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Brian LundLet’s act to halt potential ‘second-steppers’ leaving owner-occupation for the PRS
Policymakers are overlooking the problem of low-income families leaving owner-occupation and renting privately for more space. Brian Lund suggests some solutions to help ‘second-steppers’
More and more potential ‘second-steppers’ have turned to the private landlord sector to expand their living space - academic and author Brian Lund calls for radical measures to halt this trend #ukhousingShould housing association shared ownership schemes be open to second-steppers? Brian Lund suggests so #ukhousingAllowing low-income home owners to claim Universal Credit and opening up shared ownership to second-steppers... Just two ideas suggested by academic Brian Lund to prevent owner-occupiers moving into the PRS for more living space #ukhousingBetween 2003/04 and 2016/17, the number of homeowner couples with dependent children plummeted from 3,089,000 to 2,602,000: a decline from 73.3% to 53.1% in the two parent household homeowner proportion.
Finding an affordable home with more space when children arrive has become increasingly difficult. During the 2003 to 2008 house price boom, first-time buyers stretched their resources to get a foot on the homeownership ladder.
House builders responded to rising prices by building flats and cutting space standards. Bedrooms dropped to below three for the first time ever and their size dwindled. Compared with the 1990s, the homes built were 4m2 smaller.
“More and more potential ‘second steppers’ have turned to the private landlord sector to expand their living space”
In many parts of England house prices declined, with the homes bought by first-time buyers dropping by relatively more than the houses they needed, leaving potential movers short on equity.
In 2018, Lloyds Bank reported that the average equity gap between the existing homes of potential second-steppers and the property required to accommodate an expanding family was £50,000. Moreover, in response to the credit crunch, mortgage lenders increased deposits, a problem compounded by the Financial Conduct Authority’s affordability tests that included high child care costs.
More and more potential second-steppers have turned to the private landlord sector to expand their living space.
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In England, the number of households with dependent children renting privately increased from 503,000 in 2003/04 to 1,025,000 2010/11 and by 2016/17 it had reached 1,724,000. Yet, although private renting is more accessible than homeownership there is a trap.
High rents – although mitigated by housing benefit – hamper saving for a deposit and the time that families remain in the private rented sector is increasing.
Noting that homeowners are now moving half as often as before the 2008 recession, the BBC quoted Savills as stating: “Those not trading up are the forgotten people of the housing market… We’ve concentrated on first-time buyers. They get the concessions and all the focus has been on getting people onto the housing ladder.”
The Help to Buy equity loan has helped first-time buyers onto the homeowner ladder but, although its upward house price impact may have helped second-steppers to acquire more equity, they have acquired only 19% of the loans. Stamp Duty Land Tax relief – zero up to 300,000 and 5% from £300,000 to £500, 000 – applies only to first-time buyers and, when the current Help to Buy equity loan scheme ends, the new version will only be available to first-time buyers.
Policy initiatives concentrated on first-time buyers overlook the problem of potential second steppers leaving owner-occupation.
They need to be allowed to benefit from Stamp Duty Land Tax relief and to continue to use the Help to Buy equity loans beyond 2021.
“Policy initiatives concentrated on first-time buyers overlook the problem of potential second steppers leaving owner-occupation”
Ending VAT on extensions for extra bedrooms required by children and reviewing the Financial Conduct Authority’s affordability tests also require consideration. More houses are being built but, at 128m2, their average size has remained unchanged since 2013 and the housing numbers game needs redirecting towards housing size.
Housing association shared ownership schemes have considerable potential to help second-steppers but they are normally restricted to first-time buyers, a limitation that should be removed. In London the second-stepper problem extends well up the income scale but across England low-income households have experienced the worst problems.
Allowing low-income homeowners to claim the housing element of Universal Credit on mortgage interest on its UK roll out would be a radical step – well away from any UK political agenda but possible in the USA – and would boost homeownership and help to limit the £8.5bn per year now paid to private landlords.
Brian Lund, former principal lecturer in Social Policy, Manchester Metropolitan University and author of Housing politics in the United Kingdom: power, planning and protest, and Housing in the United Kingdom: Whose Crisis?
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