Skilled staff squeezed out of the South East by house prices

Research has found that many staff are struggling to take
the first step on to the housing ladder. Employers are warned if they do not
act now, the economy will suffer. By Karen Higginbottom

Spiralling house prices are causing severe skills shortages in the South

A report by think-tank the Institute for Public Policy Research shows that
employees on salaries of up to £25,000 per year are struggling to buy homes
(News, 31 July). They are not eligible to apply for social housing and are
faced with either renting accommodation or moving away from the area – and many
are leaving.

The IPPR report, Squeezed Out, warns that if employers continue to ignore
the problem then skills shortages will intensify and economic growth will

It is calling for employers to help their staff with the additional property
costs through wage additions, imaginative work-based saving schemes and
interest-free loans for a home deposit.

But some public and private-sector employers are already starting to tackle
the problem.

One of the few private-sector employers that already runs an initiative to
help its employees make their first step on the housing ladder is IT firm
Logica. It contributes to a staff saving scheme to help employees build up a
deposit to buy a house, or provide a six-year mortgage subsidy. Logica matches
staff contributions over a two-year period.

Glenn Connell, director of compensation and benefits at Logica, explains
that 15 per cent of the firm’s 5,000 full-time staff have opted to participate
in the scheme, which is offered as an alternative to the company pension.

"We believe we are benefiting as it helps us attract and retain the
best people," he said.

"The scheme is mainly aimed at our younger members of staff to give
them more choice in terms of their lifestyle. It will help them get on the
property ladder. I haven’t come across anything like our scheme

Public-sector employers are suffering the most severe skills shortages,
however. The Government has recognised the problem and is launching a £250m
scheme in September to boost public sector recruitment.

It hopes to help 10,000 nurses, teachers and police to buy their own homes.
Staff in areas experiencing the worst recruitment problems will be able to
apply for subsidies of up to £25,000 to get on to the property ladder.

The scheme will include grants that can be used as deposits, interest-free
loans and shared ownership deals, under which an employee might own half the
property and pay rent to a local authority or housing association.

It is not just a London problem, either. Skills shortages due to increasing
house prices are hitting many towns in the South East.

Another report, Counting the Cost of Housing, shows that house prices were
30 per cent higher in the South East than the UK average last year. Author Alan
Holmans, who was commissioned by the Chartered Institute of Housing and the
National Housing Federation, claims that earnings have only increased by 4 per
cent above the UK average.

Surrey Police Force has already introduced a housing assistance scheme for
its 2,000 police officers and 1,000 civilian staff.

Initiated last year, the scheme lets staff participate in shared property
ownership, explained Martin West, head of training and development at Surrey

West said, "The shared ownership scheme means that staff can identify a
house on the open market and enter into the scheme with a housing association.
They can get a larger mortgage from the mortgage provider which we have
identified to assist us."

He admits that the force is limited in the amount of financial assistance it
can offer. "We are hidebound by statutory police regulations such as
national pay scales, which means that we can’t offer staff additional

He believes spiralling house prices affect retention rather than
recruitment. "So far, we have not had huge difficulties in recruits coming
forward," said West.

"The bigger problem is with staff joining us after two years’ probation
who want to start a family and get on to the property ladder. We then find they
want to transfer to other forces in the UK where property prices are

Escalating property prices in the Thames Valley has prompted MPs to lobby
the Government over introducing a wage supplement similar to London weighting
for public-sector workers.

Martin Salter, MP for Reading West, said, "It’s ridiculous that
public-sector workers can get London weighting in Walthamstow, but you can’t
get wage supplements in Reading, which is just as expensive.

"You get a qualified teacher on £22,000 a year who can’t afford to buy
a £70,000 property. These kind of workers need the ability to bridge the gap
and access the housing market."

Salter suggests that employers should offer interest-free loans to employees
as a possible solution. He has been meeting with local private-sector employers
to encourage them to act. "I advised them to buy up existing housing stock
now so that they can house key workers," he said.

The health sector is a particular area of concern. The Department of Health
this month set aside funds to set up three staff hotels in London, which will
provide cheap accommodation overnight or between shifts. The first one has been
established near Moorfields Eye Hospital.

John Adsett, secretary of the Association of Healthcare Human Resource Management,
believes that this scheme needs to be extended. He said, "The only problem
so far is that it has been concentrated in London. It needs to be cascaded out
to the South East and other cities in the UK experiencing staff

The IPPR is calling for employers to embrace the problem. Back-office
functions should be located away from high housing demand areas, and
hot-desking outposts could be created nearer to employees’ existing homes to
avoid long-distance travel. It believes only a broad approach such as this will
effectively combat rising skills shortages.

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