Will Tanner is Director of Onward and a former Deputy Head of Policy in Number 10 Downing Street.
Housing was the standout issue of last week’s Conservative Party Conference, but the announcements largely neglected the group that the Party needs to attract most – private renters. If you rent your home rather than own it or live in social housing, you are nearly twice as likely to vote Labour as Tory. In 2017, Labour’s lead among this group grew by 12 points, as turnout amongst renters surged by 10 per cent and turnout amongst owner-occupiers stayed the same.
Matters have not improved since. According to polling for Shelter two weeks ago, the Conservatives trail Labour by an average 22 points amongst private renters in the 60 most marginal constituencies, and 61 per cent of voters in those seats do not have confidence in the Government’s housing offer.
This is troubling enough for Conservatives. But it is made more so by the extraordinary growth of the private rented sector, which doubled in size in the last two decades to more than 20 per cent of all homes. Onward’s research has shown that by 2022, there will only be 88 parliamentary seats in whih homeowners comprise more than 70 per cent of all homes, down from 330 in 2001.
If the Conservative Party wants to win a majority, it needs a retail offer for private renters. To date, Ministers have rightly focused on giving renters longer and more secure tenancies, and they recently consulted on the introduction of mandatory three-year deals for tenants. But there is another way of achieving a similar end and, in doing so, helping nearly a million people move from renting into ownership in five years.
Our proposal is relatively simple. We argue that the Government should reward landlords who give long-term tenants the Chance to Buy the rented home they live in. This would be achieved through a capital gains tax break for properties sold to sitting tenants of three or more years continuous residency, with the gain from the relief split evenly between the landlord and tenant. Since capital gains tax on second homes is currently 28 per cent for higher rate taxpayers, this would generate a significant windfall for landlords, and give tenants thousands of pounds towards their deposit.
The policy would simultaneously provide a real incentive to landlords to offer long-term tenancies and support tenants with an average contribution of £8,000 towards their deposit. We estimate that up to 88,000 landlords would make use of the relief each year, meaning that just under half a million homes would transfer into ownership over five years, affecting a million people. Just as Right to Buy helped hundreds of thousands of council tenants own their home previously, a renter’s Chance to Buy could give a new generation of insecure tenants an opportunity to own.
These changes would cost around £1.32 billion a year, according to our estimates. However, the vast majority of the cost could be covered by tightening other buy-to-let tax reliefs which currently allow second homeowners to significantly reduce their capital gains liability, often to zero. Ministers could raise £1.12 billion a year, for example, by abolishing the £40,000 Lettings Relief given to landlords who have previously lived in their second home, and by reducing the Private Residence Relief grace period from 18 to six months. Both deserve attention in any case.
In Britain, we like to think of ourselves as a property-owning democracy. But the truth is we have consistently failed to create new homeowners for the last 15 years, with major political implications. Nine in ten people say they prefer home ownership over renting and two-thirds of 18 to 40-year-olds who currently do not own, hope to do so one day. It is time to help people make their rented house their home.