A government White Paper in June – A Fairer Private Rented Sector, with its commitment to “helping Generation Rent to become Generation Buy” and that “in the meantime, renters should have a positive housing experience” – was a sign that the housing crisis was on the political agenda. Rather a lot has happened in politics since, and we can’t say with any certainty yet what our new Prime Minister’s approach to the issue will be.
But we can examine the problems ‘generation rent’ faces. What can research, which has dug into the detail, tell us about the policies needed to tackle them?
The scale of the problem
There are many ways to count the numbers of people affected by the housing crisis, but none that suggest ‘crisis’ is the wrong word to use.
According to figures from Crisis in 2018, based on our data, housing need is affecting 4.75 million households across Great Britain. People in housing need are defined as
- ‘concealed’ households – individuals or families living in other households who want a place of their own
- people in overcrowded accommodation
- those facing serious affordability problems
- households that have serious problems with their standard of housing
- families in unsuitable accommodation (no outside space etc.)
In 2021, Shelter’s Denied the Right to a Safe Home report, using YouGov data, estimated that “17.5 million people are trapped by the housing emergency”.
Research published in our Insights report 2021 said “young adults are finding it increasingly difficult to buy their first property because of a combination of factors such as high prices, debts (often due to the cost of higher education), delayed family formation, less welfare provision and difficulty in finding secure, well-paid work”.
And in the Resolution Foundation’s words: “Hypothetically, it would currently take a 27-30 year old first time buyer around 18 years to save for a deposit if they relied solely on savings from their own disposable income (up from three years two decades ago).”
The effects on health
It’s not just the intergenerational unfairness that makes this a significant social problem, though. Research has highlighted some serious knock-on effects.
We know unaffordable housing is bad for our health, because plenty of existing research says so. More recent work, though, suggests the problem could be worse than we thought, because the traditional measure of unaffordability isn’t sophisticated enough: most research looks at whether a household spends more than 30% of its income on housing.
Will Raderman, Nina Rogers, and Emily Murray point out that this measure includes higher-wage households who will be less affected, by definition. Their income being greater means their remaining 70% (or less) will be bigger in absolute terms than that of poorer households.
Instead, they used the 30/40 measure, which considers housing unaffordable when someone in the bottom 40% of the income distribution spends over 30% of their income on housing. With this, the links between unaffordability and poor health are stronger.
That research examined people’s self-reported health – but it’s also possible to use objective health data to examine health and housing. Amy Clair and Amanda Hughes used biomarker data to do just that. Biomarkers allow researchers to look at factors such as people’s blood pressure, cholesterol level, and – in this case – the amount of c-reactive protein in the blood, an indication of how well our bodies deal with infection and stress.
They found that private renters have significantly higher (i.e. worse) CRP levels than owners with a mortgage. (Type of housing is important, too: people living in detached homes had lower CRP than those in semi-detached or terraced houses, or flats.) An unexpected result was that higher housing costs were associated with lower CRP, but it may be that the health benefits of getting better quality housing (by spending more) outweigh the damaging effects of financial strain.
In terms of psychological impact, the charity Mind looked at seven years of data, and found that people living in both the social rented sector and private rented sector are significantly more likely to have experience of poor mental health than homeowners.
Social effects
On top of the health impact, there’s a lot of evidence that the housing crisis is increasing inequalities, too, exacerbating an already deep-rooted social problem.
Research by Susan Smith, William Clark, Rachel Ong ViforJ, Gavin Wood, William Lisowski and N. T. Khuong Truong talks of owner-occupation being “in retreat”. Half a century of house price rises, they say, have “turned residential property into the largest capital asset in the investable economy, exceeding the combined value of equities, commercial property, agricultural land, forestry and all gold ever mined”. Since the beginning of the 21st century, though, owner-occupation has fallen in Australia (from 69% to 61%), the US (67% to 59%) and the UK (75% to around 66%).
The likelihood of renters never having owned has increased, largely because under-35s are being priced out of homeownership. At the same time, “the proportion of owner-occupied home equity owned by the top 10 and 1 per cent by housing wealth has increased… For the first time in 50 years, a growing proportion of households – especially the young, but also those in older age – hold no property wealth at all.”
Not only that, but while those young people are facing the prospect of perhaps never getting on the housing ‘ladder’, they’re also facing rising rents and more precarious tenancy, because “individual landlords … are being edged out by a new generation of institutional investors focussed on rental income as well as capital gain”.
The importance of family wealth
Sait Bayrakdar, Rory Coulter, Philipp Lersch and Sergi Vidal also compared experiences in different countries – in this case the UK and Germany – and found that becoming a first-time buyer in early adulthood in Britain is more common than in Germany, but also more influenced by socio-economic status. Germans tend to buy their first property around the time they have their first child, while Britons do it earlier, when forming partnerships.
