At the wicked heart of both household and national finances is housing. It is the great social divide, the chasm between the perilously insecure and the asset-rich. Housing burns away private renters’ ability to live on their pay, while every year the wealth of homeowners swells. Members of the lucky boomer generation who bought their houses in the 1970s have reaped huge unearned profits. Yet Conservative chancellors keep throwing petrol on the flames.
The new help-to-buy scheme and stamp duty holiday extension announced in Wednesday’s budget offer feelgood comforts to prospective Conservative homeowners and will warm the cockles of estate agents’ hearts. But both worsen the distortions in our economy. The chancellor, Rishi Sunak, appears to have learned nothing from how such schemes push up house prices. In fact, this is quite deliberate. Of course he knows the effects of George Osborne’s flagship help-to-buy scheme, but pushing up prices is what both homeowners and estate agents want. The concerns of private renters fall below the Tory polling radar.
In reality, it’s the children of homeowners and the already wealthy who will benefit from such schemes. According to research by Shelter, the average first-time buyer in England will pay £224,600 for a property, requiring £11,200 for a 5% deposit and an income of £59,300. Yet two-thirds of renters have no savings at all, let alone a deposit. That’s the gigantic gulf: most homeowners can’t imagine life without a penny in the bank.
There are now less than half the number of council houses in Britain than in 1980, when council tenants first gained the right to buy their homes under Margaret Thatcher’s signature policy. Of those sold under right to buy, 40% have changed hands from original owners to private landlords, who often charge tenants more than council rents next door. In Tory mythology, right to buy was a triumph, and successive Conservative governments have reprised the illusory homeowning, share-owning democracy that Thatcher first promised.
What their policies have created is a penurious legion of permanent private renters. Short of an economic revolution, large numbers of people will never own secure places to live. Thatcher’s break with a postwar Tory tradition is nowhere more brutal than in housing. As MP for Stockton-on-Tees, Harold Macmillan was shocked by slum housing and scarred by the social deprivation he saw after the first world war. Macmillan was named housing minister under Churchill’s government, and he built 300,000 houses a year – private and council – in a far less prosperous Britain than today.
Britain’s stock of social housing keeps declining. Between March 2019 and April 2020 just 6,566 new social-rent homes were built, and in recent years the UK has lost more social housing than it has built. The latest extension of the stamp duty holiday will cost a further £1.6bn on top of the £3.3bn cost of the original extension. Labour argues that it subsidises second home owners and landlords, with money that could have been used to build more social housing.
The deadly effects of poor-quality and overcrowded housing have been exposed during the pandemic. Nearly a quarter of private-rented properties now fall below the bare minimum “decent homes” standard, according to the English Homes Survey, which found that overcrowding is rife. The insecurity of renting forces families to move on at short notice, dragging children from schools and relatives. Even social housing isn’t secure so long as the bedroom tax remains in place. An estimated half a million renters are now behind on their rent, yet, while rents continue to rise, the chancellor froze the local housing allowance. Renters are getting older and older: a third of 35- to 44-year-olds in England are renting from a private landlord, compared with one in 10 in 1997. More will rent into old age, but they won’t benefit from the security or equity of home ownership.
But why should the government worry? Even though the average home costs about eight times the average salary, 63% of English households own their homes. So why bother about the rest?
Indeed, 63% is an ample number of contented voters. Let Labour whinge about the others: housing comes low in Ipsos Mori’s issues index. Pumping up prices gives nothing but pleasure to homeowners: UK house prices rose by an average 7.6% in 2020, even during that Covid-stricken year. In an economy addicted to ever-rising asset values, where homes also function as pensions and family banks, guaranteeing 95% mortgages gives the government every incentive to ensure prices keep on climbing upwards, to avoid paying for negative equity in a downturn.
Paradoxically, the faster house prices rise, the fewer people can afford to buy them – even with new Treasury subsidies – and the more people fall into private renting. Families who own their homes will do all they can to stop their children falling into a downward renting spiral. But Tory policy ensures that huge numbers of people will remain in the nightmare of private renting for ever.
The market will never build enough homes, and certainly not enough “affordable” homes, as scarcity drives up prices. Rather than treating housing as something for the market to rectify, the state should start building more social housing. It already owns land aplenty, and doing this would be a double win: it would both help to solve the housing crisis and deflate house prices by introducing more social rent properties on to the market. But you can’t expect anything like that from a pork-barrelling government that shows no interest in anyone but its own voters.
Polly Toynbee is a Hlcarpenter.com columnist