The housing market is becoming a wealth fountain for the rich
The housing crisis is one of the greatest problems currently facing the UK. Too many people are stuck in poor quality rental accommodation, with no guarantee that they can stay in the same place six months from now, let alone having any hope of establishing a permanent home.
Young people who are renting are less comfortable financially and less happy than home owners. Renting is also stopping them from transitioning into family life. They feel like they can’t put down roots in an area as they may not be able to stay there for any length of time.
For these reasons, and many others, people seek the security of owning their own home. Surveys show that a majority of people who don’t own their home would like to do so and the main reason that they don’t is that they can’t afford it.
Our new analysis of data from the Wealth and Assets Survey shows that the gap between what people can afford, and the price of owning their own home, has become a nearly uncrossable chasm.
Looking at the level of savings held by renters shows them to be far below the level needed to pay a deposit on their first home. Around 95 per cent of renters don’t have enough savings to put down a 20 per cent deposit on the average first home.
It’s little wonder that the Resolution Foundation has found home ownership is now at its lowest figure for 30 years.
You might think that government schemes that allow people to get a mortgage with as little as a five per cent deposit might bridge the gap, and that in cheaper areas renters would be able to afford a deposit. But this isn’t the case.
Around 78 per cent of renters have less saved than would be needed to put down a five per cent deposit for the average house in Burnley, the area with the cheapest average house price in the country.
There is another side to this story of wealth and property. While many struggle with affordability, others are expanding massive empires of wealth based on property.
Twenty four of the wealthiest 100 people in Britain last year grew their wealth, in part, through owning property. They have a combined worth of over 78 billion pounds.
Last year these 24 people saw their wealth rise by almost seven billion pounds. That’s the equivalent of 33,144 average priced houses. They are clearly making huge amounts of money from the dysfunctional house market which is robbing others of the security of a permanent home.
Action needs to be taken now to stop the housing market from simply being a money fountain for the richest, and a poverty and insecurity trap for millions more.
Unfortunately, many supposed solutions have actually made the situation worse, rather than better. The Government’s Help to Buy schemes have succeeded in pushing up prices, which helps those already benefiting from the housing market but is nowhere near enough to make housing affordable for the vast majority of those who already own.
We need to enact serious reforms now, not counter-productive half measures. .
The first step would be to reform the way we tax property. At the moment Council Tax is the largest property based tax and it is ‘deliberately regressive in its design‘, hitting the poorest harder than the richest. As such, it fails to provide any pressure to keep house prices down and stop the richest from making billions from the property market.
At the other end of the spectrum Council Tax arrears are also becoming the single biggest debt problem the poorest face. Council Tax needs to be replaced with a more progressive tax that better reflects the value of a property so the poorest pay less and those with the most pay more.
The other area that needs drastic action is house building. For the last 30 years too little housing has been built to meet the growing needs of the population. The Government needs to ensure that more truly affordable houses are built.
They need to reform the planning system to increase the overall number of houses being built, but also to commit to building more housing for low income households.
These are big challenges but unless we want this housing inequality to permanently divide our country, action needs to be taken now.
Tim Stacey is Senior Policy and Research Officer at The Equality TrustSign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.