The new normal

Posted by: Jules Birch

14/12/2009

When was the last time a housing minister said that a fall in homeownership might be a good thing? Or at least not a bad thing?

John Healey’s speech to the Fabian Society got me wondering and I’m struggling to think of one in the last 50 years. Even when governments were building hundreds of thousands of council houses per year they also wanted to see an expansion. And apart from anything else the last six years are the only time homeownership has ever fallen.

His speech was an attempt to map out what the post-credit crunch world - the ‘new normal’ will look like. ‘As we look to a future beyond the global recession, this is the time to ask what the future will look like in housing, and what role we want Government to play in shaping that future. We know that the world has changed economically and it won’t go back.’

He pointed out that homeownership had already fallen from 70.9% of households to 68.3% today. ‘Some point to the recession having shaken people’s desire to invest in bricks and mortar. But in reality, homeownership had been dropping since 2005. And I’m not sure that’s such a bad thing.

‘At the moment, up to 70% of the population has their money tied up in property. The proportion was boosted by Margaret Thatcher’s right to buy. But you don’t need to be a grocer’s daughter to know that it’s not a good idea to have all your eggs in one basket.’

But Healey does not stop there. Pointing out that almost a third of people are relying on the value of their home to top up their state pension, he goes on: ‘Not only is this property piggy bank unsustainable, it is also unfair…as housing wealth is passed from parents to children, inequality is compounded over the generations.’

Familiar stuff, maybe, to anyone who works in housing and in tune with the private view of previous ministers but this is pretty revolutionary from a party that until recently seemed to have little to offer except ever-increasing homeownership subsidies.

Healey’s solutions are more choices in tenure and more flexibility, the chance to sell equity back to a council, housing association or co-operative as well as buy it and even reform of taxation.

‘One great advantage of homeownership is that it allows you to build an asset and benefit from increasing property prices tax free. That’s why so many people choose to make their home their family’s main investment. If we want to make renting an equally valid option and an equally privileged option for those who want to rent, we need to extend that opportunity. That could be done with tax free savings for those who are renting, a deposit for homeownership in the future, a bond for renters to build assets and store wealth as homeowners do.’

His ‘egalitarian vision’? ‘Housing in the period beyond recession will be fairer, with a reducing divide between the housing ‘haves’ and ‘have nots’… Renting will be more stable, more secure, of a better standard, and probably more common an option as it is for people elsewhere in Europe. Changing tenure may not mean changing your home, with options to release and buy back equity and convert from renting to owning with government help. There will be more and new options for those on lower and middle incomes, those who are less likely to get access to social housing at the moment. And the type of home we live in will become less of a marker of our economic status.’

That’s brave stuff. Not only does it go against all conventional political wisdom - Grant Shapps is already tweeting ‘Housing Minister confirms that if you work hard, save hard & have aspirations for your family - Labour no longer for you’ - but it also contradicts what his own boss said just four years ago. Homeownership has indeed been dropping since 2005 but that was the year Gordon Brown pledged to create a million extra homeowners by 2010.

Healey says he set out to make housing ‘more visible and more political’ and he is certainly succeeding in both. The big question is whether the ‘new normal’ really as different as he thinks.