Is renting the future in Britain?

“At the beginning of the 1970s almost a third of homes across Great Britain were affordable social housing. This provided a decent alternative to home ownership.”

“If they wanted to drive down rents, government could fund the construction of public housing. More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks.”

“Within Europe, the most economically challenged nations have the highest rates of home ownership, whereas the lowest rates are generally seen in the stronger economies.”

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The ‘housing crisis’ is a combination of many things:

The debate over housing – Vision Group for Sidmouth

Including inward migration putting up both house prices and rents:

Moving to the country: how WFH is putting up the rent – Vision Group for Sidmouth

And now with ‘the pandemic over’, the rules on eviction for non-payment have changed:

How are eviction rules for renters and landlords changing? – BBC News

Which we saw unfolding in the car park of the EDDC’s HQ in Honiton last week:

Homeless Devon family living in caravan at council car park – Devon Live

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To what extent, though, are these issues about deeper social and political attitudes to home ownership and renting?

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Firstly, a look at the statistics.

As pointed out by Rory Sutherland in the Spectator last year, in the last three decades, there has been an extraordinary change:

In 1991, 67 per cent of 25- to 34-year-olds owned their own home. In 2016, that figure had fallen to 38 per cent. The average house price in the UK is eight times the average wage, this ratio having doubled since 1998. Half of first-time buyers in Britain are now dependent on the Bank of Mum and Dad, rising to two-thirds in London and the south-east.

Over the past 20 years, the proportion of people living in the private rented sector has doubled. There are one million more 18- to 34-year-olds living with their parents than there were in 2002.

Between the mid-1950s and the mid-1990s (expressed in 2016 prices) the average price of residential land rose from £150,000 per hectare to £1.3 million. By 2007 it was £5 million. (In the 1930s, before planning permission, land cost represented only 2 per cent of the cost of an average home.)

Something is badly wrong with the housing market – so why aren’t we talking about it? | The Spectator

But the Guardian goes back to the 1970s, when things were very different:

At the beginning of the 1970s almost a third of homes across Great Britain were affordable social housing provided by local authorities, according to government data. This provided a decent alternative to home ownership. For those who could buy, the average price in the UK was £4,057.

UK housing crisis: how did owning a home become unaffordable? | Business | The Guardian

Five decades later, it’s become that bad that many young people are even yearning for a housing crash:

‘I’m praying the market might crash’: Young people in the UK’s rural hotspots feel priced out – BBC Three

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But why is there this high demand to own a home in the UK?

As Prof Christine Whitehead of the LSE says, “People care a lot about property rights. A lot:”

Berlin considers radical bid to seize flats from landlords | The New European

On the Continent, attitudes vary widely.

In post-communist countries, property rights are big, especially in housing:

Europe: home ownership by country | Statista

And that even includes the current communist countries of Cuba and Vietnam:

List of countries by home ownership rate – Wikipedia

So, the strength of ‘the housing market’ is no indication of the ‘strength of the economy’:

… at least within Europe, the most economically challenged nations – generally former Communist countries – have the highest rates of home ownership, whereas the lowest rates are generally seen in the stronger economies.

Are high home-ownership countries wealthier? – The Urbanist

It seems, then, that “many Germans can’t be bothered to buy a house”:

Most Germans don’t buy their homes, they rent. Here’s why — Quartz

And this is even more so in their even wealthier neighbour:

Because a large number of rental apartments are empty — in the last few years, their number has doubled, the study says — prospective tenants have a good selection to choose from and at reasonable prices.

Currently, 42.5 percent of Swiss residents own a home. One possible explanation for low ownership rate may be that Swiss laws are more favourable for tenants, as they pay significantly less income tax than homeowners.

Most residents in Switzerland still can’t afford to own a home, study reveals – The Local

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Perhaps a reason why ‘everyone wants to own a house’ in the UK is due to the class system.

There is a real stigma when it comes to renting:

The social housing stigma: how to fight the stereotyping of social tenants | Kate Davies, Notting Hill Housing Trust | The Guardian

As Business Insider reported some four years ago, this class divide has been exacerbated since the 1990s:

Britain has changed since 1998.

Back then, it only took workers about three years to save enough money for a down-payment on a house. Now it takes 20 years, on average, according to the Resolution Foundation, which published a landmark report on income, housing, and inequality in Britain last week.

