The current situation in which would-be home-buyers are shut out of the market is no good for anyone, not even for landlords, and has to change, says Ross Clark
PORTFOLIOS OF BUY-TO-LET properties have proved a rewarding investment strategy for some, but ultimately is it in the interests of property-owners to do anything which thwarts the ambitions of young people to buy their own home? I only ask having watched some very angry mobs laying waste to London suburbs in the August riots. True, many of the rioters were hardcore criminals, but still I wondered whether I was watching, in part, a disaffected generation expressing its frustration at being frozen out of the chance to acquire property.
In the Eighties Mrs Thatcher’s government actively promoted home-ownership as a cure for social ills. Give people the chance to buy a stake in the property, went the argument, and you turn them into fully paid-up members of the capitalist system.
Thatcher’s great ‘property-owning democracy’, however, is in sharp decline. Home-ownership in England peaked in 2002 when 70 per cent of households were owner-occupiers. Since then it has dropped to 65.1 per cent, which takes us back to the levels of the mid-Eighties. That is still higher than the 59.4 per cent of 1981, the year that council house sales began in earnest, but there is a big difference: back then there were a lot of young home-owners around. Now home-ownership is increasingly becoming the preserve of the middle and old-aged.
The growing constituency of young, non-propertied people has huge political implications. Why should people who cannot aspire to own property themselves vote for policies favourable to those who do already own property? They are more likely to vote for property taxes and for policies which at least give them power over their landlords, such as the protected tenancies which existed up until 1989. Under those, once a tenant was ensconced in a property they could be there for life if they wanted — and they could apply to a local rent officer to adjudicate if they thought their rent was too high.
Or perhaps frustrated property-owners might be more inclined to vote for a collectivist approach to housing, just as the country did in 1945, when the rate of owner-occupation stood at 32 per cent. That could mean a return to mass social housing, provided through housing associations or some other arm of the state.
One thing we are not going to become is a harmonious society of grateful tenants happily paying rent to private landlords. No such society has ever existed and it is unlikely to do so in future. The relationship between landlord and tenant has always been a fraught one, in which the tenant feels exploited and the landlord feels unappreciated. Popular culture is full of villainous landlords, not all of them fictitious.
THE BALANCE BETWEEN owner-occupiers and tenants in a society is critical. In England, owner-occupiers became a majority in about 1970. At that point the enthusiasm of government for large social housing projects quickly waned and tax policies tended to favour home-buyers: mortgage interest tax relief was introduced (by Labour) in 1969. There followed, in the Eighties, an end to the system of domestic rates.
Some people point to Germany as a country which lives happily with much lower levels of property-ownership than Britain. But then there is a huge difference in the rental market. Germany still has protected tenancies: it is very hard for landlords to remove tenants from their properties, and rents are fixed by law. As a result, even Germans with good jobs are happy to rent until well into their thirties.
In Britain, by contrast, it is not much less expensive to rent than it is to buy. Something has to give. Worst off are not those at the bottom, who qualify for housing benefit and social housing, but young people in good jobs forced to spend a high proportion of their take-home pay on poor-quality rented accommodation in which they will never build a personal stake.
One other symptom of the crisis was the extraordinary declaration by a judge in a recent case that squatters are ‘good for society’. She also demanded that councils make available lists of empty homes to an ‘estate agency’ for squatters — in effect tipping off squatters what homes are available for occupation. It does not bode well for property-owners that sympathy for squatters has reached the judiciary.
It is in the interests of property-owners that they support policies which maximise home-ownership rates. That means supporting house-building in order to keep homes affordable, and tax incentives aimed at helping people of moderate means to acquire homes and with them a stake in capitalism. The alternative is a future in which property-owners grow ever wealthier but increasingly have to barricade their doors against the unpropertied masses.
Ross Clark is a Spear’s columnist, and a property expert who writes for The Daily Telegraph and The Spectator