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 was the first national director of the new Conservative Policy Forum.
The latest Government figures, published last week, paint a bleak picture of home ownership reaching its peak in 2003 of 71 per cent and falling to 65 per cent by 2013. If this trend continues, by 2041 one in two households could be renting. ‘Generation Rent’ could become ‘Nation Rent’ as we set out in the report published on Monday by Million Homes, Million Lives, which I helped to found.
After decades of decline, private renting has mushroomed. The proportion of private renters is back to levels not seen since the 1980s. The growth in private renting is not accidental. 65 per cent is not a number which represents the natural balance of home ownership in our country. The fall in home ownership has come about because of a combination of regulatory and political decisions from 2003 onwards made by the previous government. It pre-dated the impact in the financial markets of the credit crunch. The move to reduce home ownership didn’t happen overnight, it has happened gradually and by stealth over nearly a decade.
Does this matter? Yes. Long term renting is not what British people want. People aspire to home ownership, and want the opportunity to buy a home. Polls shows that three-quarters of private renters want to buy – as do nearly half of social housing tenants. Only three per cent want to be private renters. Overall, 81 per cent want to own their own home.
Steps are being taken to reverse the decline and boost home ownership including increased mortgage availability through Funding for Lending, the Help to Buy schemes, re-energising Right to Buy, releasing public land, promoting house building and shared ownership schemes. These are important. However, the path to renting is so strong now that greater measures are needed to undo the damage of the Labour years and reverse the trend. It isn’t just about building more and more homes if those homes are going to be swallowed up by giant rental landlords. It is about building homes which people can rent and then buy as their circumstances allow.
In the last decade, private rent growth has been driven by buy-to-let amateur landlords. Buy-to-let grew from around four per cent to more than 13 per cent of gross mortgage lending. The growth of private rent in the future is expected to come from big institutional investors building up large property portfolios. Legal & General have expressed an ambition to finance and build five new towns. The investment by these large pension and insurance companies is to be measured in billions of pounds. Strong and stable long term returns from renting are an attractive proposition for investors with long term obligations, such as pension funds.
So how can we square the appetites of the new investors with the home ownership aspirations of the British people? In Nation Rent, we don’t just warn of this trend to renting. We set out an alternative approach to allow people to rent and buy over time and as their circumstances allow. We set out how long term affordable housing can be provided for those in need. We have designed and tested an alternative housing portfolio which is dynamic – it can change as people’s circumstances change. In this way people will be able to rent and to buy. We set out in Nation Rent how these new property portfolios can provide good returns of between five per cent and 15 per cent for investors, yet enable owner occupation over time and which provide affordable homes for those in long term social need.
A strong revival in home ownership is possible. Nation Rent is not inevitable. High quality renting can be part of the ownership journey; it does not have to be the only destination. It need not be a choice between ‘haves’ and ‘have nots’. We can create a housing market that everyone can be part of.