Natalie Elphicke is a non-executive director of a leading building society and a published policy writer on housing and housing finance with Policy Exchange and the Centre for Policy Studies. She is co-founder and Chairman of Million Homes, Million Lives.
Britain has one of the worst records of home ownership. Far from being the nation of homeowners we are fast becoming ‘nation rent’: within a generation there may be more renters than owners.
Most of our European neighbours have higher levels of property ownership than we do. Home ownership peaked in 2003, and before the recession and under Gordon Brown home ownership started to fall into decline.
This matters for lots of reasons, and here are three:
- Home ownership is a wealth and savings vehicle;
- Home ownership provides security and stability, particularly important for bringing up a family and for older age;
- Home ownership gives you choices – you can sell your home and move to a new job, free up the value of your housing to pay for your child’s wedding or university fees and it allows you to escape from the ASBO neighbours.
The left may not like it, but decades of study in North America have shown that home ownership is important to inter-generational success for low income families, that children are most likely to make the most of their own life chances if their parent or parents have bought their own home.
And just as importantly, the overwhelming majority of people – over 80 per cent, including a very large number of social tenants – want to own their own homes.
We shouldn’t ignore the aspirations and appetite of Britons. We need to continue to work in each generation to try to help people realise their dreams and aspirations of home ownership.
So it is right that, as Conservatives, we continue to champion the benefits of home ownership and look for ways to refresh the opportunity from all backgrounds to buy their own home. What could a modern right to buy could look like?
Let’s call it “Own Your Home”. Here are some guiding principles for Own Your Home:
1) Nationally Affordable: Own Your Home must be placed within the context of the national finances. Any proposal must be capable of being funded within its own terms; ideally improve the national finances and certainly not add to the National Debt.
2) Personally Affordable: Own Your Home must be placed within the context of the direction of mortgage regulation, particularly the context of new affordability requirements.
Accessing mortgage finance can be harder for people who are not in long term regular employment, who do not have much money to spare at the end of the month or who do not have a track record of financial management, such as car loans or credit cards.
So for some tenants Own Your Home by full mortgage purchase could be attractive and feasible and simply raising the discount level would help with that. However, for some, the risks of purchase by mortgage – all or nothing – would not be their best option even with a hefty discount.
They may not be able to get a mortgage at all, or it would not be responsible within the new mortgage framework.
3) Not sub-prime: Following from 2), Own Your Home must work as a main market solution, and not be made to work by arm twisting a few mortgage providers to make a mortgage available for the tenant sub-group at rates equivalent to sub-prime credit.
A specialised mortgage market was created for shared ownership. When the recession hit, it dried up for a time, creating difficulties.
4) Respect property rights: Own Your Homes should not take other people’s property. We are not socialists.
Any proposal should therefore build on the strong history of the equitable treatment of property rights between parties and of investment created under the Thatcher years and since: such as right to buy; right to acquire; investment by the government of taxpayer’s money in the purchase or building of specific property; and enfranchisement (purchase and extension) of leasehold interests.
Own Your Home should also respect the rights of tenants in relation to their landlords: for example where a right has been eroded by avoidance techniques in the case of enfranchisement, or where the value of a right, such as right to acquire, has been eroded by not uprating by reference to the value of money or the increase in the value of property.
5) Be modern and creative: We shouldn’t be afraid to consider and embrace new methods of ownership, new approaches to finance, and new ways to help people save in their home where they help with the purpose of people owning their own homes and saving for their future.
One of the strengths of the Conservative approach over the years, particularly under Keith Joseph and Nicholas Ridley, was to think differently about meeting the housing and finance challenges of the day. That led to giving loans to housing associations as an alternative to the ‘Rachman’ private rented sector in the 1960s.
At a time of wholesale privatisation in the 1980s, Conservatives actively created the private finance market for the not-for-profit housing association sector so it could provide high quality and well managed affordable homes for social tenants.
We face new times and new challenges for aspirant home owners. We need new options to help people buy their own home and save for their future.