Wednesday, 20 November 2013

The hitch with "hutching up"

One of the most poignant symptoms of a housing market in overload is the phenomenon of young people “hutching up”, as it is now termed. The FT’s front and third pages today exposed the potential social problems of young graduates being forced into hutching up sharing cramped accommodation in London because of rising rents.

The most painful aspect of this has been young couples ending hutched-up almost as soon as they hitched-up. The FT cited the example of Tom Johnson. (People of a certain age may now want to put on the theme tune to Radio 1’s vintage Our Tune): “When Tom moved into a one-bedroom flat in London with his girlfriend, he admits it was partly because he wanted to escape the housing situation he was in. He had been sharing a house with strangers, in a box room that barely fitted a bed and a wardrobe.

“Living in London forces you sometimes to have uncomfortable living arrangements with people you don’t know that you want to get out of,” the 25-year-old says.

“But for that, he and his girlfriend ‘would have left it a lot later’ to move in together – or perhaps not done so at all.

“They broke up about nine months into their cohabitation. In a city where few young people can afford to live alone, his story is an example of the strange things the rental market can do to people’s relationships.

Now, when I were a lad down in the Big Smoke for the first time, it was buying not rental where this phenomenon was most prevalent. In the mid-1980s, with the price of flats in many cases going up by a few percent a month many a young couple would head to an estate agent seemingly a day or so after their first liaison. The situation was exacerbated by Chancellor Nigel Lawson disastrously allowing a six month window to exchange contracts before withdrawing tax relief on couples’ mortgage interest.

Then, the day after it was withdrawn, came the crash. Couples metaphorically woke up, looked at each other, shuddered and thought “what have we done!” But the onset of negative equity meant they were stuck where they were. Friends of a friend ended up so loathing the sight of each other that they had to fix up woodchip panelling in a sort of Berlin Wall across their tiny flat. A true story. Others had to buy out their partners, often acrimoniously.

The current problems are mainly restricted to rental properties, according to the FT. Recent graduates, who are earning less than their counterparts before the crisis, are flocking to the capital - not only because of its undeniable attractions, but because it’s where most of the jobs are – but they are facing huge rent bills. The FT analysed median rents data from Hometrack, the property consultancy, shows a new graduate on an average starting salary of £22,400 can expect to spend more than a third of their gross income on rent – a standard definition of unaffordability – for a room in a two-bedroom property in 72% of inner London postcodes.

Now if some of this grouping are persuaded to apply (and are accepted) for Help to Buy funding could history repeat itself? It would probably be most likely in the first phase, allowing equity loans for new build properties. Critics of housebuilders claim that their products are like rabbit hutches in any case (I’ll not get into that debate). Could Chancellor George Osborne “do a Lawson” and woo innocent couples into homes that are too small for them … and then withdraw the stimulus, thus prompting a price crash? If so, some irate former sweethearts might end up heading to B&Q to order chipboard.

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