The ugly truth behind our rigged housing system – politicians live in fear of landlords | Sonia Soda
SSo far this year, three of my friends have celebrated buying their first apartment in their early 40s, after a decade of saving for a down payment on the remnants of sky-high rent, while looking at the prices of real estate continue to rise.
Buying your first home used to be something you did in your twenties but, compared to those who are 10 or 20 years younger than us, we are the luckiest: buying a flat in London’s zone 3 is at roughly affordable for people who, although they may not have had parental assistance, have earned professional salaries in their thirties.
Britain’s home ownership craze has become a national cliché. But to denigrate it as an obsession implies that it is a quaint cultural anachronism. In fact, worrying about moving up the housing ladder is one of the most economically sound things you can do. In a country where we don’t build enough homes and where housing wealth is taxed at ridiculously low levels, the Homeownership Club offers a number of exclusive benefits.
The monthly cost of the average mortgage is cheaper than the rent of an equivalent house; private tenants spend 36% of their income on housing, compared to 12% for mortgage owners. Rising house prices mean that by the time you’ve paid off your mortgage, not only will you have a place to live for free, but you’ll have a dramatically inflated asset to pass on to your children or grandchildren. . And then there’s the all-important security of not having to move out at short notice because your landlord decides to raise the rent or kick you out.
Boris Johnson’s latest proposal to expand home ownership by asking housing associations to sell houses to their tenants at reduced prices and allowing people to earmark benefit payments against a mortgage is not just the latest in a long line of bad ideas that claim to extend those benefits to more people. Invariably, purchase assistance programs over the past 20 years have been about trying to help a few people who are about to be able to buy, while making it worse for everyone else by further inflating prices or reducing the stock. social homes. In fact, one minister’s estimate that the program could help just a few thousand people is probably optimistic: housing associations are independent bodies, which the government should bribe rather than force to sell their stock, and people with modest levels of savings are disqualified from benefits, raising the question of how many could afford a deposit.
The sad truth at the heart of the housing crisis is that politicians have no incentive to pursue policies that would truly make housing more affordable. The rise in real estate prices is redistributed directly from those who rent to those who own. Politically, landlords have much more power than tenants, even though the number of tenants is increasing. Both sides fear the upheaval that falling house prices would generate in some far more than the pleasure it would engender in others. Economically, the UK growth model relies on consumer spending fueled by rising house prices: we simply don’t have the healthier form of investment and export-led growth that politicians have promised but have not kept.
The result is that prices have been left to rise out of control over the past few decades, celebrated by a generation that took advantage of the windfall and politicians who hailed the growth the rise has fueled, even as they claim sympathize with the fact that far fewer millennials than baby boomers will be homeowners by age 40. The private rental sector has grown to take over: one in five households live in private rental accommodation, compared to just one in 10 households 20 years ago. Renters in Britain are getting appalling value, paying some of the highest amounts in Europe for insecure rentals, with a quarter of privately rented accommodation substandard.
Young people without parental help to fall back on have been royally fucked by the dysfunctional housing market. More than a quarter of 21-34 year olds live with their parents. Rents are of course highest in areas with the best jobs. If not being able to pay a rental deposit is bad for the 20 year old who can find a good job while continuing to live at home, it is an appalling blockage on social mobility for those he keeps in areas where he does not there simply isn’t the job they aspire to.
But as the generation that can never hope to own a home ages, other dysfunctions will become more prominent. We will see a growing number of middle-income parents with children facing the same private rental trap that those on low incomes have long faced: imagine having to move your child to another school because your rental has ended and you can’t find any other place. affordable to rent, then it will happen again in a few years. What will happen to those who have rented all their working lives when they retire and do not have the security of a generous pension or a mortgage paid off?
The solutions are largely obvious but politically difficult. The government must invest in a massive program of building non-profit rental housing: the only period in living memory when we built enough in this country was 1950-1980, when the government invested in the construction of approximately 100,000 housing units per year; leaving it to the private sector has never worked.
We need sweeping tenancy reforms, to regulate rents, guarantee long-term tenancies and ensure that landlords get only a modest profit, and residential property for investment purposes should be taxed more punitive. These reforms would stabilize prices and reduce the windfall benefits of home ownership that come at the expense of private tenants.
If this all sounds like a pipe dream, it may not be long before demographic shifts begin to tip the balance of power more towards the tenants, as the club’s outcast group continues to grow. However, this leaves the big question unanswered: if not the asset bubble that is our dysfunctional property market, where will UK growth come from?