House prices in county areas are now ten times higher than average annual earnings as ‘affordability crisis’ hits shires

CCN Latest News, CCN News 2019 | 21 February 2019

House prices in rural county areas are now ten times higher than average annual earnings, with county leaders calling on the government to be bolder in planning reform to ease the ‘affordability crisis’.

An analysis from the County Councils Network (CCN), based on the last week’s Housing Price Index, shows that in some shire counties the average house price was 14.5 times higher than average annual wages in December 2018. The national average is 8.2.

CCN figures show how the affordability crisis has spread from London to shire areas, with property prices in England’s largest cities and towns six times annual wages – far less than the county average. The average house price in the country’s 27 counties is some £100,000 more than in urban areas outside of the capital.

The Telegraph have covered the CCN research, which you can read here.

Leaders of county councils say a ‘fragmented’ planning system is holding back development in county areas, pushing up house prices. This is compounded by annual wages in those areas being £1,700 lower than the national average. In 27 ‘two-tier’ shire areas, smaller district councils are responsible for planning and housing, but the county council in each of those areas is responsible for the infrastructure for these developments – such as parks, roads, public services, and amenities. Those leaders say they want to work in closer collaboration with district partners to deliver more homes.

The counties with the largest house prices to yearly wage ratios are all in the south-east: Cambridgeshire (14.6), Surrey (14), Hertfordshire (12.8), Buckinghamshire (12.8), and West Sussex (12). In each of these areas, the ratio has widened since 2016, when Oxford Economics did a similar survey for CCN. In contrast, the top five urban areas outside London are: Southend (10.5), Bristol (9.6), Bournemouth (8.6) Portsmouth (7.3) and Southampton (7.1).

Just nine out of the 27 county council areas have a ratio that is below the national average. The average house price in rural areas is now £270,923 as of December 2018, up on £262,390 in 2017. The average house price in the cities and towns is £170,212.

Earlier this month, a report from the National Audit Office argued that the planning system is ‘underperforming’ in respect to the government’s housebuilding targets. CCN has long called for a return of ‘strategic planning’ powers to county areas, as part of a rebooted devolution agenda.

County leaders have advocated a return to strategic planning, which was scrapped in 2012, replaced with a much looser requirement for district and county councils to work together to plan for economic growth.

The current government has signalled a return to encouraging local authorities to join up local plans and infrastructure proposals on a larger scale, but no formal proposals have been set out. Today (Thurs 21st Feb) CCN chairman Cllr Paul Carter will speak at a national housing conference from thinktank Onward, where he will call for strategic powers for counties and stronger planning reform, including reforms to developer contributions, from the government.

Compounding affordability issues within shire counties is a lack of properly-financed infrastructure for development. In Hertfordshire, for example, where the average house price to wage ratio is 12.8, councils there are planning for 100,000 extra homes by 2031, but £4.5bn of the required infrastructure for these developments is currently unfunded.

Despite urban areas containing more affordable properties, urban metro mayors in city regions have significantly more planning powers than county councils. CCN says counties should have similar powers to charge developers tariffs for major infrastructure projects, and to devise strategic plans alongside district councils.

Cllr Philip Atkins, County Councils Network spokesman for housing, planning, and infrastructure, and leader of Staffordshire County Council, said:

“We have long been concerned that house prices in county areas are becoming increasingly unaffordable, with millions of young people locked out of home ownership and the situation rapidly worsening. Building a variety of homes, more quickly, with the right infrastructure to support development will help ease the affordability crisis that is spreading from London. The government’s drive to tackle this issue is welcome but planning reforms to date do not go far enough – bolder change is needed to deliver the homes the country desperately needs.

“If we are to build the right homes, in the right places, with the necessary infrastructure, then we need to move towards strategic planning on a county scale, working with district partners and neighbouring authorities. To that end, we recommend that rural areas have the same planning powers that are currently only on offer to urban metro mayors, such as allowing them to prepare their own strategic plans, to help deliver more houses in England’s counties. At the same time, we would encourage more ‘Housing Deals’ outside of city areas. A closer alignment of planning and co-ordinated infrastructure provision across a county-wide geography will enable us to overcome the current fragmented approach to the planning system and build more homes and genuinely sustainable communities.”

“Many councils also face the added issue of having huge infrastructure funding gaps – running into billions in some areas in the south-east. A lack of adequate funding for roads, amenities, and public services to mitigate large-scale development is a barrier to unlocking development in some areas. Further reform to developer contributions and the way that this funding is distributed between councils is needed.”

The analysis from CCN also shows that wages in county areas lag some £1,700 below the national average in 2018 of £29,588. This is helping worsen the housing affordability crisis, with the ratio of house prices to yearly earnings widening since Oxford Economics carried out a study for the network in 2017 based on 2016 wages and prices. In Cambridgeshire, it has risen by over 60% in just two years.

With average yearly earnings in county areas £27,878, CCN has called for the government to devolve skills and growth powers to county areas so they can begin to address skills, wages, and productivity shortages.

 

National average:2018 house prices to wages

 

Area House Prices – December 2018 (av) Ratio: Average 2018 house prices to average yearly 2018 earnings
County £270,928 9.84
Core Cities/Key Cities £170,212 6
England £247,430 8.2

 

Top ten county areas: 2018 house prices to wages

 

County Ratio 2018 House Prices 2018 Pop growth 2019-2019
Cambridgeshire 14.6  

£438,911

 

+4.5%
Surrey 14  

£446,086

 

+5%
Hertfordshire 12.8  

£400,365

 

+7%
Buckinghamshire 12.8  

£402,263

 

+6.7%
West Sussex 12  

£327,228

 

+7.4
Oxfordshire 11.6  

£350,955

 

+4.6%
Essex 10.9  

£314,035

 

+7.4%
Dorset 10.8  

£296,102

 

+4.2%
Kent 10.6  

£296,113

 

+11.2%
East Sussex 10.5  

£278,723

 

+7.8%

 

Top ten cities and towns: 2018 house prices to wages

 

City Ratio 2018 House Prices 2018
Southend 10.5 £282,012

 

Bristol 9.6 £281,960

 

Bournemouth 8.6 £252,728

 

Norwich 7.8 £204,153

 

Portsmouth 7.3 £215,702

 

Southampton 7.1 £212,399

 

Leeds 6.4 £183,902

 

Plymouth 6.4 £175,339

 

Manchester 6.2 £183,902

 

 

Birmingham 6.1 £187,685

 

 

Notes to editor

–          The yearly wage figures are taken from the Office for National Statistics data Employees earnings in the UK: 2018. The figures are taken from local authority data from ‘Figure 9: Median gross weekly earnings for full-time employees for all local authorities by place of work, in Great Britain’. These weekly wages were then multiplied by 52 to create a yearly average per area.

–          The 2016 house price ratios from Oxford Economics are taken from the report ‘Understanding County Economies’  Download it here.

–          The population figures in the county tables are taken from the Office of National Statistics dataset- Population projections for local authorities: table 2

–          The data making up urban cities in and towns are taken from 19 cities described as ‘key cities’ according to the Key Cities thinktank, (removing Newport) and the 7 ‘core cities’ as described by the Core Cities thinktank (removing Glasgow and Cardiff).