Comparative Housing Tenure Structure in the UK and Holland - Comparison Essay Example

ABSTRACT

Rehashing the saying “A man is known by his friends” as “A man is known by his tenure” we meet the demand of the day - Comparative Housing Tenure Structure in the UK and Holland introduction. On the threshold of globalisation it is especially interesting to compare tenure procedures in the UK, always being detached from the continental political and economical overall, and one of the EU members, the Netherlands. These two countries have much in common as far as history of housing and tenure structure are concerned, but at the same time vary deeply in housing market changes, brought to life by different political and economical methods.

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The goal of the present paper is to compare these two countries’ tenure structures from the economical, political and social points of view. Previewed by a general survey for each of the state body, the comparative case part enlists the most significant tendencies.

Comparative Housing Tenure Structure in the UK and Holland

GENERAL SURVEY

 TENURE STRUCTURE of the UK

By now the housing structure in the UK has formed in the roll of the twentieth-century town renovation and slum clearance policies. From the 1930s the populations of large city-centres were removed to new towns, usually located in the countryside, or to new council estates in the suburbs. Historically housing structure, consisting of more than 25 million domestic dwellings, is divided into public and private sectors. The greater prices and prestige are given to the private detached property. The public is a subsidized from local government authorities or housing associations (non-profit-making bodies which manage and build homes for rent and sale with the aid of government grants) sector and is inhabited mainly by people with low incomes.

The famous British principle “My home is my castle” is vividly shown in the following dwelling types distribution according to the type of accommodation (in percentage).

Source: Living in Britain 2002, published 2004 National Statistics Website

According to tenure classification there are owner occupation, which is dominant (68% of 20,500,000 dwellings in 2002), and social rented (19%). Within the latter sector, local authority (LA) housing accounts for 13% and Housing Association (HA) housing for 6%.

Ownership is favourably granted by the UK citizens, though not all of those who are craving to become a house owner can purchase a dwelling. The most popular is social rented housing. It’s interesting to mention, that the proportions of social housing in England at least depend on such a factor as region. This is vividly proved in Census Briefing Paper One “Housing Tenure Structure in England”. The largest proportion of HA housing in England (9% of total dwellings) we can see in London district, as well as in the South East and North West regions.  The East Midlands and Yorkshire and Humberside regions have the smallest proportions. In regions where the quantity of social sector dwellings is high, there are more LA dwellings than HA stock holdings. In contrast in regions with the smaller social sector LA and HA are relatively equal. In rural areas people prefer to deal with HA housing, in urban areas – with both.

   British homes are still very difficult depending on disposition and age.

Many are old and cold; are frequently badly built; and lack central heating and adequate insulation. But there has been some improvement in housing standards in recent years, and most new houses have a high percentage of the basic amenities. Greater attention has been paid to insulation, energy-saving and quality. Oakland, J. (2002).  British Civilization: An Introduction (p. 182). London: Routledge.

POLITICAL UNDERLAY

But not only the architectural and technical details dictate the changes on modern British housing stock. Grate role play the government policies, thus, politics itself, in forming tenure structure. For example, public-sector or social housing in England is controlled centrally by the Department of the Environment and by devolved bodies in Wales, Scotland and Northern Ireland. Much of this housing has historically been sponsored by local authorities on local and central government sources. Why has it declined in recent years?

The percentage of households renting council homes increased from 31% in 1971 to 34% in 1981, but then gradually declined during the 1980s to 24% in 1991. In 2002 only 14% of all households were rented from the council. The reason is a right-to-buy policy (1980), introduced by the previous Conservative government. Under it tenants of council dwellings were to buy their “residences” at below-market prices. “This policy has increased the number of home-owners by over one million and relieved local authorities of the expense of decoration, upkeep and repair. The Labour Party, after initially opposing the policy, accepted it, mainly because it proved attractive to tenants.” (Oakland, 179)

Another example: costs. “The current Labour government has ploughed back the revenue from council sales into local government (which previously had not been able to spend it) so that it can provide more low-cost accommodation.” – evidences Oakland in his book (p. 179).

The famous shift from LA towards HA (which led to the social status changes in the British society of the 1980s and the increase of housing and renting prices) was caused by The Conservatives being critical of local government housing policies. “They wanted local authorities to divest themselves of housing management. Instead, they would work with housing associations and the private sector to increase the supply of low-cost housing for rent without providing it themselves.” (Oakland, 181) However, the Labour government has returned some control over housing policies to local government so that balance is kept nowadays. So many examples can be found to prove the fact that housing policy, thus tenure structure, depends on political motives.

