Tuesday 2 April 2019 8:06 am

Generation Rent needs more help to buy property, not Help to Buy

Britain is not yet a nation of renters – but it’s getting there. Half of children are now born in rented accommodation, versus a third back in 2003-4. The number of families renting with children has doubled in a decade, according to the insurance provider Royal London.

Meanwhile, new analysis shows that the government’s Help to Buy equity loan programme may have driven up house prices for first-time buyers – as economists widely predicted.

Read more: Rent rises: East London outpaces West London in rental growth race


The scheme has driven the construction of more new-build homes, but during its existence, the price of new builds has risen by 51 per cent, versus 26 per cent for older properties. This suggests that Help to Buy is helping some people onto the property ladder, while pulling it out of reach for others.

I’ve spent almost a decade arguing that Britain urgently needs to solve its housing crisis, both by building more houses, and finding ways to promote home ownership within the existing housing stock.

Whenever you make these points, people will pop up on Twitter to tell you that Britain needs to get over its weird preoccupation with home ownership, and learn to love renting like they do on the continent.

But this argument doesn’t hold up at all. In fact, Britain’s home ownership rates are the fourth lowest in the EU – it’s the rent-happy Germans who are the outliers with the lowest ownership rates compared to every other nation.

Yes, people who want to rent should be able to do so – cheaply and securely. But the evidence is crystal clear that home ownership remains a near-universal aspiration.

When the Centre for Policy Studies polled young voters on their policy priorities, we found that making housing more affordable was the most popular way that government could improve their lives. And they overwhelmingly wanted that to be done by making it easier to own. But the most popular answer to the question “when do you think you will you be able to afford it?” was “never”.

In other words, the politician who tells young voters just to get over their preoccupation with renting is going to get a rather Anglo-Saxon response. In fact, apart from Brexit, this might just be the most urgent problem our leaders have to wrestle with.


So what should they do?

Britain obviously needs to build more homes – and the number is rising, albeit from a criminally low base.

But we also need much more imaginative thinking about how to tilt the balance towards home ownership.

The story of the housing market in recent decades hasn’t just been about a precipitous fall in the proportion of young people who are able to own. Tax and pension changes under Labour massively incentivised savers to pile into the second home market – a trend reinforced after the financial crisis, when tighter mortgage rules and lower interest rates meant that only those with assets could buy houses, and property was the only asset offering a decent return.

We’ve proposed that, to tilt the balance back, landlords who sell to their tenant should – for a short period – be offered a capital gains tax break worth £10,000 on the average property. The tenant would receive a much greater tax break to act as part of a deposit.

Read more: Persimmon share price dips in wake of Help to Buy contract fears

But there’s plenty of scope for more action. For example, pensions auto-enrolment is one of the great policy success stories of our time. But it seems strange to encourage people to build capital for half a century down the line, while denying them a stake in society right now.

So why not allow people to redeploy their pension savings to help them onto the ladder? It’s not as if they’d be losing out in the long run.

In the long term, such schemes will only work if accompanied by a sustained surge in housebuilding. But in the short term, they can at least help to stem the tide of our unwanted rental revolution.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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