing or the
existing character or balance of a neighbourhood, but such type-specific allocation would seem
to conflict with the principle behind the local development framework spatial concept; and an
attempt by Leeds City Council to impose an area of special restraint on studentification failed
on appeal.
In addition to a family housing policy in supplementary guidance, founded upon a
housing mix policy in the core strategy, the local authority may be able to bring other influence
and pressure to bear, subject always to the proper proprieties. A local understanding with
local developers may smooth relationships; applications for planning permission involving
-
8/8/2019 Credit Crunch Crisis
28/50
28
family housing may be dealt with favourably and expeditiously; the percentage of affordable
housing requirement may be reduced; where the local authority is the landowner and is
retaining the freehold or selling the land appropriate covenants may be imposed in the transfer,
always provided that the retained land is capable of benefiting from such a covenant. Local
universities and colleges and similar institutions may be persuaded and assisted to provide in-
house halls of residence for their students so as to relieve the pressure on the local housing
market.
-
8/8/2019 Credit Crunch Crisis
29/50
29
CHAPTER 3: METHODOLOGY
This research will attempt to determine if there is a relationship between the recent
credit crunch and the buy-to-let market price variations. As stated in the introduction of this
study, the main purpose of the author was to examine the impact of the recent credit crunch
especially in the mortgage market and its implications on the buy-to-let market in the UK. For
this purpose, this study has taken two approaches. First, the researcher examines the mortgage
market trends from a theoretical perspective. Second, the researcher analyzes the impact of
credit crunch on the buy-to-let market statistically.
Research Design
The research is a secondary analysis of data collected from different reports, website
statistics and the research articles on buy-to-let market and the economic recession in the UK.
The data were generated utilizing a specialized technique developed primarily to document
discrimination in lending and housing. The technique is called paired testing (HUD, 2006).
Sample
The sample design was an integrated, clustered, two-stage probability sample design
(HUD, 2006). The first stage consisted of a list of all Metropolitan Statistical Areas, which was
stratified based on size, and proportion of the populations. Different sites pertaining to the data
on buy-to-let market such as FT, BBC, etc as well as Links like:
http://www.shieldsgazette.com/news/Buytolet-landlords-could-beat-credit.4950321.jp and
http://www.telegraph.co.uk/news/uknews/2819863/Credit-crunch-rocks-buy-to-let-lender-
Paragon.html were selected for the data of this study.
-
8/8/2019 Credit Crunch Crisis
30/50
-
8/8/2019 Credit Crunch Crisis
31/50
31
It is also possible to refine the adverse treatment measure to produce a net treatment measure.
Using the HUD2000 dataset, the net treatment measure will be found by using the following
formula: incidence of minority-favored treatment minus the incidence of White-favored
treatment. This generally produces a much smaller adverse treatment score.
Finally, the treatment questions can be combined to form a composite treatment score. The
questions can be combined to create a composite measure of each category of treatment or for
the transaction as a whole. The most important independent variable is the testers race.
Nevertheless, a large number of additional variables were measured in the following categories:
site variable, timing variable, tester characteristics, real estate agent and agency characteristics,
and neighborhood characteristics.
Data Collection
Data were collected using paired testers. Each pair of testers was given similar fictitious
backgrounds. Below is a partial list of some of the characteristics that were scripted for the
testers.
1. Minimum number of bedrooms acceptable for the household;2. Geographic preference;3. Income;4. Debt to Income;5. Credit Score; and
Table 2: Categories of Treatment Questions
Sales Issue Number of Questions
Sales Availability 3
Sales Inspection 3
-
8/8/2019 Credit Crunch Crisis
32/50
32
Geographic Steering 2
Financing Assistance 3
Sales Encouragement 3
Sales Overall Treatment 14
Data Analysis
The data was analyzed using SPSS. Treatment variables were analyzed by landlords and the
buyers. The possible outcomes indicated the proportion of paired tests that favor acquisition of
house by the tenants. When appropriate, the outcome differences was compared to those which
simply compare racial groups. Appropriate tests of significance will be employed to determine
if the treatment outcome differences are significant. The significance level will be .05. The data
were collected from major metropolitan areas. Finally, appropriate regression models (logit)
was estimated to determine if other factors may have contributed to the outcome differences.
