The great British housing crisis: where has affordability deteriorated most?

Keep on walking. Image: Getty.

The latest instalment of our weekly series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

Britain is in the midst of a housing crisis. Homes in London, Oxford and Cambridge have grown eye-wateringly expensive. Things aren’t much better in most of the rest of the south, and the only reason prices don’t look ridiculous in the rest of the country is because we keep comparing it to the south east.

All this, you probably know already. (And if you don’t, hi! Enjoy your first visit to CityMetric!) But how have things changed over time? Where have things deteriorated most?

One way of measuring how ridiculous house prices are is to look at the “affordability ratio”: the multiple of the average income in a city required to buy the average home. Banks, after all, tend to limit the size of mortgages to four or five times the borrowers’ income – so an affordability ratio in double figures is clearly bad news for the vast majority.

Here’s a graph of how those ratios changed in 62 British cities between 2004 and 2015. It's massively over-crowded (seriously, look at it), but it should at least give you a general sense of the trend. It’s also interactive: hover over a dot for more info:

The general trend in most cities has been up, with a brief dip during the credit crunch. But that trend is clearly most pronounced in more expensive cities: prices in cheaper cities have been relatively stable. And few cities seems to have significantly shifted position in their league tables: pricy cities have stayed pricy.

All of which is all pretty much what you’d expect in a country where the highly-paid jobs are increasingly focused in a small number of cities, most of which aren’t building enough housing.

That graph is a bit much though, so let's slim it down. Let's look at cities where affordability has declined most.

(A quick note on methodology, which you're welcome to skip. I'm using the change in the affordability ratios – essentially, subtracting the 2004 figure from the 2014 one – rather than the ratio between them. "Prices have increased by four times the average wave" feels like a more meaningful result than "the affordability ratio has doubled".)

Here are the 10 cities where affordability has declined by the biggest multiple of the average local wage.

Click to expand.

That's a fairly predictable list of cities to anyone who follows Britain's housing debate. The vast majority of those places are within London's orbit. The obvious implication is that house prices in the capital are having a knock on effect: commuters are pushing up prices for everyone, whether they commute into London and earn the big bucks or not.

The one exception to that trend is Aberdeen, which is about as far from London as you can get in Britain. The increase in prices there has almost certainly been fuelled by the city's 40 year transformation from economic backwater to capital of the North Sea oil industry.

Something else worth-noting about this map. Oxford is, by affordability ratio, the least affordable city in the UK. But that’s been true for more than a decade: my suspicion is that its very tight green belt, rendering growth all but impossible, is to blame.

In 2004, though, Oxford was substantially less affordable than London or Cambridge. Both have since caught up.

What about the other end of the graph? Of the 62 cities in the Centre for Cities' database, only 16 saw their affordability ratio improve between 2004 and 2015.

In half of those, the improvement was by less than 0.1 (meaning, the average house price has improved by less than 10 per cent of the average wage). Here are those eight cities:

Click to expand.

It'd be wrong to say that housing affordability has been flat: it hasn't, and if we started or ended the data at different points we’d get different results. But we can say it hasn't improved very much.

Lastly, here are the eight cities where – statistical fluke or not – housing affordability was a bit better in 2015 than in 2004. In some of these cities, there does actually seem to be a slight downward trend:

Click to expand.

Only two cities have seen their housing affordability ratio fall by more than 0.3. In Sunderland, it's fallen by 0.5; in Nottingham, by 0.53.

This is the second time recently Nottingham has been an outlier. In an earlier instalment of this series, I noted:

Why Nottingham and Leeds should have sustained their populations when most similarly sized British cities didn't is quite frankly a mystery to me. Leeds, one can speculate, was helped out by having one of the north's more diversified (and richer) economies; the same can't be said of Nottingham, though.

So – Nottingham has sustained its population, when most large English cities outside the south have not; and, at the same time, its housing has become slightly more affordable.

There's clearly some key piece of information I'm missing here about the economics and demographics of Nottingham. If anyone out there has it, please do let me know.

Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @jonnelledge.

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To see how a city embraces remote work, just look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”