Will Tanner is the Director of Onward and a former adviser to Theresa May.
If you are a young and growing up in Britain today, there is one thing you know for sure. That your chances of owning a home are fast becoming a pipe-dream.
In 1996, two-thirds of 25 to 34 year olds on middle incomes owned their own home. Last year, that figure had fallen to barely a quarter, the lowest level since records began. The average 30 year old now has to save for two decades to save for a deposit, up from just three or four years in the 1990s. Within a generation, the dream of homeownership has crumbled.
This locked-out generation faces much higher housing costs. As recently as the 1980s, private renters outside London spent just a tenth of their earnings on rent. Now, they spend a third. In London, that figure has risen from 15 per cent to 40 per cent over the same period. In contrast, their parents’ and grandparents’ generations have seen their property wealth grow and mortgage payments become more manageable thanks to rising prices and lower interest rates.
In this context, it is no wonder that two of the groups that voted overwhelmingly for Jeremy Corbyn at last year’s general election were 25 to 34 year olds and private renters. Faced with a treadmill of rising rents and fading dreams, they voted for change. If the Conservative Party does not act fast, those groups could swing the balance entirely at the next election – the number of seats where more than a fifth of households are private renters will rise from just 18 in 2001 to an estimated 253 in 2022.
The Government, thankfully, is seized of the issue. The Prime Minister has spoken of housing as one of the defining missions of her premiership. The new Secretary of State, James Brokenshire, is determined to deliver levels of housing not seen since Harold Macmillan. This morning, Oliver Letwin publishes important findings from his government-commissioned review of housebuilding.
These are all important steps. But more can and must be done to reverse Britain’s 15-year decline in homeownership and give young people a chance to get on the property ladder once again. Onward’s first policy paper, by Neil O’Brien, sets out a three point plan to do just that.
First, ministers should reform Britain’s planning system to tackle the root causes of under-supply and help councils to plan homes in places people want and need them the most.
Demand and support for new housing is highest in the centres of our large cities, which house fewer people than their equivalents on the continent. So we should be building upwards and densifying our cities with attractive terraces and squares.
The kind of housing often most opposed is piecemeal development tacked on the edges of towns and villages without the proper infrastructure to support new homes. So we should move towards building new communities with proper infrastructure in places where the impact on existing residents can be minimised.
That means shifting the balance of power from developers to local councillors. We should have a system more like that in Europe and US states, where local government plays a leading role in buying and assembling land for developer and capturing the gains from development for the community. In the process, we would cut the cost of land, which now accounts for 70 per cent of the cost of a new home, and help councils capture much more of the value created when planning permission is granted – generating up to £9 billion in revenue for new housing.
Second, we should rebalance the housing market away from owning for a return and towards owning for a home. It is a sobering thought that if Britain had maintained the balance between privately-rented and owner-occupied properties since 2000, we would have two million more families owning their own home.
We should protect existing landlords who have made investments. But for future rented properties, ministers should tighten tax reliefs that encourage people to put their savings into buy-to-let instead of Britain’s businesses. We should also give councils more powers to control or limit foreign purchases of property for investment. The resulting downward pressure on demand would support new homeowners and mean greater funding for more productive parts of the economy.
Third, the Government should announce a big and bold retail offer specifically for young families locked out of home ownership. We propose this includes building half a million new reduced rent homes for young people in work, and helping a further half a million young people by lending them a deposit in the same way government already underwrites some of their mortgage costs. However it is done, young people need a short-term route to ownership as well as long-term stabilisation of house prices.
We like to think of Britain status as a property-owning democracy. But last year only three of the 28 EU member states had lower rates of homeownership than Britain and house prices have risen faster here than in any other developed country. If we are serious about fixing Britain’s housing problem, we must do more than just build many more homes. We must also create many more homeowners.