Validity and Reliability
Since reliability is an estimate that similar results should be obtained under the same
conditions, it would be reasonable to assume this would be the case using the secondary data.
The validity is the degree that we measured what we said we would measure. In this study, we
specifically targeted tenants with regard to treatment variables in the home buying process.
-
8/8/2019 Credit Crunch Crisis
33/50
33
CHAPTER 4: RESULTS
Introduction
This chapter will include the analysis of the data. It will describe the sample and test the
hypotheses. There were several neighborhood characteristics for the advertised unit, which
were included in the original research, but not available in the dataset. Those characteristics
were median house value, per capita income, poverty rate, percentage of the population that
was Black, percentage of the population that were Hispanic, and the percentage of housing units
that were owner occupied. Therefore, these neighborhood characteristics will not be included in
the analysis.
The proceeding section will describe the sample used in the data analysis. The variables
employed in the analysis are those used in the original research conducted by Margery Austin
Turner, Stephen L. Ross, George C. Galster, and John Yinger (2002). In addition, these
variables have been used in other research efforts on gender discrimination. According to
Roscigno, there is a possibility that gender and race has an impact on housing discrimination
(2007). In an article by Hansen, Worst of Both Worlds, focus group participants (attorneys)
noted the combination of being a racial and a gender minority had a devastating effect on both
their personal and professional lives (2006). Hansen (2006) notes diversity programs have not
reversed employment patterns. Wilson (2006) suggested age discrimination overshadowed race
and gender discrimination. Summary of Demographic Data of the Sample.
Table 3 shows the frequency and percent distributions for the gender, race, marital status, age,
and income. Relative to gender, there 55.6% of the testers were female.
-
8/8/2019 Credit Crunch Crisis
34/50
34
In terms of race, 64.4% of the testers were White. In the original sample, there were exactly the
same numbers of minority testers as White testers. Because this research will only test for
Black and White differences, the other minorities were excluded. Therefore, there are more
White testers than Black testers.
In terms of tester marital status, 94.2%, of the testers were married. Tester ages ranged from 18
to 73. Sixty-five percent of the testers were between the ages of 26 and 45. The final category
of this table is income of the tester. There are two modal categories, 44,200 69,201 at 27.2%
and 69,202 94,202 22.0%.
Table 3: Frequency and Percent Distributions of Testers Gender, Race, Marital Status, Age, Child Present, and Income
Variable Percent Cumulative percent
Gender
Male 55.6 56.0Male 43.7 100.0
Race
White 64.4 64.4Black 35.6 100.0
Marital StatusMarried 94.2 94.2 Not Married 5.8 100.0
Age
18 25 8.0 8.026 35 39.0 47.0
36 45 26.3 73.346 55 19.9 93.2
56+ 6.8 100.0
Discussion of Tester Treatment Variables
-
8/8/2019 Credit Crunch Crisis
35/50
35
In the original research conducted by Turner, Ross, Galster, and Yinger (2002), they
divided the treatment variables into several hierarchical categories. One category was sales
availability. It included:
1. Advertised Unit Available,
2. Similar Units Available, and
3. Number of Units Recommended.
Sales inspection was category two, which included:
1. Advertised Unit Inspected,
2. Similar Units Inspected, and
3. Number of Units Inspected.
Geographic Steering was category three, which included:
1. Homes Recommended, and
2. Homes Inspected. .
Financing Assistance was the fourth category, which included: :
1. Help with Financing Offered,
2. Lenders Recommended, and
3. Down Payment Discussed. .
Sales Encouragement is category five, which includes: :
1. Follow-up Contact from Real Estate Agent,
2. Agent Told Tester of Qualification to Buy, and
-
8/8/2019 Credit Crunch Crisis
36/50
36
3. Agent Arranged for Future Contact.
Treatment variables used are: Advertised Unit was Available, Inspected the Advertised
Unit, Similar Unit, Available, Qualified to Buy, Agent Offered Financing Help, Agent
Suggested Lender, Agent Suggested Down Payment, Arrangements for Future Contact. In
83.3% of the cases, testers were told the advertised unit was available. In only 16.7% of the
cases, the tester told the advertised unit was not available. In 25.8% of the cases, testers were
told the advertised unit was not available for inspection. In 71.2% of the cases, the tester was
told that a similar unit was available. In 28.8% of the cases, testers were told a similar unit was
not available. In 98.3% of the cases, testers were told if they qualified to purchase a home. In
1.7% of the cases, the tester was told they did not qualify to purchase a home. In 57.7% of the
cases, real estate agents offered to help find financing while in 42.3% of the cases real estate
agents did not offer help with finding financing. In 53.2% of the cases, real estate agents
offered suggestions of potential lenders, while in 46.8% of the cases real estate agents did not
suggest lenders. In 35.2% of the cases, agents suggested a down payment amount, while in
64.8% of the cases the agent did not suggest a down payment requirement.
