We know the housing crisis is a giant issue threatening to undermine the UK’s economic recovery and set back the futures of millions of people. We also know that as social housing has been squeezed and house prices have rocketed out of the reach of any ordinary earners, the private rented sector has become a much larger tenure which needs regulation if there is to be any chance of it providing suitable homes for renters in the long term.
But most of all, as we hear time and again, housing and the homeownership/private renting opposition is an intergenerational issue. The latest English Housing Survey shows that in the last ten years, private renting amongst 25–34 year olds has risen from 21% of those households to almost of half of them (48%). In the same period and within that demographic, owner-occupation has fallen from 59% to 36%.
Growing rental sector, rising rents
These figures show how quickly things can change, but indeed the causes of this housing crisis and what it means for new generations have roots in policy going back thirty years. A toxic combination of deregulation of the private rented sector from the late 1980s onwards, a lack of housebuilding to meet demand, and the buy-to-let bonanza unleashed in its wake almost seems like a deliberate recipe to hit this generation’s housing chances as heavily as possible.
As a lack of housebuilding meant that owner-occupiers saw their homes rise in value with them having to do nothing, it also started to price people out of the market. A deregulated private rented sector meant renting expanded as rents themselves grew, lowering the chances further for many of being able to save up for a deposit. Finally, wide-scale buy-to-let saw those already with property able to capitalise on that to gain access to more, becoming landlords to the next generation and profiting massively from them.
In 2015 these policies have converged to the point where most young people feel trapped in the private rented sector but are at the mercy of the high rents and high house prices keeping them there. So what is the solution?
The need for regulation
To most reasonable people it seems natural that the private rented sector should be more heavily regulated; security of tenure should be reintroduced and better standards of conditions should be applicable before any rent is taken. Equally, landlords and letting agents, like any other business, need to be properly licensed so that the bad players in the market are forced out and proper standards are maintained across the sector.
Yet if we agree that young people should be able to access homeownership like the generation before them, then affordability needs to be tackled head on. For Generation Rent, that means rent controls. We have looked at setting bands related to council tax bands, or they could be set at a living rent level.
However, we have suggested that if landlords really want to charge above that cap, they’re welcome to, on the proviso that all rent above that cap is subject to a surcharge – and the total sum received should recoup the previous year’s Housing Benefit Bill in the private rented sector. Such a levy would raise hugely important finance for the hundreds of thousands of homes needed in the coming years. No party has yet set out how it can fund the numbers this country needs.
State intervention in housebuilding
In addition though, and on a point of important principle, we also need to be looking to culturally and economically change the way the country views the housing “market”. To this end, we believe we need to remove the investment attitude that naturally accompanies rising house prices. While we continue to have a politics that says rising house prices is a good thing, we will continue to have speculators who view housing as a market to profit from, rather than as homes. Equally, if house prices continue to rise above average wages, then increasing numbers of people will never be able to own their own home.
To this end, Generation Rent has proposed a secondary housing market, which would provide homeownership based on the cost price of housebuilding, and fully capped rents for those who rent out in it. The full proposal would take an initial state investment of, say, £1 billion to build 10,000 houses, on cheap and state-owned land. Selling these at cost-price would immediately provide people with cheap homes at £100,000 in London, for example. The advantage this has over social house building is that by building and selling these properties to the general public, the money would be immediately recouped to be spent on more building (unlike in social provision, where the return comes over many years).
It is also an advance on plans that call for housebuilding of any kind and whatever the private sector will fund; such plans fail to account for who will actually buy these properties (those who already have fingers in the housing pie) and who they will be affordable for in the current market (not first-time buyers).
Each of these properties would be part of a “secondary” housing market which would not rise in value at the rate of the private market; the return would be capped at something closer to a savings rate, around 2% – whatever the minimum level of appreciation is that will give comfort to lenders. These properties would therefore be aimed at anyone who wanted to live in them, not speculate on them, and without any means test. They would be affordable to a much wider demographic than currently has access to the free market; anyone who chose to be a landlord in this market would be able to do so, but under strictly enforced, low rents.
Essentially we tackle the housing crisis by returning affordability to its heart, ensuring it’s an essential good and not a speculative asset. That combined with protection for renters would provide a platform for a stable, sustainable housing sector that was based on the country’s need, not developers’ profits.