What should we do with the homes we already have?Posted: August 1, 2022 | |
Originally published as a column for Inside Housing.
Never mind the supply of new homes – should we be thinking more about the ownership and distribution of the ones we already have?
That’s the intriguing question at the heart of a new discussion paper from the Joseph Rowntree Foundation (JRF) that challenges the orthodoxy that new supply is the key to fixing the housing system.
The problem is that, while supply has to be part of the solution, it takes time to have an effect and people who need affordable homes do not have time.
Even if we built 300,000 new homes a year in England (an even bigger if as Tory leadership candidates pander to their MPs and members) that would have to be sustained for years to have an impact on prices. Even if that included the 90,000 social rent homes a year advocated by campaigners, and even if no more were sold off, it would take more than a decade to house families on council waiting lists that significantly understate demand.
So why not look instead at the 25 million homes that already exist? As Darren Baxter-Clow, Joseph Elliott and Rachelle Earwalker argue in the paper, recent history shows that rapid changes are possible.
Almost 1.9 million council homes have transferred into owner-occupation thanks to the Right to Buy in England over the last 40 years, and perhaps a third of those sold have subsequently been bought by private landlords.
Meanwhile the private rented sector has more than doubled in size this century and private landlords now rent out significantly more homes than councils and housing associations.
This graph from the report puts those trends in context:
As they point out, the private rented sector has grown by 1.4 million homes since the Global Financial Crisis in 2008. Reversing that by transferring them to a different tenure could boost owner-occupation by nine percentage points, more than offsetting its decline, or increase the size of the social sector by a third.
If that sounds far-fetched, I’d look a bit further back in housing history for a parallel. Estimates vary but in 1914 80 to 90 per cent of the housing stock was private rented. The expansion of owner-occupation and council housing in the mid 20th century came about not just because of new construction but also because so many private rented homes transferred – either directly through sales or indirectly through redevelopment and slum clearance.
The discussion paper argues that looking afresh at redistribution could help deliver a higher rate of owner-occupation, a much larger pool of sub-market rented options and a smaller, higher-quality and better managed private rented sector.
But it argues that this will not be possible without action across a whole range of policy, including financial regulation, taxation and the enabling of alternative forms of investment that challenge a culture of property speculation.
Arguably, private landlords are already beginning to sell up in response to the withdrawal of tax reliefs and the prospect of renter reform.
That is only likely to accelerate thanks to the huge costs to private landlords of meeting the Decent Homes Standard and the EPC C energy performance rating by 2030.
Options to support what the discussion paper calls ‘the equitable redistribution of homes sold off by private landlords’ could include allowing local authorities, social landlords and community groups to intervene directly in the secondary market to buy homes, giving more support for people to build up their wealth and access ownership and creating routes for landlords to socialise their homes.
Other possibilities include the expansion of the community housing sector and a new Right to Buy for private renters.
The discussion paper has met with a predictable response from landlord groups (the National Residential Landlords Association argues that reducing the size of the private rented sector would be a ‘disaster’ and increase rents) and will provide further evidence for the Telegraph that there is a ‘war on buy to let’.
The JRF rejects claims that rents will rise as supply falls on the basis, outside of build to rent, most landlords did not add to supply in the first place, and that the overall supply of homes will not fall.
However, it acknowledges that the transition will need to be managed carefully to avoid negative impacts on the poorest tenants reliant on the housing benefit market and homes in multiple occupation.
It’s not hard to think of further unintended consequences to add to that list or of other potential problems, perhaps most urgently the housing options available to homeless people.
One big issue that is not addressed is that landlords who want to transfer their stock already are already switching to the holiday and short-term let market. Regulation of that sector will also be needed to prevent a trend becoming an exodus.
That declining supply may already be pushing up rents. Different surveys are currently suggesting very different annual rent rises but a report by Capital Economics this week forecasts that rents will grow at twice their 2010s rate in this decade.
There must be doubts about how much private rented stock would social landlords really want to buy – especially if it is older and scattered across different blocks.
And there is another way to look at distribution. For all its faults, the private rented sector is very good at using housing space efficiently (aka packing tenants profitably into small spaces) but home owners have every incentive to buy as large a home as they can afford regardless of how much space they need.
Finally, although the report rightly calls for action on a wide range of fronts as part of a strategy to ‘proactively shape the market’, our machinery of government is not exactly noted for its ability to work strategically.
However, this is a discussion document that is just the start of a coordinated programme of work on the ownership and distribution of homes. Its great strength is that it considers the housing system in the round, including the fiscal and regulatory systems that underpin it.
The search for answers has to start with asking the right questions.