There’s no Blitz spirit in economics. When times are hard, we tear each other apart. Often, immigrants are singled out for stick. Sometimes, as in the George Osborne years, it’s the jobless needing social security who take the hammering. Such minorities are again attracting grief: witness the Telegraph’s unhinged fixation on disability benefits.
But as the big squeeze drags on, it seamlessly morphs from an energy crisis to a food inflation crisis and now a cost of housing crisis, and misery creeps up the social scale. Suddenly, neither the unemployed nor any other minority group feel like a big enough target for all the rage.
So instead of “all in it together”, we’re all tearing lumps out of each other. As mortgage costs rocket to the point where they will eat up a quarter or a third of income for many, renters turn to homebuyers and say, with a scarcely suppressed smirk, “welcome to our world.” Mortgagors howl in reply: “well, at least renters can always just move.”
The overlay of the buying/renting divide with the fissile generational schism between millennials and Gen Xers makes it more explosive. Poke around Twitter and you can even find people trading blows as to which is meaner: the (outrageously restrictive) government loan to help impoverished borrowers with mortgage interest or the (frozen) Local Housing Allowance which no longer pretends to cover rent.
By instinct, I’m with the renters. For too long, they’ve been paying far more than someone else’s mortgage to live in a house that’s slowly becoming the same someone else’s asset. Or worse, they’ve been paying more than a mortgage to someone without a mortgage who has simply sat back and enjoyed all that rent—plus long years of galloping property prices.
England’s Thatcher-era laws (which the Conservative government is now finally rewriting) are so loaded against tenants that they can be “moved” at short notice for no reason. That doesn’t happen to homebuyers. Despite some of the noise, it shouldn’t be forgotten that they, too, are generally free to “just move”. Swapping to a cheaper property will be painful, for sure. But the similar pain afflicting longstanding tenants on being booted out of their family homes barely registers in the political discussion. Which only underlines how slanted it has become.
So, renters are reasonably riled when they hear voices—never raised against the huge gap between rent and housing benefit allowances—suddenly making blank-cheque demands for general mortgage tax relief.
Still, I can see some principled reasons why the sudden plight of mortgagors might merit special attention—and myriad political reasons why it almost certainly will.
Taking the politics first, sheer weight of numbers is the first thing on their side. Despite becoming substantially thinner on the ground in the 21st century—with roughly a 10 percentage point swing out of homebuying and towards private rental across the working-age population—there are still far more mortgagors than private tenants overall. Adding in social tenants evens things up, but they face rather different housing issues.
Moreover, both renting groups—one skewing heavily young, the other heavily poor—cast their votes less often than the home-buyers of Middle England: Ipsos estimates their turnout at 51-52 per cent last time, against 64 per cent for mortgagors. Then there is the political map—private renters are clustered in inner London and university towns, both almost locked-down for Labour. By contrast, homebuying workers are the norm in increasingly-marginal commuter towns in the south and the northern small towns that famously flipped to the Tories last time. Put it all together, and politicians are almost bound to jump faster to the concerns of homebuyers.
But there are higher-minded reasons, too, why the unfolding pain of the mortgagors can’t be dismissed. Thinktank calculations point to increases in repayments of nearly £3,000 a year for many, a sudden rise at a rate that outstrips inflation in rent or anything else, and one which will gobble up a fifth of total disposable income for some.
Moreover, if house prices take a serious dive then stretched buyers can end up with one problem that renters don’t have to worry about: negative equity. Once that happens, “just moving” isn’t an option, as the bank wants a plan for getting its money back.
Naturally, the reach of the negative equity nightmare depends on how far prices drop. We’ve grown used to thinking that any decline will be modest and temporary. After all, in London at least, even the global financial crisis now looks like little more than a blip on the long rising tide of prices.
But predictions about future market movements are a special category of proposition. Ordinarily, claims about the world get more certain as they are verified by experience. But if you predict a market crash that doesn’t arrive, it might well mean you’ll be even more right when it does. The great bubble and bust in Japan a generation ago seemed increasingly unthinkable before it became indisputable: prices halved from the peak and then stayed on the floor for a decade.
Now, it’s not only homebuyers that would need to worry about anything like that happening at speed. With millions of Britons suddenly discovering they were less much wealthy than they’d imagined, wallets would slam shut. The ensuing recession would threaten mass unemployment.
So while there is no good reason for public policy to prop up high prices permanently—gradually reducing them relative to income over time would make society fairer—it can’t afford to be sanguine about a sudden crash. And, whether long-suffering renters like it or not, avoiding one might well require intervening to keep threatened mortgagors in their homes, and contain the nasty dynamics of negative equity.
Any support needs to be carefully targeted, all the more so at a time when there are so many competing pressures on the public finances, not least relieving the human crisis of rising destitution. Nonetheless, some of it may be needed.
What of the politics of getting it done? If homebuying is on the way to becoming as much of a rip-off as renting, then is it too much to hope mortgagors and renters might eventually find common cause?
Should rates stay high, then the real divide will no longer be between them, but between both groups and the very substantial proportion of the population that owns outright. In 2017, renters came out in unexpected numbers for Labour and helped deny Theresa May her majority. Should mortgagors and renters be stirred to a similarly mutinous mood in tandem next time, then the government would go down in spectacular fashion.
Whether a new government would be able to hang onto such harmony, however, would depend on it being able to hack a course through the dark thicket of problems we have slowly allowed to overwhelm the UK property market.
It won’t be easy.