Preliminary Analysis of Differential Treatment
The goal of this research is to examine the impact of credit crunch on the buy to let market in
the UK.
Preliminary Analysis of Hypothesis OneHypothesis two states that White female testers will receive less favorable treatment
than White male testers. Hypothesis two predicts that White females will be treated less
favorably than White males. Table 6 displays cross tabulations of the treatment variables by
gender for White testers only. This preliminary analysis will not employ a test statistic per se. It
-
8/8/2019 Credit Crunch Crisis
37/50
37
will simply compare percentages by gender and will use the long standing convention that a
difference by 10 percentage points or more is significant.
The table shows that for six of seven treatment variables White females and White
males were treated about the same. There was no instance in this analysis where White females
received less favorable treatment than White males. For the treatment variable, Recommended
Lenders, 59.8% of the White females were told of possible lenders compared to 49.5% for
White males. There is differential treatment by gender by least ten percentage points. However,
White females were treated more favorably than White males.
This preliminary analysis provides no support for hypothesis two, that White females would be
less favorably treated than White males. For one treatment variable, females were treated more
favorably than males hypothesis two was not supported in the preliminary analysis.
Preliminary Analysis of Hypothesis Two
Hypothesis three states that Black female testers will receive less favorable treatment
than Black male testers. Hypothesis three predicts that Black females will be treated less
favorably than Black males. Table 7 displays cross tabulations of the treatment variables by
gender for Black testers only. This preliminary analysis will not employ a test statistic per se. It
will simply compare percentages by gender and will use the long standing convention that a
difference by 10 percentage points or more is significant. The variable Offered Financial Help
comes close to being significant. In this instance, Black females (62.5%) were told of possible
financial assistance. This is 9.3% percentage points more than males (53.2%). However, also,
Black females were treated more favorably than Black males. This preliminary analysis
provides no support for hypothesis three, that Black females would be less favorably treated
-
8/8/2019 Credit Crunch Crisis
38/50
38
than Black males. In fact, for two treatment variables, Black females were treated more
favorably than Black males Hypothesis three was not supported.
Preliminary Analysis of Hypothesis
As in the previous preliminary analysis, this analysis will not employ a test statistic per
se. It will simply compare percentages by race for gender. It will use the long standing
convention that a difference by 10 percentage points or more is significant. As in the
preliminary analysis for gender, there were few differences by race for six of the seven
treatment variables. The one treatment variable where there was a difference by race was
Inspected Advertised Unit, where 77% of the White females were told the advertised unit could
be inspected. On the other hand, only 67.1% of the Black females were told the Advertised Unit
could be inspected. This is a difference of 9.9 percentage points. In this one instance hypothesis
four was supported.
There is little support in this preliminary analysis for hypothesis four. Hypothesis four
had an expectation that Black females would be treated less favorably than White females. In
only one instance, Inspected Advertised Unit was there any difference in the treatment of White
and Black females. In this instance, White females received favorable treatment compared to
Black females as hypothesized. Hypothesis four was supported in only one of the seven
treatment variables.
Logistic Regression Analysis
The results of the preliminary analyses of the hypotheses provided little support for the
hypotheses. However, the preliminary analyses only included two independent variables;
gender and race. The proceeding analyses will test the hypotheses and will include up to six
-
8/8/2019 Credit Crunch Crisis
39/50
39
independent variables. The hypotheses will be tested using Logistic The Logistic Regression
procedure allows one to perform regression analyses using nominal-level dependent variables.