But perhaps the most significant difference between the two countries is our view of renting. In Britain, owner-occupation is seen as a mark of social success, while renting, particularly in the social sector, is more stigmatised. In Germany, it’s common to rent for a lifetime, renting carries far less stigma than in Britain – and it’s easier. There has been greater public and, increasingly, private investment in rental housing in Germany since the 1950s – and tenants’ rights are protected by indefinite contracts and rent controls. In Britain, the social housing sector has shrunk dramatically – although our mortgage market is more competitive, while Germany’s is conservative, predominantly targeted at better off social groups.
A report by the Resolution Foundation found that people with wealthier parents are more likely to buy their own place, and that the importance of parents owning property has been increasing. “At the age of 30,” the authors Stephen Clarke and John Wood say, “those without parental property wealth are approximately 60 per cent less likely to be homeowners than people whose parents are homeowners. … In the 1990s and early 2000s 30-year olds with parental property wealth were approximately twice as likely to be homeowners as those without. From the mid-2000s we estimate that those with parental property wealth were almost three times as likely to be homeowners.”
Perhaps it is little wonder, then, that some young people appear to be giving up on the idea of ever owning a home. Paul Sissons and Donald Houston found that there was “increasing acceptance of long-term renting”, and that while local house prices were becoming a barrier to homeownership, people were not seeing moving to a cheaper area as a solution. Instead they were “reducing their aspiration for homeownership” or “staying put and saving”.
It’s not just the young
It’s not just the youngThe University of Oxford’s Migration Observatory points out that the housing divide is not only between young and old. Carlos Vargas-Silva and Mariña Fernández-Reino’s Migrants and Housing in the UK: Experiences and Impacts report says:
- foreign-born migrants have lower home ownership rates than people born in the UK, and are more likely to be in the private rental sector
- recent migrants are almost three times as likely to be renters compared to other migrants
- migrants are more likely to live in overcrowded housing than people born in the UK, especially in London.
What can government do?
We know that housing policy can change people’s ability to rent or buy – and thus their lives as a whole. Research by Nils Braakmann and Stephen McDonald, for example, looked at the coalition’s cut to Housing Benefit in 2011. This had the effect of lowering house prices – which happened immediately after the policy was announced, suggesting that prices adjusted to expectations of lower rental returns.
The effects, they said, “were concentrated in flats, which are more likely to be rented by those on housing benefits, and had stronger negative effects on house prices in areas where demand is lower relative to supply. We also find some evidence that the benefit cuts led to HB recipients being more likely to move home than other renters.”
In other words, Housing Benefit is a difficult policy to get right: it allows recipients to rent properties they otherwise couldn’t afford, but at the same time they increase property prices, which makes buying more difficult.
So, what new things might governments do?
Potential housing policies
Andy Green used 22 years of our data to devote a chapter of his book, The Crisis for Young People, to homeownership. He found that “house prices are now so high, particularly in the south of England, that fewer than a quarter of young people under 30 are able to buy homes – and most of these need help from their parents”.
But he also had concrete policy proposals to tackle the issue:
- introduce capital gains tax on house sales
- reform council tax
- waive stamp duty for retired people
- regulate the rental market.
Main homes are currently exempt from capital gains tax, but it is imposed on the sale of other assets worth over £6,000. This would reduce house prices – but it might encourage older people not to sell their homes, reducing the number of properties for sale. This could be solved by revaluing properties and increasing council tax bands so the tax is more proportionate to property values. If the government waived stamp duty – the tax currently levied on all house sales over £125,000 – for retired people, older people would be encouraged to downsize to free up more family homes.
Finally, he says, “A new Housing Act could re-establish fair rent tribunals in big cities, provide longer notice periods for tenants, and make it mandatory for all landlords to be licensed and for councils to inspect their properties on a regular basis.”
The need for social housing
Housing and homelessness charity Shelter says, “We need many more social homes built to end the housing emergency. But our housing system has too many barriers that stop getting the most affordable tenure of housing built.” Its Unlocking Social Housing Report calls for measures such as “£12 billion of investment p.a. to build 90,000 social homes a year”, and reform of the 1961 Land Compensation Act to help councils buy the land needed.
Will Raderman, Nina Rogers, and Emily Murray’s work supports this idea. Their blog specifically mentions “more investment in social housing and less prohibitive land-use policies” as ways to build up housing supply.
The House of Lords Built Environment Committee is also in agreement. Their Meeting housing demand report says, “Many tenants who would previously have been in social housing are now living in expensive private rented accommodation, with their rents subsidised by housing benefit, which is costing the Exchequer around £23.4 billion per year. We suggest that a transition to spending more on the social housing stock would address this problem over time and help meet the most critical needs. We ask the Government to reform Right to Buy to enable the replenishment of the social housing stock.” (The committee also published Understanding Society’s written evidence on housing demand alongside their final report.)
Political interests?
As a footnote to this, it’s interesting to see that research using Understanding Society can also show us the political effects of housing reforms. The 1980s policy of giving council house tenants the right to buy their property, for example, was thought to make people more conservative, but actually appears – as one ingredient in a long-term shift in people’s political views – to bring them closer to (New) Labour.
With an election expected in the next year or two, will one of the UK’s political parties commit to new social housing in light of this? We wait to see…
Authors
Chris Coates
Chris is Research Impact and Project Manager at Understanding Society
