Britain has too few homes for sale
13th September 2011
Our shortage of housing is good for rich foreigners and buy-to-let landlords, but bad for young adults – and even their parents.
More and more people are being forced into renting their homes
By Ed Howker
They are a national sport, an unhealthy obsession, guaranteed to lift newspaper sales and warm up the most icy dinner-party conversation: I refer, of course, to Britain’s house prices. Napoleon’s nation of shopkeepers has indeed become a nation of homeowners, every one of us determined to acquire a slice of Eden to call our own. But there’s trouble in paradise.
New figures compiled by Oxford Economic Forecasting and the National Housing Federation prove the point: home ownership in the UK is expected to fall to 64 per cent in 2021 from a peak of 73 per cent two decades earlier. By 2012, London, for the first time in decades, will have fewer owner-occupiers than tenants. The generation promised “homes for all” may well beget an era of high-priced rents and housing instability.
Over decades home ownership has been knitted tight into the fabric of every political vision from Mrs Thatcher’s “property-owning democracy” to New Labour’s “stakeholder society”. One after another, prime ministers have promised to extend home-owning to an ever-wider circle of voters. David Cameron is no different. A little less than a year after he became leader of the Conservative Party, Mr Cameron took Kirstie Allsopp, the television property pundit, on a day trip to Chiswick to make his point. There, he explained that: “Home ownership for our young people threatens to become the preserve of the lucky few. I passionately believe that everyone should have the right to buy their own home.”
A little more than a year into his premiership, we now know this is bunkum. Mr Cameron faces the prospect that there will be even fewer of those “lucky few” at the end of his first term than when he began. Underlying these headlines are some truly disturbing trends. House-building rates stand at their lowest level since the 1920s. There are 10 per cent fewer first-time buyers this year than last. Vast swathes of the population can look forward to a life not in negative equity (they can’t get on the ladder) and not in council housing (waiting lists across the country are decades long) but in expensive, short-term rented accommodation.
Perhaps those who own property don’t object – indeed, the constriction of supply can only inflate the value of their homes – but as a national policy this is a catastrophe. Our housing market will continue its progression upwards, while failing to satisfy its most basic purpose: to provide secure, stable accommodation to the people of Britain.
And lest you think that these grim figures are merely a symptom of our more generalised economic malady, or some temporary glitch that will quickly be corrected once Mr Osborne’s Plan A kicks in, consider this: at the peak of Britain’s 21st-century boom, we were building only half the number of homes erected in the 1960s. Our housing shortage has been developing for years.
But there is a second problem which is almost greater: huge numbers of properties sold are not purchased to live in, but to speculate on.
Kicked in the teeth by Gordon Brown’s pension taxes, employers’ pension holidays and weedy investment performance, the older generations have turned to buy-to-let property purchasing to make up for the shortfall. In the past decade, 1.8 million buy-to-let properties have been created – purchased in the main by the babyboom generation. Spurred on by little meaningful regulation, standard contracts that allow landlords to jettison tenants at short notice and rising prices, the numbers will swell further.
Never mind the sale of gold at all-time low prices, this was surely New Labour’s worst blunder: to have presided over a capitalist economy in which those with money were incentivised to invest in dead housing stock rather than productive businesses. In this way, our housing obsession is harming economic recovery. But, for all his talk about growth, Mr Osborne has done nothing to reverse the trend.
Things are worst in London. Here, domestic buy-to-letters have been joined by Russian and Far-Eastern speculators who buy new homes for cash. For these people, property purchase in Britain provides tax efficiency, a safe haven and in some cases, the perfect mechanism for money laundering. In the last five years foreign speculators have bought housing worth £16.5 billion. At a time of unprecedented shortage, Britain is exporting the right to own its property. And, once again, the Coalition looks on and lifts not a finger. The cumulative effect falls hardest on young adults who now pay the mortgages of speculators rather than buying their own homes. Far from being cut out of the housing market, the hard work of the young underpins it – but as tenants they do not receive the assets.
The effects are more widespread, though. Last year, the housing charity Shelter estimated that 2.8 million people are delaying having children because they can’t afford to buy a house. Unsurprisingly, the prospect of being evicted from rented accommodation fills young adults who would wish to be good parents with dread. A further quarter of a million are delaying nuptials for the same reason – think about that when the Government next proclaims that it believes in marriage.
Millions more are trapped on council waiting lists for social housing that may never come their way. Many councils suffer such intense shortages that they now pay premium rents to private landlords where once they would have owned sufficient property themselves. That is why immigrant families are found to be living in vast central London houses paid for by taxpayers.
The Government knows it must act. So far, the housing minister Grant Shapps has reiterated a commitment to deregulating the planning system to make it easier for private developers to build; he has underlined the need to make public land available for development, too. (Gordon Brown promised just the same.) But it’s not that simple.
For one thing, it will take a decade of concerted work by private developers to replenish our housing stock. For another, there is nothing to stop speculators leveraging the housing they already own to buy up more. So the best result of what has been proposed will be that Britain’s younger generation will spend another decade locked out of the property market. At worst, whatever properties are built will be swallowed up before they can be sold to owner-occupiers.
So what else can be done? At the top end of the market, the Government could levy specific taxes on the foreign speculators. Further down the chain, we should demand more of our buy-to-let landlords. Across the sector, capital gains tax avoidance is rife – landlords, just like those expenses-hungry MPs, often redesignate their rental properties as primary residences whenever they choose to sell them. The loopholes should be tightened up, if only to encourage investment in the productive parts of the economy.
And if a generation can no longer aspire to become part of the “property-owning democracy”, then the Government must bite the bullet and create more secure tenancy agreements. We can’t expect to create a continental model of rented housing if young families can be evicted at two months’ notice, and if rental prices are not being set by market demand, but by the mortgage rates of over-stretched amateur landlords.
Here is a final reason for the Government to be bolder: many of those who have benefited most from the house-price boom are also losing out. Today, nearly one third of adults aged under 34 live with their parents. The older generation, who made small fortunes as their properties rose, look on with sadness as their children can’t begin to live independent lives. So they, in turn, have begun to drain their retirement funds, sell their houses, and do whatever possible to give their children a decent start in life. But these noble acts simply mean that only those who can rely on rich parents can own a home.
What a tragedy this is. We have become a society convinced, just like David Cameron, that property ownership is a “right” at the moment when that right is beginning to be withdrawn.
Ed Howker is associate editor of 'The Spectator’ and co-author of 'Jilted Generation: How Britain Has Bankrupted its Youth’
Source: Telegraph 13/9/11