Home-ownership: time to end this doomed love affair?

There are not enough homes in the right place at the right price for the people who need them – so how are we going to house the next generation?

In the last 40 years there have been four major housing bubbles, and four predictable, but hugely damaging, collapses. A country that is often described as having a love affair with home-ownership has found to its considerable cost that the love affair can go badly wrong. The outcome is disastrous for people whose homes have drastically lost value or who can't find a suitable place to live – and it can be catastrophic for society as a whole. All parts of the housing system are affected by the extreme volatility of the market, particularly households that are struggling because of their income or changes in circumstances.

The JRF Housing Market Taskforce's final report presents a number of recommendations for how we can achieve long-term stability in the housing market, especially for these households.

The evidence of need is compelling and powerful. What is less frequently demonstrated is the extent to which this shortage of housing drives a cycle of rapid house price rises, dramatic falls, and hence insecurity for all those involved. Developers and builders, providers and managers, policy-makers and the general public all have to deal with a market that is functioning badly, and for which we are all paying a big price.

So what do we know about how the market operates now?

• Home-ownership is becoming an unlikely dream for young people – the average age of a first-time buyer who has no assistance from parents is 31 (CML, 2009).
• The housing market is extremely local, and the vast differences in price across the country prevent mobility.
• Prices increased 250% between 1994 and 2008, making it even harder for people to pay a deposit. We know that even before the collapse of the markets in 2008 almost half of first-time buyers received assistance with their deposits (CML, 2006) making home-ownership effectively a hereditary tenure.
• The safety net is inadequate and uncertain. While successive governments have intervened to protect at the time of crisis, this is not targeted, unreliable, and means that there is little incentive to develop, let alone use, good insurance.
• The only way in which private sector landlords can run their business is by constantly buying and selling, hence depriving their tenants of the one thing that most tenants aspire to, namely security.

So if the current market is not working for anyone, what should be done?

First and foremost we need more housing of the right type in the right place. We will not be able to run a housing market fit for the 21st century on the basis of perennial shortage, and mismatched supply. But as well as building more housing, the rapid price fluctuations in the market also need attention.

Local and national taxation – if deployed carefully – could keep house prices more stable, providing real stability and a safe place for people not just to invest, but to live their lives.

The failure to manage the housing market also costs the taxpayer dear. The tax-privileged position of home-ownership means it is estimated that £10.6bn tax revenue was foregone in 2009 (UK housing review) and the failure to revalue our council tax bands means that an estimated 3.7 million households are worse off (Lyons Inquiry).

Our current system is expensive, unsustainable and unsafe for many people. It is high time we looked again at our love affair with home-ownership and decided that we might be better off entering into a different sort of contract.