William Humphries Associate Fellow at the liberal conservative think tank Bright Blue
It is almost universally acknowledged that the UK is in the midst of a housing crisis, and the figures published yesterday provide yet more evidence of the extent of the problem.
Nowhere is the crisis more acute than in the South East of England, and particularly London, where average house prices are now a staggering nine times average earnings. In May 2016, the Labour candidate Sadiq Khan swept into office as Mayor of London having promised to make the election a ‘referendum on London’s housing crisis.’ Six months later it remains to be seen whether he will be able to solve this behemoth of an issue.
Across the country concerns over housing are continuing to creep up the political agenda. The unavailability of affordable housing for those wishing to buy, once the mainstay of middle class aspiration, has pushed more and more people into long-term private renting. Since 1990, the number of households privately renting has more than doubled from fewer than 2 million to over 4.3 million today. Meanwhile the average age of first-time buyers has increased from 31 to 33 over the last decade.
The biggest obstacle for aspiring homeowners is the difficulty of raising a deposit. Since 2000, real median wages have increased at an annualized rate of 0.8%, while real median house prices have jumped yearly by an average of 2.7% – in spite of the 2008 financial crash that supposedly brought the UK housing market to its knees.
The discrepancy between wage and house price growth is alarming, and the difficulty of saving has been exacerbated by an average rise of 17% in rent across the UK’s private sector over the last six years. Even if aspiring homeowners consistently save a modest percentage of their income towards raising a deposit, the goalposts are often shifting faster than they can catch up. It is therefore unsurprising that the percentage of private renters who believe they will one day own their own home is falling. And yet home-ownership remains the goal for most Britons – with two-thirds of non-homeowners hoping one day to be able to call a place their own.
The divide between those owning and those renting could hardly be more pronounced. Over half of owner-occupied households in England have more bedrooms than are currently in use. Meanwhile only 13% of privately rented households report under-occupancy, while rates of overcrowding have more than doubled since the mid-1990s. Of course, it makes little sense to rent more than you need; however, these statistics are testament to the sort of divide that is widening in our housing market.
It is no secret that the main reason for this crisis is a chronic lack of housebuilding. The number of new homes added to the housing stock each year has been consistently falling since the 1980s, even as the population has grown. The UK now needs to build around 250,000 new homes each year simply to keep up with rising demand – a target unlikely to be met. This continuing undersupply will only exacerbate the underlying problem.
In her first speech as Prime Minister, Theresa May acknowledge that ‘if you’re young, you’ll find it harder than ever before to own your own home’. She was right to highlight the issue, but it is now the responsibility of her and her ministers to reverse this trend by addressing the supply-side shortages that have plagued the UK housing market. If the government does not act, voters will punish them.
A third of private renters admit to changing the party they vote for between elections, making them a volatile and important demographic for any party seeking control at Westminster. As the sector grows both in size and discontent, elections may be won or lost by how the parties respond to the aspirations of these voters.
Once seen as a tenure of transition into homeownership, private renting has increasingly become the last stop for many Britons. Politicians need to wake up to this reality and help voters get a foot in the door of their own homes.
William Humphries is an Associate Fellow of Bright Blue