Furthermore, it allows one to use multiple independent variables. Finally, it provides tests of
significance for each independent variable used. The level of significance used in the
proceeding analyses is .05. Logistic regression is a regression procedure for nominal-level
dependent variables. The dependent variables are the seven treatment variables. The dependent
variables are: (a) Advertised Unit Available, (b) Inspected Advertised Unit, (c) Similar Unit
was Available, (d) Qualified to Buy, (e) Agent Offered Financial Help, (f) Agent
R
ecommended Lenders, and (g) Down Payment Discussed. The response categories for each
dependent variable were either one for yes or two for no. Both the independent and dependent
variables were also used in the study in 2002 by Turner, Ross, Galster, and Yinger. There will
be a separate logistic regression performed for each treatment variable. The independent
variables are (a) tester gender, (b) tester race, (c) tester martial status, (d) tester age, (e) child
present, (f) tester age, and (g) tester income.
Regression Analysis for Hypothesis One
Hypothesis 1: Female testers will experience less favorable treatment than male testers.
It shows that four of the seven independent variables were significant in accounting for
treatment. They were race, age, gender, and income. However, none of these independent
variables were significant for all of the treatment variables. The independent variables were
significant for five of the seven treatment variables. Race is significant for two of the seven
treatment variables. One of the treatment variables is in the beginning of the home buying
process (Inspected Advertised Unit) and the second treatment variable is at the end of the home
-
8/8/2019 Credit Crunch Crisis
40/50
40
buying process (Down Payment Discussed). Tester age was significant for Financial Help
Offered, Lenders
Recommended and Down Payment Discussed. Tester gender was significant for Similar
Unit Available while Income was significant for Lenders Recommended. Hypothesis one
asserts that gender is likely to be statistically significant for the entire home buying process; i.e.
for all or most of the treatment variables. It should be noted that Tester Gender is significant for
only one of the seven treatment variables (Similar Unit Available).
The regression analysis produced similar results as the preliminary analysis. In both
analyses, there was only one instance of significant differential treatment by gender. Therefore,
the regression analysis for Hypothesis One confirms the preliminary analysis of little to no
support for the hypothesis. That is, there was little to no difference in the treatment of male and
female testers. Similar to the finding in the preliminary analysis, this regression analysis for
Hypothesis Two provides no support for the second hypothesis. In the preliminary analysis,
Suggested Lenders did show a difference in treatment by gender. But the difference favored the
females. Therefore hypothesis two was not supported since White females did receive more
favorable treatment than White males.
Regression Analysis for Hypothesis
With regard to Gender, the regressions performed to test Hypothesis Three provided
absolutely no support for that hypothesis. That is to say that there is no difference in treatment
between Black female and Black male Testers. The regression analysis is similar to the
preliminary analysis for Hypothesis Three. The preliminary analysis showed that for five of the
seven treatment variables, both Black females and Black males were treated about the same.
But for the treatment variables of Suggested Lenders and Offered Financial Help, Black
-
8/8/2019 Credit Crunch Crisis
41/50
41
females were treated more favorably than Black males. In summary, there were four hypotheses
tested. For hypotheses one and three, there was little or no support. For the hypotheses two and
four, there was moderate support. When the regressions were performed for Black testers, the
patterns were quite different than for White testers. The public use data sets for the research in
this study are free. The data sets are in AS format and can be found online.
-
8/8/2019 Credit Crunch Crisis
42/50
42
CHAPTER 5: DISCUSSION, IMPLICATIONS, RECOMMENDATIONS
Introduction
This chapter has been divided into three sections. Section one discusses the results of
this investigation. Section two describes the implications, while section three provides
recommendations.
Section One: Discussion
As we all know, in many parts of the country, especially in south-east England, there is
a serious housing shortage, despite the current fall in prices. There are many reasons for this
pressure. The population is increasing, immigration playing a significant part. People are living
longer. More people live alone, in single households, than in earlier times. A lot of housing is
old and in poor repair and gradually being lost. Many houses are being converted into houses in
multiple occupation, HMOs. The big rise in the numbers of students, especially in the
university cities and towns, has led to studentification in many areas. Building land is in short
supply, and very expensive. In the building industry labour and materials are expensive, and
productivity is not particularly good. The requirements of the planning system and local plans
and emerging local development frameworks are often seen by developers as unduly and
unnecessarily restrictive.