TENURE STRUCTURE of the NETHERLANDS

For many centuries Netherlanders have been settling in the cities, and this is true about contemporary housebuilding habits. Each mansion used to be longstandingly planned, which plans began with preparing land for housebuilding – at the high cost. Over 75% of new dwellings for many years now constitute houses. Roughly a third of the housing stock is in the form of multi-family structures and two-thirds are single family dwellings. Of those single family dwellings, two-thirds again are terraced houses.

Traditionally the housing system consisted of owned and rented dwellings. Up to a certain moment the level of owner-occupation was relatively low and the social housing sector was, on the contrary, developed. The tendency has changed though: “Progressively more Dutch households are choosing to become homeowners” (Ball, M. (2005). RICS European Housing Review 2005, p.98).

The high demand for homeownership from the 1990s was caused by several interlinked factors: 1) demographic developments; 2) economic growth, which increased real disposable incomes and damped unemployment, that’s much so important as from the mid-1990s borrowing-to-income ratios in Netherlands have been based on all incomes in a household, rather than that of a single family member only; 3) greater (to the early 1990s) competition on the mortgage market as lenders have fought to gain larger market shares.

As for the renting sector, there are two types of private landlord in Holland: a small landlord sector of individuals and small firms, and a large landlord sector owned predominantly by institutional investors. In the first segment housing is of lower quality – small, pre-war dwellings in inner-city areas – and of moderate cost. Properties are owned as a result of inheritance or speculative purchase. Landlords try to sell dwellings on to owner-occupiers or social housing institutions for renovation purposes. As land and housing costs grow vividly such tendency is clearly understood.

Institutionally owned rental housing, on the contrary, has been built over the past thirty years, predominantly in good city locations. The units are generally spacious, well-equipped and maintained, and the rents are high and, thus, outside of the strictest government controls. “This sector is popular among mobile, affluent households, because by renting they avoid the high transactions costs of ownership. It is also popular among the elderly, partly for locational preference reasons, and because it enables them to realise equity previously locked up in a home” (Ball, 102).

POLITICAL UNDERLAY

In 1980 the percentage of homeownership structures in Holland rated at about 42%, in recent years – at around 54% of the stock. Now almost 80% of new houses are built for owner-occupation. This trend has been encouraged by the state, at local and national levels, which “plays an important role in housebuilding as a key land developer.” (Ball, 98) The new coalition government – “tightly controlling political situation on the backstage of “soft” housing market” – is pledged by powerful possessors to sustain the tax benefits of homeownership, “despite its fiscal cost and the distorting impact on personal sector asset holdings and housing choices (Ball, 98)”. As a result we see the freshly introduced policy document ‘What people want, where people live’ (passed through Parliament in 2001 and despite several changes of government since then, acts still), one of the prime goals of which – to increase owner-occupation to 65%, the EU average, by 2010. “Such a major shift of 12% of households into homeownership in a relatively short space of time implies a significant absolute reduction in rental housing” – states Michael Ball (p. 100). By his calculations, such a policy requires to transfer of 700,000 existing rental dwellings into homeownership. Half a million of them is owned by housing associations (around a fifth of their housing stock of 2.4 million dwellings in 2003). The step will actually “rob” local authorities and the private sector. Partly that was done to enable people on low incomes to buy their own home. It means that they are likely going to sell social housing to sitting tenants (a new owner-occupation grant scheme, the Home Ownership Promotion Act, introduced in 2001).

Nobody else but the state government provoked the repositioning of social housing in the Netherlands. The case is rental housing in this country is dominated by social housing providers. Housing corporations are private non-profit institutions, whose single stated aim is that of providing good and affordable housing. 36% of their dwellings are in the low-rent category (almost 60% in Amsterdam and Rotterdam); 58% affordable; and 6% high rent (Ministry of Housing, Spatial Planning and Environment, http://www.vrom.nl.).

Up to 1995 housing corporations were financially tied up with social housing institutions through a ‘grossing and balancing’ agreement. Under it, housing associations repaid all their outstanding public loans and, in compensation, received a sum equal to the estimated value of all government subsidy obligations. In a “grand gesture” in 1995, the government abolished its once substantial subsidy and crossed out previous financial arrangements. To balance their books and finance new building and stock improvements, social housing organisations decided to source on rental income or property sales, which led to the increasing of rental rates.

