Angharad Paget-Jones of Port Talbot, Wales, has no hope of ever climbing the housing ladder. Despite tips and guides to save money online, “it’s not as easy as quitting coffee in the morning or canceling your Netflix subscription,” she says. Paget-Jones, 28, needs his own home to live in. As a person with a disability, she is in dire need of adapting her property to improve her quality of life, but she cannot do so in the rental market.
“The goal is to have your own home,” she says. But even though she works full time, she can’t save enough to get close to making a deposit. The average price of the houses she has been looking for is around £180,000 ($235,000). She has about £3,000 ($3,900) in savings and her rent is £675 a month. She can save around £200 a month, but the higher cost of living has hit her hard. “I save a lot more than most people, I get it, but with everything else growing, it’s impossible to save more by being able to heat your home and eat,” she says.
Paget-Jones’ situation is far from unique. House prices 4.4 times the average disposable income in the US, the highest level since 2006. In England and Wales 8.9 times, up from 6.7 times ten years ago. Canada is considering ban on foreigners buying houses in the country after the average house price rose nine times the average household income. The housing market is broken and more people are stuck in an endless rental cycle because they can’t afford to climb the housing ladder.
This problem is exacerbated as those with money to invest are opting for real estate over bank accounts after years of low interest rates, leaving the rest to spend their income on rent rather than saving up to buy their own home.
“Relatively low global interest rates are fueling rising house prices around the world,” says Dan Wilson Crowe, deputy director of Generation Rent, a British tenant rights lobbying group.
“Housing is not housing,” agrees Richard Ronald, Professor of Housing and Chair of Political and Economic Geography at the University of Amsterdam. “Housing is an investment commodity. It’s a pension.”
This is a problem that countries around the world have recognized and many are trying to solve. “There is fairly broad agreement that the supply and demand equation is very, very unbalanced,” says Remy Reisner, founder of New York-based investment firm Raisner Group and co-author of the study. World Economic Forum report about the global housing crisis. In the United States, housing construction has declined by about 3 million homes in a decade this century.
Some suggest that Japan is a role model. There prices for rent has largely remained unchanged over the past 25 yearsThis is evidenced by the data of the Bureau of Statistics of the country. The reason is that the government controls zoning at the national level and is more open to development in terms of the number of houses it allows to build. A little over a third Japanese citizens rent the houses they live in under the protection of a 1991 law called the Land and Building Leasing Law, which makes it difficult for landlords to terminate a lease or prevent a tenant from renewing a lease.
Taken together, this means that Japanese citizens are third most satisfied with good affordable housing in all OECD countries—more than 10 percentage points higher than the United States and 20 percentage points higher than Canada.
“One thing that is unique to Japan is the building permit process, which means that obtaining a building permit in Japan is less uncertain than in other countries,” says Jiro Yoshida, associate professor of business at the Smeal College of Business University of Pennsylvania. “Japanese zoning regulations and building codes are completely rule-based. Government officials and planning boards do not have much leeway.” It’s day and night compared to the United States, where local jurisdiction planning teams can change and adapt the rules as they see fit. “Negotiations in the US are so vague and non-obvious that each area has its own lawyers who specialize in the process of granting rights,” says Yoshida.
Wilson Crow supports the implementation of the Japanese system in other countries. “I don’t think there’s any reason why we can’t have a Japanese-style housing system,” he says. However, no politician wants to be held responsible for lower property prices for fear of alienating home-owning voters, meaning acceptance is unlikely. Because new developments in close-knit communities can be politically unfavorable, politicians are being discouraged from speeding up new home construction.
White House recently adopted that the pace of housing construction has not kept pace with population growth for more than 40 years, and that the houses under construction are too large and too expensive for first-time buyers. The number of new homes under 1,400 square feet being built in the United States is more than 80 percent less than the number built in the 1970s. The land is earmarked for golf courses popular with older voters who would rather vote than at home.
However, not everyone thinks Japan’s housing market is as rosy as it seems. While rental prices have remained largely unchanged, the price of buying a property in Japan increased, as an everywhere. “The Japanese system is by no means better,” argues Ronald, who has lived between Japan and the Netherlands for the past two decades.
“It’s just not overstated because there are fewer Japanese in the world than when we started this phone call, but the same number of houses.” Japan’s aging population has helped explain its comparative success from an outside perspective. “They didn’t do anything magical with housing policy in Japan, and in fact they had very damaging house price inflation,” says Ronald. “Japanese housing policy is nothing special.” And even the country’s successes would be difficult to replicate elsewhere. “It’s the only country that was – for better or for worse – almost completely rebuilt after World War II,” Reisner says. “It’s going to be hard to replicate this model where there obviously wasn’t the same amount of history, so to speak.”
So where else should we look but in Japan for a model to help fix the broken housing market in much of the west? One option is Singapore, where public housing is being built in specially designed neighborhoods and sold to private individuals with 99-year leases below market value. The sale of this property is severely limited to reduce speculation, but this can happen after five years of ownership. Near four out of five Singaporeans live in public housing, according to official statistics. “Prices can never go beyond ordinary working families,” says Ronald. “They have this virtuous circle and it’s interesting to think about the role of housing regulation.”
In Europe, there is another viable alternative played out in Germany.
“The German model is too extreme and unique in the sense that they have so much public housing, but living in a rented apartment is the norm in Germany,” says Yoshida. The country has second largest share of homeowners throughout the OECD. There, buying a home to live in is not always the ultimate goal. “In Germany, they live in rented apartments and buy a house as an investment,” he says.
Tenants’ rights have been the subject of a campaign called D.W. & Co. Enteignen (Expropriate Deutsche Wohnen and Co.), designed to try to transfer a quarter of a million properties from private owners to public ownership, which will establish fairer prices for tenants and increase the chances of home ownership.
Property ownership is on the rise in Germany along with house prices as people view owning a roof over their heads as a post-pandemic feeling of security, driving up prices but not necessarily affecting the experience of many in the market. “Tenants have long-term and secure leases, and they can decorate and invest in their own homes, assuming they will live there for the rest of their lives, have children and raise them in rented housing,” says Ronald.
Until the end of January 2022, housing construction in Germany is subsidized by the government below market rates for the first five years after construction. “This means that tens of thousands of apartments come on the market every year, which lowers rental prices and prevents attempts to buy property,” he says.
A similar pattern exists in Austria and Switzerland, where the ratio is about 55% to 45% (in favor of renting in Switzerland and owning in Austria), compared to an average homeowner share in Europe of 70%. When you get to the Austrian capital of Vienna, the homeownership rate will be only 7 percent.
“German and Swiss housing policies provide subsidies to some extent to ensure a reliable flow of low-cost rental housing into the system,” says Ronald.
There are problems with the Central European model, but in general the countries that have made their housing markets work best are those that encourage low rental prices or easy home ownership while discouraging those who want to invest in property purely as a source of income. . Source of income. “There is no reason why we [the rest of the world] this cannot be,” says Wilson Crowe. “But practically, to get from here to there, we need to think about what kind of barriers the political system creates.”
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