Housing shortage in England to keep prices and rents high

Margaret Thatcher dreamed of creating a home-owning democracy, conservative, hard- working and frugal. Today, however, the numbers owning their own property in England, if not elsewhere in Britain, is at its lowest level since the 1980s, and it will fall further.

In 2003, the number peaked at 71 per cent of householders, but it has now dropped to 65.3 per cent, according to this week’s English Housing Survey. One in three homes is owned by pensioners, the higher percentage recorded.

In London particularly, prices are ticking relentlessly upwards, fuelled by economic policies that are keeping interest rates far below their historic averages, along with foreign money looking for a safe home.

In addition, chancellor George Osborne, desperately trying to create growth, has added a further stimulus with his funding for lending scheme, which has funnelled £80 billion (€92.8 billion) to lenders to encourage mortgage approvals. More than a few see the seeds of trouble in coming years.

For the first time since the 1960s, the number of singles and families renting privately has surpassed those renting from local authorities – reflecting the increase in landlord numbers, along with the drop in the number of council homes unsold after the Thatcher era.

Yet, the ache to own a home is no less than before. This month, the Halifax building society found that 79 per cent of those aged between 30 and 45 want to do so, believing that home ownership is important for raising children.

Nearly 60 per cent feared that they would never be able to retire unless their owned their own property, while a roughly similar number told of their “nesting syndrome” feelings – that they will never properly settle if their days of renting do not end.

The changing pattern of home ownership has economic consequences. On average, tenants of private landlords are paying out 28 per cent of their gross income to put a roof over their heads, compared with 18 per cent for owner-occupiers enjoying low mortgage rates.

Each tenant is paying £164 a week in rent, while the average mortgage-holder is forking out £142, according to the English Housing Survey carried out for the department for communities and local government.

“The reality of life among 20- 45-year-olds in 2013 is that fewer than half (44 per cent) can claim to own their own home, with 46 per cent renting and 9 per cent still living with their family. Compared to their parents’ generation, where more than four-fifths of parents (82 per cent) own their own home – most of them without a mortgage – the difference is stark,” says the Halifax.

Meanwhile, the situation is going to get more difficult. The Royal Institution of Chartered Surveyors has warned that London rents may rise by a fifth over the next five years, while the figure for those outside London will not be far behind.

"Whatever supply measures the government puts in place, there is going to be an ongoing housing shortage and that will continue to squeeze house prices and rents upwards," Simon Rubinsohn, the society's chief economist told the Financial Times.

However, the young have to shoulder some of the responsibility. “Almost a third said that they wouldn’t be prepared to save for more than three years in order to fund a deposit, when in reality many would need to save for longer than this,” says the Inter-Generational Foundation, an organisation that argues for greater fairness between the generations.

For many young people, however, economic undercurrents, rather than any frivolity on their part, determine their fate. “Squeezed incomes among the younger generation are also making it much harder for many of them to save regardless of how enthusiastic they are about saving,” the foundation says, commenting on the Halifax report.

“Thirty-five per cent said they were unable to save anything at all towards a deposit, while only 15 per cent could put aside more than £50 a month.”

A fifth of young people have given up hope of ever owning their own bricks and mortar.

However, the overall picture through England is skewed.

In Stoke, the local authority is prepared to flog off run- down council houses for £1, while a budding homeowner in the northeast of England can hope to raise a deposit with nine years of saving.

Faced with a £23 billion a year housing benefit bill, the British government wants to build 80,000 so-called affordable homes over the next two years – although the rents that will be charged by local authorities will be far higher than anything experienced before.

Even then, however, it will still be more expensive to rent privately. Tenants of private landlords qualifying for housing benefit get £113 a week from the State towards their bills, while local qualifying local authority tenants need a £73 a week boost.