Everyone knows we are amid a housing crisis. We hear politicians blaming property developers and see newspapers pointing the finger at immigration. But the issue of property shortage only scratches the surface of our housing catastrophe, which is now at a critical point. House prices have doubled in relation to incomes since the turn of the century , house deposits now require 19 years of saving from young families, and 40% of thirty years olds currently reside in private rented accommodation (PRA) compared with only 10% fifty years ago . How fitting, yet regrettable, that the term ‘generation rent’ has emerged from the ashes of our broken housing market.
An out of reach property ladder has detrimental effects on the living standards of generation rent, who often pay one-third of their disposable income on rent to avoid spending years of their adult lives sharing accommodation with their parents. For this price they receive short-term contracts with landlords who frequently push the rent up to unaffordable levels, often resulting in eviction and sometimes homelessness. In addition to this unacceptable lack of security, a third of PRA in England failed to meet the governments Decent Homes Standard .
By getting a foot on the property ladder through affordable housing, previous generations effortlessly caused their net wealth to skyrocket with house prices. If a fair distribution is one which limits the extent of inequality to an acceptable level, this distribution of wealth is unfair to say the least, as it has come straight out the pockets of subsequent generations facing the eyewatering housing costs. To understand how housing became so unaffordable, it is appropriate to highlight a series of short-sighted policymaking decisions.
Firstly, deregulation and liberalisation in the 1970s and 80s enabled banks to award homeowners credit against their homes value, resulting in a surge of mortgage lending. Many households could now acquire second homes and enter the buy-to-let market, boosting demand relative to housing supply and therefore heightening price . The banks are primary culprits of inflating house prices, quadrupling their money creation through mortgage lending in the ten years before the financial crash, and continuing to push house prices to ever higher levels today .
Next, the Conservatives enabled social housing tenants to purchase their dwellings at a discounted price between 1980 and 1997, whilst at the same time cutting local authorities’ housebuilding grants. During this period, over 2.2 million tenants exercised their ‘Right-to-Buy’ whilst only 660000 new social houses were built , shifting the responsibility of providing sufficient and affordable housing to the private sector. However, since land is tax-free, profit-seeking private developers prefer to ‘landbank’ in order to proliferate prices, rather than attempting to close the gap between supply and demand.
To make matters worse, the succeeding New Labour government gave rise to speculation in the property market by granting tax breaks to buy-to-let landlords, further increasing competition for first-time buyers to contend with and pushing up rents . The government has since reformed the tax system but are still failing to ensure enough homes are built to thwart spiralling inflation.
Instead, the current government have proceeded to sell off public land to private developers instead of replenishing the social housing stock and pursued a ‘Help-to-Buy’ scheme which escalates mortgage lending without increasing the supply of homes. These policies are pushing the property ladder further out of reach for all but those fortunate enough to receive help from the ‘Bank of Mum and Dad’.
Whether it was to secure homeowners’ votes, to satisfy the vested interests of one-in-five MPs who are landlords, or just out of sheer negligence, successive governments have exacerbated the housing catastrophe. Nevertheless, it is not too late to reverse the damage their policy has inflicted on a whole generation.
Limiting the amount of debt which banks can hold against property would slow down mortgage lending and give supply a chance to catch up with demand . Applying a Land-Value-Tax to discourage land-banking, halting the privatisation of public land, and empowering Councils borrow in order to replenish the social housing stock would slow inflation and provide an alternative for those who cannot afford PRA .
But beyond these measures, we ought to adjust the lens through which we see housing; viewing homes as a place to live, rather than an investment. Furthermore, it is high time we remedy the injustice of the wealth distribution which has amounted to generation rent living the horror show of sub-standard accommodation, faultless evictions, and rough sleeping in a country which is one of the world’s richest. Net wealth has more than tripled over the past couple of decades , one-third of that wealth being held in property . A reformed tax system is paramount for a fair redistribution of this unearned wealth gained at the expense of future generations, and to discourage exploitation of our flawed property market from undesirable investors.
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