A generation locked out

Those who cannot afford to buy a property have been forced into the under-regulated private rental market.

Illustration by Maria Bloom / Ikon Images

The failure by successive governments to build enough homes means that Britain now has a shortfall of 4.3 million properties compared to the average European country. As a consequence, the ideal shared by Margaret Thatcher and the liberal philosopher John Rawls of a “property-owning democracy” has withered. After peaking at 70.9 per cent in 2003, the share of owner occupiers in England has fallen to 64 per cent, a lower rate than in 1987. The average age of a first-time buyer is 33 and far higher for those without family assistance.

Those who cannot afford to buy a property have been forced into the under-regulated private rental market, where surging housing costs make it even harder for younger people to save for a typical deposit (around £62,000). Outside of London, the average rent now stands at a record high of £1,190, while inside the capital it has reached £2,500.

The creation of a rentier economy – 40 per cent of former council properties are owned by private landlords – means millions are reliant on state support to remain in their homes. Annual government spending on housing benefit has reached £23.4bn, more than twice the amount spent on housing development and more than the total running costs of departments such as the Home Office and the Department for Transport.

For the Conservatives, the fall in home ownership is a long-term political crisis as well as an economic one. The party’s electoral dominance rests on the propertied. At the 2019 general election, 57 per cent of owner-occupiers and 43 per cent of mortgage-holders voted Conservative (against just 22 per cent and 33 per cent for Labour). Only three Tory constituencies – Chelsea and Fulham, Kensington, and Cities of London and Westminster – have home ownership rates below 50 per cent.

Mindful of this, Rishi Sunak is considering resurrecting the Help to Buy scheme, launched by George Osborne in 2013, which was closed to new entrants last year. This would be a mistake. Far from making housing more affordable, the £29bn policy merely exacerbated the crisis. As a House of Lords report published last year concluded, Help to Buy “inflates prices by more than its subsidy value in areas where it is needed the most… This funding would be better spent on increasing housing supply.”

[See also: What is Labour’s housing policy?]

The true intention behind the scheme was disclosed by Mr Osborne at a cabinet meeting in 2013 when he declared: “Hopefully we will get a little housing boom and everyone will be happy as property values go up.”

The ensuing housing boom helped create a feel-good mood – outright owners now outnumber mortgagors – but it did nothing to improve long-term affordability.

That Mr Sunak is now seeking refuge in Help to Buy is an admission of failure. His unwillingness to reform the UK’s anachronistic planning laws and to invest in housebuilding means he sees no alternative. As a government source told the Times: “If we can’t do anything on housing supply we are going to have to do something on affordability.” Yet action on housing supply is precisely what the UK needs.

Keir Starmer, who vows to make Labour “the party of home ownership”, has pledged to meet the government’s abandoned target of building 300,000 new homes a year and to reform planning laws in order to do so. Labour has also promised to establish a “renters’ charter”, which would include a ban on no-fault evictions and the creation of a national register of landlords.

But, as Andrew Marr writes on page 16, Mr Starmer must offer a more inspiring, imaginative vision alongside his rather Gradgrindian pledges. Labour should promise not only more homes but the revitalisation of the public realm and a coherent national plan.

Net migration, for instance, reached a record 504,000 people between June 2021 and June 2022, and is expected to be even higher for 2022 as a whole. Yet the 300,000-a-year target for housebuilding assumed net migration of 170,000 a year. As well as answering the question of how many homes the UK needs, Labour must answer the question of how many people it needs.

Britain’s dysfunctional housing system is symptomatic of wider state failure. Rather than more grandiose targets, the UK needs a patient, strategic government that invests for the long term.