In many towns and cities new residential development is mostly in the form of flats not
houses, often 80 to 90 per cent. The developers can get more units on to the site, and more
easily meet the required affordable homes element, and make the development economically
more viable or profitable. The demand is there in the market. Buy-to-let has up until now been
very common indeed. PPS3 requires the efficient use of land and density policies, though they
may vary for different areas. Local authorities are under pressure to meet the government-
-
8/8/2019 Credit Crunch Crisis
43/50
43
imposed housing or dwellings numbers targets. Flats may be seen by the developer as more
profitable than houses per hectare as it were, and flats may make a greater numerical
contribution to the dwellings targets of the local authority. There is a good deal of opposition
among the public and local residents and elected members of local authorities to the
development of flats. The professionals generally prefer to see more balanced communities.
Flats can change the character of an area, especially an area of traditional residential houses.
Flats bring more people, often young people, often people who are not particularly socially
considerate to their neighbours, and more traffic and parking problems. The area does not look
and feel so nice as it used to. And, dare one say it, without being too pejorative, not such a
nice class of people come to live in the area.
The family man is finding increasing difficulty in finding a house suitable for the family
needs, and suitably located and priced. He cannot afford the high prices for houses, and he
cannot compete with the high rents paid collectively by students and others living under the
same roof. So has arisen the demand for more family housing. Accordingly some local
authorities are putting or contemplating putting a family housing policy into the core strategy
and LDF, e.g. minimum x per cent family housing required in new developments subject to
certain minimum thresholds, and the requirement for no net loss of family housing previously
on the site.
Recommendations
Potential recommendations for further study include:
-
8/8/2019 Credit Crunch Crisis
44/50
44
1. This research focused on buy to let market in the context of recent credit crunch. Itcould be worthwhile to see if the same pattern exits in the mortgage market in the UK.
2. This research focused on metropolitan areas. It is not known whether the buy-to-letmarket was impacted in rural areas.
3. This research focused on housing purchase. Does the factor of credit crunch have anyeffect on treatment in the rental process?
4. Another potential topic would be real estate agent characteristics regarding minoritypopulations. A possibility could exist that older agents could discriminate more so than
younger agents. The size of the real estate office could also be a factor.
A suggestion for future research could be to give more attention to the experience level
and characteristics of the testers. The differences between them could also influence the
outcome of the data. Since this is secondary data, it would be interesting to find out if it is the
real estate agent that brings up the subjects of financial assistance, suggesting lenders, and
discussion of down payment or was it the tester that brought up the subjects.
-
8/8/2019 Credit Crunch Crisis
45/50
45
REFERENCES
Barker, K.,ReviewofHousingSupply.DeliveringStability--securingourfuturehousingneeds
(2004), 19. Available at www.hm-treasury.gov.uk/media/OF2/D4/barkerreviewreport
494.pdf.
Best, R. and Schucksmith, M.,HomesforRuralCommunities.ReportoftheJosephRowntree
FoundationRuralHousingPolicyForum (2006), 1 and 25-26. Available at
www.jrf.org.uk/bookshop/eBooks/9781859354933.pdf
Bramley G. and Karley, N.K. How much extra affordable housing is needed in England?
(2005) 20(5)HousingStudies 685, 690.
Department for Communities and Local Government,HomesfortheFuture:MoreSustainable,
MoreAffordable (The Stationery Office, London, 2007). Also available at
www.communities.gov.uk/pub/967/HomesforthefuturemoreaffordablemoresustainableH
ousingGreenPaperid1511967.p
Directgov, OpenMarketHomebuy (2007). Available at
www.direct.gov.uk/en/HomeAndCommunity/BuyingAndSellingYourHome/HomeBuyingS
chemes/DG066591
Howell, B. (2006). Exploiting race and space: Concentrated subprime lending as housing,
discrimination. California Law Review, 94(1), 101-147. Retrieved from the Academic
Search Premier database.
-
8/8/2019 Credit Crunch Crisis
46/50
46
Korecki, N. (2004, July 14). Bank settles U.S. lawsuit that alleged redlining. Chicago Sun-
Times. Retrieved
http://www.findarticles.com/p/articles/mi_qn4155/is_20040714/ai_n12554316
Ladd, H. (1998, Spring). Evidence on discrimination in mortgage lending. Journal of Economic
Perspectives, 12(2), 41-62.
Leach, C. W. (2005, November/December). Against the notion of a new racism. Journal of
Community & Applied Social Psychology, 15(6), 432-445.
