Dan Wilson Craw is the Director of Generation Rent.
One of the greatest long-term threats facing the Conservative Party is the decline of home ownership. Since the start of universal suffrage, the party’s appeal has been rooted in expanding asset ownership in the economy, with home ownership the literal cornerstone.
But home ownership rates have been falling for 15 years, resulting in fewer people who feel that they have a stake in the system to conserve. The collapse in home ownership appears to be a long-term phenomenon, with schemes such as Help to Buy failing to pull off the dramatic reversal the party needs.
Following years of rapid house price inflation, home ownership in Britain has reached record lows. Less than half of people under 35 are homeowners, with the private rental sector the only alternative for most. Yet the housing crisis affects all age groups – not just the young. Here is an important but hitherto neglected statistic: half of all private renters are over 35. If housing remains at its current level of affordability, this proportion will only grow, posing major challenges for policymakers.
This week, Generation Rent released a new report, Life in the Rental Market, which details the changing demographics of the housing market. Using the data from the English Housing Survey, we estimate that the number of retirees in England’s rental sector will swell to nearly one million by 2035. This marks a three-fold increase from its current level of 370,000.
The ageing population of the rental sector threatens to create an unsustainable fiscal burden for the Government. Whereas most homeowners have paid off their mortgages by the time they enter retirement, renters confront monthly housing costs that stretch deep into retirement. We predict that the growth of pensioners in the rental sector will cost the government another £3.5 billion in housing benefit each year, assuming that their lower levels of income keep them eligible.
For generations, Conservative housing policy has aimed to support first-time buyers to become homeowners. Right to Buy offered social tenants a rare opportunity to acquire their own council homes. Help to Buy supported tenants to afford a mortgage for the first time. These policies were based on the ideal of homeownership, and the premise that the vast majority of British households subscribe to it.
Yet the rise of the renter retiree has begun to undermine this ideal. According to the English Housing Survey, only 11 per cent of renters over 65 years old expect to buy a home in their lifetime. As tenure expectations begin to change, so do renters’ preferences for the housing policies they want to support them. Our report shows that renters in their 60s are nearly twice as likely to prefer affordable rental tenure than homeownership. The differences between these age groups extend across a range of policy preferences. Renters over 60, for example, were 38 per cent more likely to support social housing construction than renters in their 20s. As their desire for home ownership declines, so renter retirees call for more basic protections – from rent rises and no-fault evictions. The Government should be attentive to these shifting preferences.
Rather than focus exclusively on boosting homeownership – by reducing stamp duty, for example – Philip Hammond should design policies that address the needs of renters as they age into retirement. Next week’s Budget will set out the government’s proposed solutions to the housing crisis. One area the Treasury is looking at is how to increase security of tenure for private renters.
Doing so, by restricting the ‘no fault’ eviction process that means tenants are given just two months’ notice to move, and by limiting the amount that rents can rise, should be key priorities for government. The rewards for the Tories would be fewer disrupted educations, more reason for tenants to invest time in their community, and fewer people with the sense that capitalism is out to get them.
There is also a basic sense of fairness that is currently undermined by ‘no fault’ evictions; in theory a diligent tenant, who has always paid their rent on time, has as much security as someone who has trashed the property, so there is no real reward for being a responsible renter.
More secure tenancies bring greater stability to renters’ lives, allowing them to plan more effectively for the future – to put money away money for a mortgage, or to save for retirement. But Hammond should also consider strategies to support the ageing rental sector population and reduce the government’s growing benefit burden in the process. New social housing construction, for example, would not only provide more opportunities for stable tenure. It would also lower the housing benefit bill in the long run, as housing supply begins to catch up with demand.
For too long, renters have remained marginal to housing policy. This strategy is no longer sustainable. The findings from our report suggest that renters are crying out for new protections. If the Conservatives hope to win back their support, the Budget provides an opportunity to show they are listening.