Datablog: Croydon’s housing market

By - Wednesday 9th September, 2015

Once again, Robert Ward crunches the numbers so that you don’t have to

Photo author’s own.

Housing has been on my mind to examine for some time. What kept me from doing so was not the complexity. It was the opinionated rhetoric.

Look no further than the blog by Councillor Newman, the leader of Croydon Council or Councillor Butler’s press release on landlord licensing for routine landlord-bashing, finger-pointing and hand-wringing.

What changed my mind was listening to Jeff Ma, the inspiration for the film 21 in which a team of card-counting MIT students made millions in Las Vegas. He told of an occasion where everyone around him at the blackjack table, including the dealer, thought he should do one thing, but he thought he should do another. He eventually went his way because in spite of the crowd’s disapproval, he knew something the others didn’t. That something was the statistics.

Fairfield is 40% private rented accommodation, yet Shirley is only 6%

Housing is even more complex than the noble art of ‘winning at blackjack’, but if we analyse the 2011 census and the Greater London Authority population estimates, we have a better chance of creating a good strategy. The census showed 145,000 dwellings in Croydon, of which 59% were owner-occupied, 18% social rented, 21% privately rented and a few empty. Digging deeper, we find that tenures are unevenly spread. Selsdon is 90% owner-occupiers whereas Fieldway is only a third. Fairfield is 40% private rented accommodation, yet Shirley is only 6%. Our houses vary in size, from Fairfield where 70% of properties are two bedrooms or fewer, to Selsdon where 85% of properties are three bedrooms or more.

This is our housing stock. Market prices can tell us something about the supply/demand balance, but care is needed with demand. Many want a bigger house, but that’s not demand. Demand is when I want a bigger house and I have the means and inclination to pay for it.

Detailed information on private rents is scarce, but over the last four years rents across Croydon have increased by roughly 3% per year. This is greater than earnings growth over the same period, implying excess demand, but describing rents as ‘soaring’ is, to my mind, hyperbole.

Social housing demand cannot be assessed using market prices because there is no market

Purchase prices have grown by around 10% per year, which might qualify as soaring. Demand clearly outstrips supply, given that mortgage rates have not changed significantly. Clouding the analysis is the unquantifiable variable ‘confidence’, but it’s clear there’s a shortage of owner-occupied housing.

Social housing demand cannot be assessed using market prices because there is no market. Social rents are subsidised by the taxpayer, with the council making a judgement by how much. That demand exceeds supply is shown by the council housing some people in the private sector. Council figures also show 10,500 households on the housing register with only around 1,300 available lettings each year. We can conclude that there is excess demand in all tenures.

But who are the people who create that demand? GLA population estimates show that we have a roughly equal number of residents and bedrooms, so on the face of it for every Croydonian we have a bedroom. But the people and the beds are not spread evenly. Selsdon has 0.85 people per bedroom, whereas in Fairfield the figure is 1.3. Put another way, there are at least 2,500 empty bedrooms in Selsdon whilst Fairfield has 5,000 more people in multi-occupancy bedrooms than the Croydon average.

Now is the wrong time to be jumping to conclusions

The figure shown above indicates how these lower room occupancy levels are associated with older residents, who are more likely to be owner-occupiers. One can see a life pattern of moving out from the parental home, into rented house sharing, to renting a small flat with a partner to eventual owner-occupation and children, who grow up and repeat the cycle. Perhaps it shouldn’t have, but how strongly age seems to determine where we live did surprise me.

An interesting group is the Fairfield, Broad Green and Fieldway trio. Fairfield has a high proportion of one and two bedroom properties and the highest percentage of private rented accommodation. Fieldway has the highest proportion of social housing as well as the highest proportion of three bedroom housing. Broad Green sits between the two, with its roughly equal split of private and social renting spread more evenly across one, two and three bedroom properties. This trio, with the similar Selhurst and West Thornton, look like a good group to investigate in detail.

We have made a start to understanding the context, but there is some way to go before we know what the right questions are. Indeed, now is the wrong time to be jumping to conclusions. We have yet to define what the problem is, other than that there is excess housing demand.

We may not even need to do anything. Rising prices and excess demand should bring a supply side response: homes being built, empty properties being brought back into use and redistribution where people with spare space down-size enabling others to move in. Anecdotal evidence is that this has not been happening, but anecdotes are not data. We need to look deeper into our test group before, like Jeff Ma, we can claim to know something that the others don’t.

Robert Ward

Robert Ward

Engineer and project manager specialised in helping businesses make better strategic decisions and improve safety, quality and effectiveness. Conservative Party Councillor representing Selsdon and Addington Village on Croydon Council. He tweets as @moguloilman.

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  • moguloilman

    A point for clarification on social rents. My understanding is that government sets a framework within which councils then have some discretion. It is therefore a combination of central government and councils who determine social rents. Happy to be corrected.