Markowitz, R. (2002, January 29). Levittown, St. James Encyclopedia of Pop Culture,
R
etrieved from http://www.findarticles.com/p/articles/mi_g1epc/is _tov/ai_2419100714
Martinot, S. (2003, June). The militarization of the police. Social Identities, 9(2), 205.
Massey, D. S., & Lundy, G. (2001, March). Use of Black English and racial discrimination in
urban housing markets: New methods and findings. Urban Affairs Review, 36(4), 452-
469.
McGregor, S. (2005). Westchester realtors admit discrimination. New York Amsterdam News,
96(40), 6-30. Retrieved from the Academic Search Premier database.
Munnell, A. H., Browne, L. E., McEneaney, J., & Tootell, G. M. (1996, March). Mortgage
lending in Boston: Interpreting HMDA data. Federal Reserve Bank of Boston, Working
Paper, 92(7).
National Training and Information Center (2001). NTIC PLIP Project takes on predatory
lending for a second year. Retrieved from http://www.ntic-
us.org/publications/reports/Issue_83_fall_2001/preda-ntic
-
8/8/2019 Credit Crunch Crisis
47/50
-
8/8/2019 Credit Crunch Crisis
48/50
48
Ritzer, G. (2000). Sociological theory. New York, NY: McGraw-Hill Higher Education. Ritzer,
G. (2003). Contemporary sociological theory and its classical roots: The basics.
McGraw-Hill Higher Education
Robinson, Carla J. (1991, Spring/Winter). Racial disparity in the Atlanta housing market.
Review of Black Political Economy. 19(3/4), p85 105. Retrieved from
http://search.epnet.com/login.aspx?direct=true&db=buh&an=9612200581
&loginpage=login.asp
Roller, J. (2003, November/December). Abercrombie & Fitch sued for racial discrimination.
R
etrieved from http://findarticles.com/p/articles/mi_qa3835/is_200311/ai_n9311945
Roscigno, V. J. (2007). The face of discrimination; how race and gender impact work and home
lives. Portland, OR: Rowman & Littlefield.
Ross, N. A., Christian H., James R. D., & Marcellin, A. (2004, Winter). Dimensions and
dynamics of residential segregation by income in urban Canada, 1991-1996. The
Canadian Geographer 48.4 433(13). Expanded Academic ASAP. Thomson Gale.
Russell, M. (2005, May/June). Race, not economics, key factor in housing discrimination.
crisis, 112(3), 9-9. Retrieved April 22, 2007 from the Academic Search Premier
database.
Satsangi, M. and Dunmore, K. The Planning System and the Provision of Affordable Housing
in Rural Britain: A Comparison of the Scottish and English Experience (2003) 18(2)
HousingStudies 201, 213
Schaefer, R. T. (2005). Race and ethnicity in the United States. Upper Saddle River, New
Jersey: Pearson Prentice Hall
-
8/8/2019 Credit Crunch Crisis
49/50
49
Schwartz, A. (1998). Bank lending to minority and low-income households and neighborhoods:
Do community reinvestment agreements make a difference? Journal of Urban Affairs,
20(3), 269-301
Smith, K. (2005, July 18). American planning association studies racial steering. Retrieved
from http://www.findarticles.com/p/articles/mi_qn4181/is_ 20050718/ai_n14780414
South, S. J., & Crowder, K. D. (2004, October 29). Housing discrimination and residential
mobility: Impacts for Blacks and Whites. Population Research and Policy Review,
17(4), 369-387.
Straka, J. W. (2000). A shift in the mortgage landscape: The 1990s move to automated credit
evaluations. Journal of Housing Research, 11(2), 207-232.
The National Fair Housing Alliance (2006, May/June). The 2006 fair housing trends report.
Journal of Housing and Community Development, 63(3).
Turner, M. A. (1992). Discrimination in urban housing markets: Lessons from fair housing
audits. Housing Policy Debate, 3(2), 185-215.
Turner, M. A., Ross, S. L., Galster, G. C., Yinger, J., Godfrey, E. B., & Bendnarz, B. A.
(November 2002). Discrimination in metropolitan housing markets: National results
from phase I HDS 2000 final report. The Urban Institute Metropolitan Housing and
Communities Policy Center.
-
8/8/2019 Credit Crunch Crisis
50/50