Thursday, 27 April 2017

Blind alley

From: Inside edge

What happens if this is just the start of the fall in home ownership? That’s the sobering question raised in a new report out today that begs huge questions for social landlords, potential investors in private renting and above all the government.

The End of the Affair, a joint report by Andrew Heywood from the Smith Institute and Genesis, concludes that the ‘age of aspiration’ promised by Grant Shapps soon after he became housing minsiter is not going to happen.

‘Most citizens would welcome the opportunity to live in an “age of aspiration”,’ he says. ‘However, few would argue with the assertion that aspiration infinitely deferred is a wearying blind alley.’

Instead, on current trends, there will be 1.9m fewer homeowners in 10 years’ time as owner-occupation’s share of housing falls from the current 67% to more like 60%. And they will end up in a private rented sector that will rise from 16% of the housing stock to more than 24%. As I’ve argued before, private renting has probably already over-taken social renting in England. 

Of course what seems obvious on current trends may not turn out quite like that - just ask Gordon Brown who promised in 2005 that there would be 1m more homeowners by 2010 and instead created 1m private tenants.

But Heywood argues that the decline of home ownership is being driven by fundamental social, economic and market forces including unaffordable house prices, radical change in the mortgage market, rapid formation of single households and rising migration and the erosion of job security. Add soaring personal debt, tax concession for private landlords, an ageing population and declining pension provision and you can see what he means. 

For government, that means recognising that its commitment to extend homeownership is unrealistic unless it is prepared to invest lots of money (for example with relief). ‘In these circumstances, government must find a way to manage down popular aspirations to attain home ownership if widespread disillusion is to be avoided.’ 

It makes it even more urgent to find a way to unlock large-scale institutional investment in private renting and a way to boost housing supply without expanding owner-occupation or major government investment to drive it. 

For housing associations, it may mean moving into private renting rather than relying on the return of the old low-cost home ownership cross-subsidy model. And, in the absence of the political will for large-scale investment in social renting, asking what happens once the current surge in affordable housing completions runs into the buffers.

For all of us it means asking what new social vision will replace the one that has dominated the last 30 or 40 years: rising home ownership and individual prosperity combined with a reduced role for the state and greater individual responsibility.

All of which begs lots of questions he doesn’t really answer. Will things settle down into German-style levels of home ownership and private renting? Or will those millions of new private tenants start to wonder about the fact that previous generations have done very nicely, thankyou, out of rising house prices and then pulled up the ladder behind them?

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