Miserable housing figures suggest Britons must rein in their obsession with ownershipby Mirren Gidda / June 25, 2013 / Leave a comment
Aspiring homeowners have been dealt a blow by Shelter’s latest housing report. The homelessness charity found that saving for a deposit now ranges from six years for a couple looking outside of London, to a terrifying 30 years for a single person hoping to live in London. Shelter has also created an online calculator so you can calculate just how long it will take you to afford a home.
This report makes depressing reading, as does the news that property prices in London have reached an average of £414,000, according to the latest figures from the ONS. Predictably housing minister Mark Prisk was quick to assert that the government is “building 170,000 new affordable homes across England.” Equally predictably, the shadow housing minister, Jack Dromey stated, “David Cameron simply has no answer to Britain’s housing crisis.”
It is becoming apparent that the government isn’t doing enough to make housing affordable, particularly in London. The “Help to Buy” scheme, an extension of the NewBuy Guarantee scheme, which offers mortgages for those with 5 per cent deposits, has been criticised by the International Monetary Fund for helping to inflate house prices. Mervyn King commented that it’s “too close for comfort” to the US mortgage schemes which caused the financial crisis. Furthermore, the scheme is only scheduled to run for three years, prompting Paul Smee, Director General of the Council of Mortgage Lenders, to demand that the government explain what will happen after the scheme has elapsed.
Despite these schemes, which 30 per cent of young people see as unworkable, house prices remain artificially high, in part due to low interest rates and quantitative easing which has made obtaining a mortgage easy, providing the applicant has a sizeable deposit. The attractiveness of the London property market to wealthy foreign buyers has created what has been termed “a second housing bubble” in central London.
Buyers with small deposits don’t stand a chance. Instead, however, of cursing the banks, bemoaning the previous generation’s profligacy and fuming at whichever political party you oppose, perhaps now is the time for a re-think of British property culture. We are obsessed with buying property, particularly in the advent of the 1980s Right to Buy scheme which resulted in just 9 per cent of the British population privately renting by 1988, not to mention property prices rising.
Look across to Europe and the situation is completely different. In Switzerland, 51 per cent of the population privately rent, in Germany it’s 39.9 per cent and in Denmark it’s 32.8 per cent. Unlike in the UK, there is no stigma towards long-term renting in Western Europe. Renting isn’t “dead money,” it is the norm. So why can’t we think the same?
Part of the problem is that Western Europe’s legislation protects tenants more than landlords. In France, landlords cannot evict tenants during the winter months of November to March. In Germany, a landlord can be fined if their rents are 20 per cent higher than comparable properties during a period of limited accommodation.
That is not to say that the UK isn’t moving in that direction. The 2004 Tenancy Deposit Scheme ensures landlords can’t retain tenants’ deposits for no reason. However, tenants can still be evicted with a mere two months notice and long-term contracts are difficult to find.
Nevertheless we are facing a situation where large numbers of young people are forced to rent for increasingly long periods of time. There is growing impetus for greater legislation against unscrupulous landlords to increase transparency in the renting market. Tenant friendly Germany has a rent index, or Mietspiegel, which allows renters to compare their rent against the average for their area. Were such an index to be implemented in London, along with fines for such profiteers, it might spell the end of extortionately high rates charged by certain avaricious landlords.
The age of the unscrupulous landlord may, however, be coming to an end. The government’s rent-a-room scheme offers homeowners the chance to earn £4,250 tax-free from renting a spare room, providing they meet basic safety standards. Not only does the scheme offer income to cash-strapped homeowners but it creates a new, hopefully less untrustworthy, class of landlords.
Newham Council have introduced compulsory licensing of all private landlords in a bid to crackdown on unsafe housing. Landlords are required to take a Criminal Records Bureau check, offer property repairs and show gas and electricity certificates and legal tenancy agreements, a move which is being seriously considered by other London boroughs.
Turning renting into a long-term, transparent option still won’t make it as desirable as owning a property. After all, renting can never create the same certainty provided by ownership. However, now is the time to re-adjust our expectations and accept that we won’t be able to purchase property with the comparative ease afforded to pre-recession buyers; it may be that some of us will never be able to own a property.
But is this such a big deal? There are a myriad of benefits associated with renting; it enables you to live in central areas that are unaffordable to buy in as well as offering greater flexibility and freedom of movement, which is so useful amidst increasing job insecurity. Additionally, depending on the landlord, “surprise costs” such as boilers breaking down are usually covered, keeping accommodation expenditure fairly stable.
So instead of constantly trying to match the previous generation and becoming stressed struggling to reach the unobtainable, we should accept that we are the renting generation and enjoy the flexibility and the choice that that provides. Far better to rent, than to live, scrimping and saving, with your parents for 30 years…