Government should focus on renters rather than setting new housebuilding targets
This week’s Budget is set to see more promises from the Government about how they are going to solve the country’s housing crisis, with Theresa May claiming last week that she is making it her ‘personal mission’. Sajid Javid, Communities & Local Government Secretary, has also used a speech to warn that unless the Government succeeds, the UK risks creating a ‘rootless generation’ who never stay in one place and become part of a community.
The Chancellor has pre-briefed that the Budget will contain a commitment to build 300,000 new houses every year. This sounds great and is what experts have been calling for every year since 2010. There is nothing to disagree with in the target, but to seasoned observers, all this talk feels like too little too late. Looking at recent figures highlights how far behind we have been as a nation and makes one wonder where these new homes are going to come from. Last year saw the most new houses built in England since 2007 and the figure was just 184,000. Between 2010 and 2016, the number of new homes hovered around the 100,000 mark, barely a third of what has been needed.
More concerning than the focus on arbitrary targets that look doomed to being missed is that even now, our leaders seem to be fixated on the wrong housing priorities. Rather than pouring money into Help to Buy schemes which, incidentally have been criticised by economists for focusing on demand not supply and helping the wealthy, Ministers should reframe the conversation and accept the fact that for a huge proportion of under 40s renting is now the new reality.
It is a fact that those renting are growing at the fastest rate the country has seen. Just 26% of those aged between 20 and 39 will be on the housing ladder in 2025 and the situation is more acute in London where 60% of the population will be renting within a decade. I co-founded Ideal Flatmate, a new flatsharing platform designed to match up compatible tenants, two years ago and the assumption was that our users would be students and young professionals. Our fastest growing user group however, are the over 35s with 32% of our users now falling within this category. Indeed, the average age of a flatsharer is now 32 and the fastest rising age range is those between 45 and 54, which has grown by 300% in the last five years.
The Government should stop talking down to this growing group and announcing expensive gimmicks to suggest it will become somehow easier to find a place to buy. In reality, especially living in London, unless you are taking home an outrageous salary or can rely on help from the Bank of Mum and Dad, you are not going to be buying any time soon. It is not, as some have claimed, the fault of Millennials, and no amount of abstaining from avocado on toast is going to help!
Instead, the Government should be reversing some of the wrongheaded policies which have hit landlords hard in recent years. These have served only to push up rents and disincentive good landlords from making improvements for tenants.
The first step that the Chancellor should make this week is to reverse Section 24 of the Finance Act 2015, which has imposed a pernicious tax on landlords where tax can exceed income (creating an infinite tax rate). No other business owner would be forced into this situation. It is simply unsustainable and is a dominant factor as to why rents are now going up in the private sector. This is not, as some claim, going to line the pockets of landlords, but to help pay the astronomical bills they are now facing.
If the Government is able to reach the sort of house-building levels it is set to promise this week then we will all be applauding them, but in the meantime it needs to do more to support today’s renters.
