Making a house a home: Why policy must focus on the ownership and distribution of housing

• We need to set policy which works to create a smaller, higher quality, and better managed private rented sector, which meets the needs of people seeking flexibility, while rejecting the notion that private renting can be a home for such a large portion of the population.
• We must develop policies which proactively shape the market and offer ways for households to move from private renting to homeownership or a sub-market housing option.
• We should look to support households for whom homeownership is not feasible or desirable to sustainably build wealth.
• We must ensure that the transition to a smaller private rented sector is managed equitably, with a particular regard for renters on lower incomes.

We'd love to hear your thoughts and feedback on this, please contact: darren.baxter@jrf.org.uk

The housing market is not working

A significant number of households face unaffordable, insecure homes and are locked out of opportunities to sustainably build wealth.

This has been driven by a seismic shift in the distribution of homes in recent decades, marked by the rapid growth of the private rented sector — which grew by 2.7 million homes between 2000 and 2020, the equivalent to three quarters of total net additions in this period. At the same time, we have seen a decline in the proportion of households in social housing and owner occupation.

This situation flows from long running trends, some by policy design and others by political inaction, yet policy does not currently frame the housing issue in a way which recognises these trends.

Instead, the housing debate has too often been narrowly focussed on the need for a sustained increase in house building, designed to correct for a historic undersupply of new homes, above all else.

Why supply alone is not enough

This framing risks overlooking the role housing plays not only as a place to live, but as a financial asset and investment vehicle. Without addressing who homes are for, who controls them, and how value is extracted, supply-led solutions risk reinforcing existing inequalities. A focus on total numbers, without sufficient attention to tenure, affordability, and ownership models, may continue to privilege those with access to capital while leaving others locked out of secure housing.

We do need new supply. A core driver of the issues in the housing system is the rising cost of housing relative to earnings and new supply can have an impact in reducing prices, particularly in areas of high demand. And it is essential that we focus on the nature of this supply, delivering a far larger amount of social and affordable housing.

However, a focus on supply alone is partial — not least as any reduction in prices from maintaining high rates of supply will take a generation to achieve, while also being unlikely to offset the total scale of the increases in prices we have seen in the last three decades on its own.

Alongside this, we must place a much greater focus on the 25 million homes we already occupy, both to address the cost of housing and to explore the strategies, levers, and policies which can be utilised to rapidly shift who they are owned by and in whose interests.

Learning from past shifts in tenure

Recent history shows that rapid shifts in the distribution of homes are possible when policy actively reshapes incentives and market behaviour. Ten years on from the introduction of the Right to Buy scheme in 1980, which allowed sitting tenants to purchase their council homes with a significant discount, nearly 1 million homes were sold, an 18% reduction in stock.

Replacing this stock at current levels of social and affordable house building would take 19 years, and at current levels of social rent delivery it would take 150 years¹, before even considering the loss of stock through sales under the Right to Buy.

Even if rates of building were taken up to 90,000 units a year (the figure often used by housing campaigners as to the need for social rent homes) it would take a decade. Similarly, twelve years on from the Global Financial Crisis in 2008 the private rented sector had grown by around 1.4 million homes, a 39% increase.

This growth was spurred by demand for homes, due to barriers to accessing homeownership and social housing, and macro-economic, fiscal, and regulatory conditions which incentivised individuals to become landlords.

Were this growth to be reversed overnight, the proportion of homeowners could increase by 9%, offsetting its recent decline, or the proportion living in the social rented sector could increase by a third (33%)².

Both these cases demonstrate that proactive policy and the regulatory, fiscal, and macro-economic context which govern the housing market can create rapid shifts in the distribution of homes. This is unsurprising when we consider that transactions of existing homes far outweigh the contributions of new building.

Of the 20 million privately owned properties in England, around 3% were built in the last 5 years. Whereas around a quarter (25%) changed hands over the same period. This drives home that we should be intervening in the housing market now with the ambition to create a shift on a similar scale.

This framework places a much more explicit focus on utilising transactions between parties in the housing market to drive change, with the aim of delivering:

• a higher rate of homeownership, especially among young people and people on lower incomes, including a greater diversity of shared, community, and cooperative ownership options
• a much larger pool of sub-market rented options, across social and intermediate price points, including with options to build equity and assets over time
• a smaller, higher-quality and better managed private rented sector, which provides flexibility to people that choose it and appropriate financial support for people that need it.

A framework for rebalancing the housing system

This can be achieved through a focus in 4 key areas.

Firstly, we need to set policy which works to create a smaller, higher quality, and better managed private rented sector, which meets the needs of people seeking flexibility, while rejecting the notion that private renting can be a home for such a large portion of the population.

This means changing the ‘rules of the game’ which are advantaging those with larger deposits and therefore biasing lending towards investors over first-time buyers. It also requires policies which make becoming a landlord much less attractive, recognising the negative consequences of this form of investment.

This will mean exploring regulatory and fiscal changes which re-orientate lending towards first-time buyers and which limit profits from speculating on property, such as reforms to stamp duty, capital gains, and council tax. This should also focus on creating positive alternative options for sustainable investment, challenging a culture of property speculation.

Secondly, we must develop policies which proactively shape the market and offer ways for households to move from private renting to home ownership or a sub-market housing option.

This would mean working to develop, support, and build models which:

• allow local authorities, housing providers, and community groups to intervene directly in the secondary market to buy homes, retrofit them to high decency and environmental standards, and let them out at more affordable rents;
• support access to homeownership for people it is feasible for, including through mortgage market reform, shared or discounted ownership, and community-led and cooperative models; and
• create routes for landlords to socialise their homes by leasing them to intermediaries, retaining ownership while accepting lower yields and greater security.

Thirdly, we should support households for whom homeownership is not feasible or desirable to sustainably build wealth. This includes expanding shared ownership and rent-to-buy models, reforming the Right to Buy, and developing non-extractive approaches to wealth building.

Finally, we must ensure that the transition to a smaller private rented sector is managed equitably, particularly for renters on lower incomes. This includes improving the purchasing power of renters through reforms to housing cost support, which would be less expensive in the context of a smaller private rented sector and greater supply of social and affordable housing.

Taken together, this framework could have a substantial impact in shifting the distribution of homes in the UK housing market.

This output is deliberately framed as a discussion paper and we are keen to solicit views on, and challenge to, this argument. We do not see this as a solo endeavour and are keen to work with others, including tenants, community groups, and grassroots organisations, in advancing this work.

1. JRF analysis of Table 1000: additional affordable homes provided by type of scheme, England (Average annual social housing additions taken as the average number delivered between 2016-17 and 2020-21, rounded (51,500 units a year)). 

2. JRF analysis of Dwelling Stock Estimates — England (Historical).

If you are using this document in your own writing, our preferred citation is:

Baxter, D. Elliott, J. Earwaker, R. (2022) Making a house a home: Why policy must focus on the ownership and distribution of housing. York: Joseph Rowntree Foundation.