Richard Bassford looks at how renting became the new norm in the UK housing sector.
Planning minister Nick Boles is developing plans that would see communities receive financial support for local amenities, in exchange for supporting the building of new homes in their neighbourhoods. The shortage of new homes, it is argued, is pricing first-time buyers out of the market and creating a housing crisis.
Since his appointment in September, Boles has continued to push the need to build more homes up the political agenda, going as far to suggest a further three per cent of the UK should be built upon (taking us to a total of 12%).
However, this is only half the problem; the increased cost of mortgages is also having an chilling effect on the first time buyer market.
Whether or not you agree with the minister, it is clear the government could be doing more to help with the cost of housing. Introducing a cap on housing benefit, for example, has the issue upside down, targeting demand rather than the problem of supply.
Ed Miliband was on better ground when he called for action to improve the rights of tenants in the private rented sector and encourage long erm letting as is found in other parts of Europe. Miliband was putting forward policy ideas that reflected the new reality – privately renting is now the norm.
Research by Rightmove and property specialists Savills forecasts the private rented sector will grow significantly in the next three years, as will the number of those people ‘trapped’ in the rental market (those who wish to purchase a home but can’t afford to do so). Those staying in the rental market are also doing so for longer; 37% have been in their current property for five years or longer, while 22% expect to be there for another three years.
More affluent and older age groups will also be drawn into the private rented sector.
At present just under a fifth of all homes in the UK are within the private rented sector, which is now larger than the social housing sector. But measuring its size relative to the total market is misleading; it fails to capture the number of individuals who have privately rented during their lifetimes.
The easiest group to identify is students. As universities have increasingly chosen to divest themselves of their own stock of halls of residence in favour of private operators such as Unite (see NUS and Unipol report) and Opal, most university students will find themselves renting for the full duration of their courses. For most, that’s three years assuming they then move straight into home ownership. More likely, they join the ‘boomerang’ generation and return home for a number of years to save or continue to privately rent.
With approximately 50% of school leavers attending university it is likely the majority of young people will rent at some stage in their life. The NUS estimates a total of 1.7 million students per year. We must also consider those who have never entered higher education that will privately rent; we can suggest a significant majority of young people will experience the private rented sector at some point.
It therefore seems logical the sector should be properly regulated and adequate protections put in place. Miliband’s call for the striking-off of unscrupulous landlords and increased transparency around the fees that can be charged is a response to issues within the sector. Such action is likely to have a much greater and immediate impact on those privately renting than increasing the amount of housing stock in the UK.
There are perhaps simple reasons for the lack of focus on the private rented sector. Home ownership is often presented as aspirational, a goal most people are expected to aspire to. The term ‘council estates’ and ‘council housing’ are generally pejorative, helping to explain the aspiration to home ownership. The idea that a house is an investment first, a home and form of shelter second, may also have fed the ambivalence toward those renting.
Nick Boles argues it is an issue of ‘social justice’ and a ‘moral right’. This argument builds on Mrs Thatcher’s idea of a ‘home owning democracy’ and fits neatly into the calls for intergenerational fairness that has sometimes helped to define the government’s wider strategy. In its most simple form it is an argument for immediate fiscal tightening; we cut our cloth so that our children don’t pay off our debts.
For homeownership, it’s an argument against Nimby’s preventing the building of new housing, which it is hoped will in turn reduce house prices for young people.
But social justice could also be improved by properly regulating the private rented sector and constructing more social housing to reduce the 1.8 million waiting list, in addition to encouraging more private sector house building. They are not mutually exclusive. Only as rent rises have soared above inflation and the cost of living pushes more households into difficulty has it risen up the political agenda, although not high enough yet.
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• We need to keep up the pressure for affordable housing in 2013 – January 2nd, 2013
• The economic costs and real life consequences of the social housing crunch – December 3rd, 2012
• Just building more homes is unlikely to fix London’s problems – November 16th, 2012
• The inequality at the heart of the housing crisis – October 24th, 2012
• We need a new kind of tenure for a new kind of housing market – October 8th, 2011