In a series of easy-to-understand charts, RF data show that income growth for workers is stagnating while housing costs are rising. 

That double-whammy — housing costs and stagnant wages — are now the major source of inequality in Britain.

It is tough to understate how radically this has changed the country. In 1998, most people had a shot at owning their own home. Now a full half of the population — younger people, mostly — have almost no chance of buying property.

That has created two classes in Britain: property owners and people who are getting poorer. And, of course, the poor are largely paying rent to the rich.

Here is how it happened…

There Are Two Distinct Classes in Britain: People Who Own Property and People Who Are Getting Poorer

And today, if you’re middle-class with access to the bank of mum and dad, then you have more chance of getting onto the ‘housing ladder’:

Generation rent is a myth – housing prospects for millennials are determined by class

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There is also a political dimension.

John Rawls, the American moral and political philosopher in the liberal tradition, first popularised the idea of the “property-owning democracy”:

Understanding Society: A property-owning democracy

Property-owning democracy – Wikipedia

Although it was a 1930s British Conservative who originally gave us the notion:

Who invented the British dream of a ‘property-owning democracy’? : Democratic Audit

The politics around home ownership is long and fraught, so, here’s a taster from the iconoclastic Economist from last year:

As our special report this week explains, much of the blame lies with warped housing policies that date back to the second world war and which are intertwined with an infatuation with home ownership. 

Home ownership is the West’s biggest economic-policy mistake | The Economist

But perhaps it’s meant to be this way, as is the the conclusion from the New York Review of Books:

The fear of another financial crisis combined with the fear of angry middle-class, middle-aged voters gives politicians every reason to keep house prices from falling. During the Golden Age, strong unions and strictly regulated lending meant that wages went up faster than asset prices. No more. Today, the average home-owning Londoner earns more every year from rising house prices than he does from work. Easy credit, low interest rates, low down payments all stimulate ever-higher real estate values.

It isn’t as if government were impotent. Of course, demand for New York apartments has risen while demand for workers has fallen, but how we distribute society’s ever-growing wealth is at least in part a political decision. If they wanted to drive down rents, government could fund the construction of public housing, as they did during the Golden Age. More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks. Thus it is not likely to happen. Property prices, at an all time high, are not likely to fall, and if they do, expect the government to put a floor under them.

During the Golden Age, affluence flowed toward labor. Today it flows toward asset owners. I think my retirement is safe. I’m not so sure about my children’s work prospects.

Why Your Rent Is So High and Your Pay Is So Low

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Finally, why not embrace renting?

Here’s a good list which shows why:

To Rent or Not to Rent? 5 Common Renting Myths: Busted!

And as this piece suggests from a couple of years ago, the rent you pay actually has a lot of value, even if that value isn’t the deeds to the property:

Ultimately, the national dream of home ownership at all costs is an outdated dream. It was conjured up decades ago when there wasn’t such a large gulf between earnings and the average price of a home; and saving for a deposit could take one year rather than ten.

So today, we should embrace renting for all its benefits. Gain independence, avoid the risk of homeownership, live flexibly, try different things and experience a variety of lifestyles.

Why Renting is NOT Dead Money | Essential Living

In fact, it could be a really positive choice:

For myself and some of my friends, owning a house seems more like a burden than an achievement. Since the post-WWII flurry of house building and buying, it’s become so ingrained in British consciousness that renting carries a stigma. But in 1918, the vast majority – 77 per cent – of households rented.

One unpleasant former acquaintance referred sneeringly to renters as “down on their luck”. But while it shouldn’t be the status quo that buying a house is only available to those with parents who can sub them a five-figure sum, or who happen to live and work in a particularly cheap area, that doesn’t mean all renters are unhappy with our situation…

We need more of this thinking in the UK, and we need policymakers to focus on making the rental industry viable for long-term use by means of Berlin-style rent caps, restrictions on multiple buy-to-lets, a crackdown on unaffordable luxury developments, and less loopholes for unscrupulous landlords.The current property market isn’t working, and the emphasis on profit and status needs removing. Renting isn’t for those who are down on their luck; with improvement, it could be the future.

Millennials like me don’t actually want to own our homes – with proper changes, renting could be the future | The Independent

   
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