The benefit of hindsight

It is 2020 and, on the occasion of my 60th birthday - I still have 10 years to go before reaching the new retirement age - I am reflecting on the changes to the UK housing scene over the past decade.

Housing scarcely got a mention when the coalition government came to power in 2010. Everyone knew the big issue was the economy, the budget deficit, and the debt mountain. And money - or the lack of it - has been the dominant issue that has shaped the housing market over the past 10 years.

Back then, few people appreciated how committees of financial regulators would reshape the UK’s housing market with the decisions they made setting out how much capital and liquid assets banks needed to hold. The result was a decade of credit shortage.

Homeownership continued to decline as first-time buyers were unable to secure loans on reasonable terms. Things would have been worse without the entry of Chinese, Indian and Brazilian banks to the UK mortgage market. Many first-time buyers were helped by retail investment funds buying equity shares in properties in locations with the prospect of house price growth. Even so, today the average age of first-time buyers unassisted by family or friends is 40.

In the social rented sector, reduced funding for new building, combined with persistently high unemployment, meant rising levels of need. Local authorities turned to the private rented sector to plug the shortfall in social homes. But people in need found themselves competing for rented property with those unable to buy. Rents started to rise - and as they did so did the bill for housing benefit.

Two years after election, the coalition government realised it needed to increase the supply of new private rented property, and turned to the only organisations still looking to invest billions each year - the life and pension funds.

A package was put together in terms of public sector land, changes to affordable housing requirements and tax breaks, and the institutions started to invest at scale.

Diversity in the private rented market also started to emerge from 2012 onwards with intermediate rent products being targeted at defined groups such as low-income, working households as part of measures to address the benefit trap.

All in all, throughout the ‘teenies’, as the past decade has come to be known (reflecting a period of considerable angst), the housing market has continued to move in the direction established in the ‘noughties’. Now, less than two thirds of households own their own home, 20 per cent are private tenants and only 16 per cent are social housing tenants; and the ‘twenties’ look likely to bring more of the same.

Chris Cobbold is head of the residential practice group DTZ Consulting