We need less corporate socialism for private sector landlords

The UK housing debate is increasingly focused on who the housing system serves: the nation’s needs or vested interests that seek to preserve tenure-based wealth inequalities.

Landlords

The UK housing debate is increasingly focused on who the housing system serves: the nation’s needs or vested interests that seek to preserve tenure-based wealth inequalities.

Home ownership lobbies, financial institutions and private landlord associations campaign to retain home ownership as the central tenure in the UK coupled to an expanded private rented sector; both increasingly feather-bedded by the tax-payer through the Help-to-Buy scheme and the housing benefit budget.

Promotion of home ownership beyond sustainable levels for more than thirty years has embedded tenure inequalities. Home ownership’s preferential status since 1979 has fuelled the widening gulf in asset ownership, with owners possessing an average of £100,000 more realisable wealth than tenants, most of whom have no savings at all.

Even though home ownership has fallen as a proportion of all homes from 70 per cent at its high point before the Credit Crunch to 65 per cent today, this has not resulted in improved affordability. The average cost of a home is still 6.7 times the average wage compared to 6.9 times in 2007.

The key reason for this persistent affordability problem has been stagnant incomes and low levels of house building and house sales. This latter trend is shown in the first chart which shows that house prices have remained reasonably buoyant due to lack of supply.

This reversal in the percentage of homes occupied by owners is partly explained by the buy-to-let phenomenon which has boosting the private rented sector to almost 18 per cent of the total housing stock. After almost a century of decline, the last two decades have seen a massive rise in the number of people renting from private landlords.

The number of households living in the private rented sector has increased by almost four million. According to new research by the Strategic Society Centre, the number of private landlords as a proportion of the population has also more than doubled.

The Strategic Society Centre found that a range of inequalities are entrenched in the private rented sector.

The average age of private landlords is 48, but average age of renters is 32. Over two in five of private landlords have total financial assets worth £30,000 or more, with a quarter having financial assets worth £70,000 or more. Mean financial wealth of private landlords is £75,103. The equivalent financial wealth for private renters is just £9,506.

Average house price graph 1

Average house price graph 2

While home owners and private landlords are receiving financial and societal support, social housing has been denuded as a tenure and tenants vilified as a group. Chart two illustrates how the social house building has been reduced to a trickle since the 1970s.

What is needed is a more economically rational housing strategy that subsidises productive social house building to tackle ballooning waiting lists and homelessness – while radically reducing subsidies going into the pockets of private financial institutions and private landlords at the expense of social tenants’ employment prospects.

A new Compass paper recommends:

  • Linking future funding for social housing to reducing tenure-based inequality and increasing asset ownership by creating a national Tenants Mutual to oversee tenants’ asset accounts. This would help restore the self-esteem of tenants and the reputation of social housing, while tackling financial exclusion and creating an asset-owning democracy.
  • Extending mutualism within, as well as outside, social housing to provide tenants with more of a say in how their homes and communities are managed. Housing associations, appealing to their historic social purpose and learning from sectoral examples, could be the vehicles to spread the influence mutualism to come in line with EU norms.

The result over time will be greater economic activity, growth and employment and less corporate socialism to the finance and private landlord sectors.

4 Responses to “We need less corporate socialism for private sector landlords”

  1. OldLb

    We need less socialism for the public sector too.

    Mind you, 100K a year plus earner, Bob Crowe would have to get out of social housing and live in the real world, rather than being a parasite on others.

  2. OldLb

    Linking future funding for social housing to reducing tenure-based inequality and increasing asset ownership by creating a national Tenants Mutual to oversee tenants’ asset accounts.

    ==========

    Complete twaddle of jargon.

    Now what about the impact of your taxing people, and spending all their pension contributions, on a new Tenants Quango.

  3. OldLb

    Notice too what’s left out.

    Supply and demand.

    Increase demand by allowing in 5 million people, most in low skilled jobs and you screw the poor.

    Can’t mention the real cause of the problem can you, because you engineered it.

  4. Evan Price

    I have to say that I have spent the last 13 years litigating property disputes and I have just read the pamphlet produced by Compass and I have absolutely no idea what is in fact being proposed.

    What does “Linking future funding for social housing to reducing tenure-based inequality” actually mean?

    I understand that they want to establish some sort of interest for tenants in a ‘Tenants Mutual’ but what is actually proposed? Can someone please explain “increasing asset ownership by creating a national Tenants Mutual to oversee tenants’ asset accounts? How will this work? What is actually being proposed?

    So far as I can tell, this is simply jargon and polemic dressed up in fancy words. It is utterly and depressingly meaningless.

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