Friday 11 December 2009

Could falling home ownership be good for us?

The Independent reports Housing Minister John Healey's Fabian speech on Wednesday night, noting that this is the first decade in which home ownership has fallen, and suggesting that Britain may be becoming more European in its attitudes to home ownership and renting.

The era in which all Britons aspire to own their own home may be coming to an end, according to the Housing minister, John Healey. In a controversial speech, he suggested that Britain may be moving towards a European model, with renting on a roughly equal footing with buying. He said home ownership had fallen from 71 per cent of households in 2003 to 68 per cent today, noting that this trend began in 2005, well before the recession. "I'm not sure that's such a bad thing," he said.

You can read John Healey's full speech, which was hosted by the Royal Institute of Chartered Surveyors, on the Fabian website as well as Next Left's live report from the event.

Healey was clear that he was not arguing for hostility to home ownership but for a more balanced approach.

So we need a new ownership model. Not all or nothing, but a flexible system which suits the different stages in people’s lives. With shared ownership arrangements like HomeBuy Direct allowing people to buy more of their home when they can afford to.

And in the future, I’d like to see it be just as easy to sell equity in your home back, to the council, housing association, or co-operative, allowing people flexible tenure in the same property, that adapts to their circumstances. People may choose to release equity whenever it suits them and build it back up when they can, and if they want.

Of course, not everyone will want to own property. So we need new choices in tenure – more opportunities for everyone to have a decent, secure, affordable home. That means increasing the diversity of tenures, it means allowing people to move more easily between tenures and it means putting them on a more equal footing with home ownership, as they are in other European countries.

The Independent reports support for that broad approach from Martin Gahbauer, Nationwide Building Society's chief economist.

Gahbauer said he did not think the era of people aspiring to own a home had come to an end, but added it would be "no bad thing" if renting became a stable alternative. "In Germany, over 60 per cent of the population rent their homes and stay in one rented property for many years, whereas here most people stay in one for six months to a couple of years. If renting makes sense in the long term, it's not necessarily a bad thing," he said.


Newmania said...

So you still don`t seem to want to tell us whether you are buying or renting Sunder.
you see that would be handy because then we would know you meant renting was good for "Other people". The same people tax rises are justifiable for and so on.

Sunder Katwala said...

I have a mortgage.

It is John Healey's speech, not mine, and I posted on it because it was an interesting topic for debate.

If he had said we should be hostile to people who want to buy and push them to rent I wouldn't see any sense in that.

He seems to be saying that there should not be penalties (eg tax free savings opportunities) for those who want to rent rather than to buy; also arguing that he doesn't want the opportunity to buy to only go to those whose parents were home-owners. They seem to me sensible terrain for public discussion.

Personally, I wouldn't want to tell people what they should do in their own personal and family circumstances, nor will we be offering other forms of personal financial advice on the blog!

That is not the same as whether policy should strongly encourage and incentivise a range of different approaches, and how, or whether owner occupation should be particularly incentivised for specific social ends.

13eastie said...

You rightly point out that home ownership started to fall before the recession took hold.

But isn't that because the cause is a combination of more people living alone, more staying with their parents, and fewer who can afford property after an explosion in prices? All of which are a bit of a shame?

The number of homes continues to increase. Property ownership must therefore be being progressively pooled among fewer landlords. Who are they?

It's impossible to project the impact of this over a lifetime without making wild assumptions about social trends and tax regimes, but at first sight reduced home ownership looks like increased inequality. Certainly CGT rules seem to make this so (if this was the point of your tax comment then I agree), but to change them would be unthinkable.

Provision for old age (the most tax-efficient investment) will become an increasingly significant and necessary part of the nation's investment portfolio in years to come. And I accept institutional investors own huge amounts of residential property.

Shared ownership is a very costly way to invest.

But no-one is willing to make guarantees on investments or tax-rules over a life-time.

Isn't greater home-ownership the best opportunity for people to escape state dependency and invest in a simple, low-risk asset over a life-time that will allow people who started with nothing to achieve their goal of total financial independence? (It might sound romantic, but this is actually something that makes people feel good about themselves, and who are any of us to spoil that?)

Sunder Katwala said...


That's a well argued case. There is increasing asset and wealth inequality, partly because of the property price boom, partly also because of the way increased income inequality in the 1980s has an impact over time.

I felt Healey's argument was a balanced one, and it did not seem to me hostile to the idea of home ownership, as opposed to thinking also about the implications that not everybody will own, or want to own.

There is a concern with equitable access to the ability to own, and that this should not depend on having parents and grandparents who are home-owners.

Alongside that, there is a concern to be fair to those who prefer to rent, and to think about what parity of status might entail practically.

And the two goals might be compatible: for example, the idea of forms of tax-free saving for renters was suggested both to support those seeking to save for a deposit for home ownership, and as an opportunity to build up assets for renters who do not want to own.