Why You Should Be Worried About the Housing Crisis | Blake Coe
Government policy is making the poor poorer and the rich richer. This is a political choice, not an economic necessity. This might normally be loony left thinking, but we all know the proverb about broken clocks.
Marvellous news for property owners, but to state the obvious, housing is much less affordable for the rest of us. There are now 10 million private renters in the UK. Not that the rental sector doesn’t have a role, but at these levels, that’s 10 million people paying the mortgages of those who are far richer. Unlike mortgages, rent is dead money. You pay your rent and never see it again.
Under such circumstances, it’s not surprising that the bank of Mum and Dad has become one of the UK’s largest mortgage lenders. Millennials can’t both pay rent and save for a hefty deposit, so parents release some equity from their property to cover the shortfall. The lucky offspring is now on the housing ladder, acquiring equity and even spending less on housing than before. All is well and good, provided you have a few tens of thousands of pounds handy and often someone to guarantee your loan.
The bank of Mum and Dad has of course always existed. Those with wealthy parents have always had an advantage. It used to be that if you were reasonably successful, you’d have a fair shot at buying a place in good time to have a family, whether your parents helped you or not. As house prices soar ahead of earnings, taking financial support from family is quickly becoming the only option for many. Your chances in life depend less and less on your own achievements, and increasingly on the wealth of your parents.
Picture two people who throughout their lives have exactly the same income. One buys a home at 28 with parental support. Their university fees paid upfront; they have no debt. The other is stuck renting and servicing their student loan. After ten years, the first has saved on rent, interest and acquired enough equity to purchase a buy to let flat. They then let it out to the second. The rental income covers the mortgage and there’s a bit left over for a holiday. Ouch!
Why is this a political choice, and not just an unfortunate fact of life? Between the greenbelt, height restrictions on new builds, planning all too often in the hands of NIMBY local councils and London’s protected views; government imposes huge restrictions on supply. Meanwhile it does next to nothing to make up the shortfall and inflates the housing market with high immigration, the help to buy scheme and a decade of rock bottom interest rates.
It’s not like there aren’t practical, well thought out solutions to the problem either. No one’s suggesting concreting over Hyde park or the Cotswolds. More social housing, planning reform introducing zoning, green belt reform, insisting foreign buyers either live in or rent out their properties and implementing the recommendations from the better streets trial are all practical, realistic options.
Many of these proposals are, however, politically difficult. Imagine the mayhem if the government attempted even the most modest greenbelt reforms! I can already see the bear chested XR activists prostrated on the tarmac in front of the first diggers.
The government thought about planning reform, but very quietly dropped it after push back from southern tory MPs and losing the Chesham & Amersham by-election to the Lib Dems, who campaigned heavily on the issue.
This persistent refusal of the government to tackle the issue, combined with Universal Credit cuts and a hike in national insurance to protect – you guessed it – homeowners, is quickly becoming a pattern of defending the interests of the propertied classes by shafting everyone else.
Michael Gove as the new housing minister might offer a glimmer of hope. He’s a deep thinker, an exceptionally capable minister and his appointment has widely been seen as a sign Boris recognises there is a problem with housing and wants a solution – but doesn’t have one. I am, however, not optimistic.