Alex Morton is Senior Research Fellow for Housing and Planning at Policy Exchange
There is agreement across the Coalition that we need a better housing market. But we don’t just need that: we need a better housing debate. Today’s series of articles in the Independent illustrate why. First, it seems to believe that home ownership only rose under Margaret Thatcher. In fact, it rose consistently over the 20th century. As a share of households, home ownershipwas 23% in 1918, 43% in 1961, 57% in 1981, and 70.4% in 2001.
Second, it ignores the fact that home ownership was rising across Europe until the recent asset price bubble. For example, it rose from 47% to 55% in France from 1980-2000 (and if you look at the figures, across all medium size countries with comparable data from 53% to 68% over the same period).
Thirdly, it completely ignores the fact that renting and home ownership are substitute goods. Over time, rents and house prices tend to balance out in terms of cost (as the IMF and OECD argue). At a time when rents are rising by 4.5% a year as house prices stagnate, the Independent’s argument is running at least a year behind reality (try asking anyone who rents how "cheap" they think it is).
I could continue to argue using data, but want to take on the broader thrust. The paper seems to think we should all rent because, well, it’s what those groovy Europeans do. Yet is a society in which more people rent a good one? When the last government worried that “inequality in housing wealth represent one of the starkest inequalities in Britain”? When we already have to pay housing benefit of £7 billion to the over 65s who never got round to owning their home? When data shows consistently that across both the UK and Europe home owners are happier than renters, even adjusting for income? Where your lifetime income becomes ever more reliant on a housing windfall from your parents?
Ultimately, this is a sterile debate. Politicians shouldn’t support renting or home ownership for everyone, though they should certainly take note of most people’s preferences. Politicians, who have allowed the Bank of England to prop up about a quarter of the UK mortgage market, should get on with increasing the supply of homes so that in the medium term housing costs stop escalating. Sort that out, and then let people achieve their goals (of renting or owning) as they see fit. Most people in Britain have had quite enough of being told how to live their lives. They just want government to stop putting barriers in their way.