Now the national government and institutional framework try to find consensus – the ‘Polder model’. Social housing institutions are asked to sell social dwellings at lower prices to the constant residents. In turn they’ll be granted to some “bonuses”: to build for sale, which means public urban renewal subsidies, the quality of their existing stock upgrade, new dwellings for homeowners. “Housing associations are reported to have significant plans for transforming and shrinking their stocks in such ways, although recent government pronouncements have emphasised that social housing institutions should focus on their affordable renting role” (Ball, 100).

COMPARATIVE ANALYSES

DISTINCTION

·        The average Dutch dwelling is one of the most spacious in Europe. Average useful floor areas are more than ten per cent better than in the UK. In the Netherlands thus housing market is denser, which leads to a greater demand of land.

·        The UK housing market, after booming in 2003 and early 2004, seemed to decline. The causes were not directly related to the economy, which remained strong, but to a series of interest rate rises in 2004 and the high risks of house price falls, spoken in the media and by a series of organisations including the OECD, the IMF and, on several occasions, by the Governor of the Bank of England. “The general opinion, however, was that the boom was over, and that 2005 would see moderate price rises or stagnation.” (Ball, 144) Holland didn’t see the price rise at such a speed.

·  In Holland homeownership continues to receive favourable tax treatment while in the UK this tenure sector surrendered positions to the rental. The reduction in Dutch social housebuilding and renovation subsidies fell from 18.1 million euros in 1995 to 0.4 million euros in 2002, state government withdrew general subsidies for this sector and previous social housing tenants became homeowners. In Holland social housing as a share of all dwellings reached a peak of 38% in 1998 – an EU record – but since then it has declined to 34%. In the UK the situation is quite the opposite.

·  As Michael Ball notes on his RICS paper, “private renting and owneroccupation are common sequential stages in many people’s housing life-cycles. For others, house purchase takes place as soon as the household is formed.” (p. 142) These patterns can be seen in data (England, 1999/00. Source: ODPM): 46% of under 25 year olds rent privately, whereas 80% of 45 to 64 year olds owned, and only 5% rented privately. In Holland the age of the first buyers is approximately 30-35 year old.

SIMILARITIES

·        In both countries the private tenure sector is in stagnation. In the UK we see people, mostly young with earnings growth been below average, such as public sector workers or in the early years of their employment careers. Trends in migration and the labour market have stimulated rental demand as well. Private tenure doesn’t demand entry costs of homeownership, which lures low-income Britons and immigrants. The growth of the social sector up to the mid-1990s was accompanied by a sharp fall in private renting, which now houses only about 10% of the population, compared to 24% in 1980. In Holland the decline occurred in the 1990s. Due to rent controls less than 10% of households live in the tenure now.

·        In both countries we can trace the shortage the similar house planning procedures, though reached in different methods. In the Netherlands due to the land shortage and strict environmental protection policies it is hardly possible to develop the house building industry. While the ownership house building hardly reaches 5%, the social rented sector is engrossed in 12 %. In the UK the second-housing stock is also flourishing but due to the politically caused shift from LA to HA model, as it happened, for example in Glasgow, where the whole stock of council housing was sold to a new social organisation in 2001. Over 1.5 million council dwellings were transferred like this all over the country under the Right-to-Buy programme. By 2001, council housing’s tenure share had declined by over half, to 14%.

CONTENTS

I.                  GENERAL SURVEY ………………………………………………..3

1.                TENURE STRUCTURE of the UK…………………………………………..3

2.                 POLITICAL UNDERLAY………………………………………………4

3.                TENURE STRUCTURE of the NETHERLANDS………………………6

4.                POLITICAL UNDERLAY……………………………………………….7

II.               COMPARISON……………………………………………………….9

1.                DISTINCTION…………………………………………………………   9

2.                SIMILARITIES………………………………………………………….10

REFERENCES

1.                Ball, M. (2005). RICS European Housing Review 2005.

2.                 Harris D. and Marshall D. (July 2003). Census Briefing Paper One Housing Tenure Structure in England (2001).  University of Cambridge: Dataspring, the Centre for Housing and Planning Research.

3.                 Living in Britain 2002. (2004). National Statistics Website. http://www.statistics.gov.uk/cci/

4.                 Oakland J. (2002). British Civilization: An Introduction. London: Routledge.

5.                 Scanlon K. and Whitehead Ch. (November 2004). International Trends in Housing Tenure and Mortgage Finance. London School of Economics.

6.                http://news.bbc.co.uk/1/hi/business/4306975.stm#

7.                http://www.minbzk.nl/uk/urban_policy/introduction

 

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