Britain’s 8 million renters are a key electoral battleground

June 18, 2014

–Stephen Evans is a former Senior Policy Advisor for HM Treasury and Director of Employment and Skills at Working Links. The opinions expressed are his own.–

Estate agents boards are lined up outside houses in south London June 3, 2014. REUTERS/Andrew WinningEstate agents boards are lined up outside houses in south London June 3, 2014. REUTERS/Andrew WinningAsking prices for London houses have risen by £80,000 since the start of 2014 according to Rightmove. A three-bedroom house in London increases in value more each day than the average Londoner earns, a sobering thought on your daily commute. These are just the latest startling figures on house prices, particularly in London and the South East, prompting concern from Mark Carney and all three major political parties.

To some extent this is a return to business as usual – rising house prices have long been the stereotypical topic of conversation for dinner parties. But rarely has this cut through into a major political topic, with the exception of Homes for Heroes after World War 1 and Right to Buy in the 1980s. This time it could be different, with Labour and the Conservatives pitching offers to Britain’s 8m both renters (promising longer tenancies and more stable rent rises) and property owners (Help to Buy offering easier access to finance).

Beyond these short-term pitches, however, our distorted housing market is a long-term cause of inequality and low social mobility – whatever the short-term trends.

There is widespread agreement that we are not building enough houses to match our growing population – housing demand is going to increase as a result of a growing population, people living longer and a longstanding trend toward single person households. All the main parties have pledged to increase house-building, though without a particularly clear plan of how to do this beyond vague talk of planning reforms.

This ongoing failure to build enough housing has three main long-term impacts:

  • Education: The significant house price premium in the catchment areas of the best schools means those who can afford to buy there get a better education and opportunities for their children. This is one of the reasons for the UK’s particularly strong link between parental background and children’s educational outcomes.
  • Wealth inequality: Housing is the major part of household wealth in the UK. High house prices mean homeowners have more wealth to pass on to their children, and that it becomes more and more difficult to get on the housing ladder for those without access to the Bank of Mum and Dad. So over time, wealth risks becoming more concentrated in hands of the ‘haves’, with the  ‘have nots’ left further behind.
  • Rising rents: Rents tend to rise in line with house prices, making it more difficult for renters to save a deposit as well as leaving them with less money to spend on other things.

The consequence could be a Britain in 20 years time more polarised between owner occupiers (more of whom will also own Buy to Let properties), and a growing army of renters paying higher rents to the first group. Anyone born into the renting group will have little chance of making it into the owning group.

This scenario helps in part to explain the popularity of French economist Thomas Pickety. His 696-page book, Capital in the 21st Century, is top of many bestseller lists and his recent lectures in Britain packed out. His argument, using data from several hundred years, is that capitalism has an inherent tendency to greater inequality as the wealthy accrue more wealth over time. This was only briefly interrupted in the 20th century by two World Wars and the more social democratic settlement (with progressive taxes) that followed. When this broke down in the late 1970s, normal service was resumed, so the story goes.

There is an ongoing debate about the data. But if you buy the analysis then solutions could include things like a land value tax, to prevent landowners benefiting from landbanking (that is, benefiting from rises in land values without developing  the land); the mansion tax proposed by the Lib Dems; or the extension of Capital Gains Tax to profits made on the sales of primary residences as well as second homes. The latter would be the most radical solution, but would amount to electoral suicide so don’t expect to see it in a manifesto any time soon.

So the current focus on housing isn’t just because of the ongoing British obsession with house prices or Labour’s argument about a so-called ‘cost of living crisis’. It is also a debate about whether and how to spread power and wealth more fairly. And it’s a debate that’s not going away.

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