Renting could be a firm foundation for people to get out of poverty but dealing with its issues is difficult while it is seen as the second option and the focus remains on home ownership, says Julia Unwin.
The campaigners behind Homes for Britain should take great pride in the recent flurry of press articles describing the parties’ housing offers. These and the latest polling data suggest that housing will be one of the main themes of the election. I am struck by the overwhelming emphasis on home ownership. Of course the reasoning is easily understandable.
‘Asset-based’ approaches to welfare, made necessary by people living longer, depend on citizens in their prime amassing resources that they can draw down later. Compared with other forms of savings, home ownership remains a relatively efficient way for many individuals to achieve this aim, especially in the parts of the country where demand is high and supply is constrained.
Our trust and faith in the power of home ownership seems relatively unscarred by recent volatility. The reaction to reports such as the UK Housing Review, which show that levels of home ownership have dropped for young people, is generally one of frustration and alarm. Few question whether the trends suggest a deeper change in attitudes.
The problem is squarely put down to affordability. People want to own their own homes and governments of all stripes see their role primarily in terms of helping them on that journey.
Economists have long been puzzled by this lack of neutrality. My main interest in this debate is not about the macro-economic advantages or disadvantages of encouraging ownership, nor even about its social benefits. More pressing to my mind is how this policy preference plays out to the cost of those on low incomes, especially in an environment of much hand-wringing but not enough building to help keep a lid on prices. There are three main consequences.
First, ownership on its own most definitely does not provide a firewall against poverty. Any crisis – a drop in income, poor health, divorce – can create major problems for many low-income buyers long after they have bought a home. Research for JRF has shown that for over 20 years home-owners have made up more than half of people living in (before housing costs) poverty.
Right to Buy
And now first-time buyer house prices in the UK are running at five times average earnings. Unless supply is greatly increased, this problem is likely to get much, much worse for succeeding generations of poorer buyers. Specific measures aimed at low-income earners also have mixed results. JRF’s review of the original Right to Buy scheme showed that it actually resulted in the best properties being purchased by the most affluent tenants.
And, of course, as a large proportion of our socially-rented stock has been sold without the necessary public investment to replace it, more households in poverty have had to move into private rented accommodation.
There too the focus on ownership has encouraged a policy vacuum to emerge. Private renters in the bottom fifth of the income distribution spend the highest proportion of their income on housing costs compared with any other group.
Private renters are also more likely to live in poor-quality housing, with one in three being described as ‘non-decent’ and one in ten being damp. Even more worrying, analysis for JRF published last year predicts that private rented sector (PRS) rents will rise by 90 per cent in real terms by 2040, more than twice as fast as incomes (40 per cent).
Better regulation of the PRS would ensure that it provides a safe, stable tenure for the wider range of household types that it now accommodates. But so long as private renting is seen merely as a precursor to ownership it will be difficult to formulate policies that arrest the most negative trends associated with the sector. Private renting for a short time in someone’s life is one thing. The private rented sector for the whole of life requires a very different framework.
Finally, the emphasis on ownership inexorably squeezes the scope for debate about the vital role of publicly subsidised rental housing, which, as Professor Rebecca Tunstall noted in a recent review for JRF ‘is highly targeted on people with low incomes and has been shown to be the most “pro-poor” and redistributive major aspect of the entire welfare state’.
In recent years the sector has also quietly delivered a revolution in quality, with social rented homes now more likely to reach the decent homes standard than private rented or owner-occupied homes. Indeed we have broken the historic link between poverty and squalor – something of which we should all be proud, and something which is now in grave peril. Low rents also provide a strong work incentive and recent analysis for JRF confirms that we can only contain poverty at current rates if the proportion of social rented housing does not decline.
Affordability, quality and accessibility are the issues that should be at the forefront of housing policy debates over the next few weeks. But these will only get attention if we in the sector raise them. Pandering to the majoritarian instincts around ownership may help galvanise some politicians around the important topic of housing supply but it will do very little for many people experiencing poverty. Instead it perpetuates the notion that renting is second best – a point of transition, rather than the secure foundation on which to build a life with some chance of getting out of poverty.