Tories want young to rent, not buy: Ministers consider switch away from home ownership

Ministers are considering a historic policy shift that would call into question the Tory ideal of universal home ownership for the first time in more than a decade.

The Treasury, Environment Department and Prime Minister's Policy Unit are studying ways of using tax breaks, grants or 'soft credit' to persuade banks, building societies and pension funds to invest on a large scale in the private rental market. The long-term effect could be for many more young couples to rent their first homes for several years, perhaps as long as 10, rather than buy.

The tentative proposals being discussed in Whitehall would, if adopted, presage a change in the culture of home ownership that characterised Thatcherism.

One government source said he could not see the Tories abandoning the ideal of a 'property- owning democracy', in which every family eventually owns its own home. But younger home- seekers should be able to rent well managed properties for several years rather than buy their first homes as a matter of course.

'We are not talking about going back to the Rachmanism of the Fifties,' the source added. 'We are talking about serious, responsible money going into well managed properties.'

Private rented housing has declined steadily from 90 per cent of all homes at the beginning of the century to about 8 per cent today. Sixty-nine per cent of today's homes are owner-occupied, three per cent are owned by housing associations and 20 per cent by the public sector.

The percentage of housing that is privately rented compares with 45 per cent in western Germany and more than 30 per cent in North America.

Limited plans for incentives to the rented market have been discussed before - notably in the summer when ministers eventually rejected proposals for encouraging building societies to buy empty homes and rent them out.

But the new and more wide- ranging proposals have been given fresh impetus by Mr Major's drive for a fresh domestic agenda in 1993. Some ministers argue that the costs of an incentive scheme could be offset by a corresponding reduction in the costs of public housing and in the annual grant paid to the Housing Corporation to run the housing association budget.

Until recently, potential investors in rented housing have been deterred by fears that the return of a Labour government - tightening protection for tenants - would make such investment hopelessly unprofitable. Now, however, the indications are that Labour would not reverse deregulation measures in the 1988 Housing Act.

But ministers recognise that the institutions would need further incentives because the return from rented housing is less than that from other investments.

Sir George Young, the housing minister, hinted last week that tax concessions or cheap loans to private landlords could help to ease homelessness. While an estimated 600,000 homes stand empty 35,000 families were accepted as homeless by local councils in the third quarter of 1992 and 65,000 families were living in temporary accommodation.

Government planners envisage that, if the more wide-ranging scheme went ahead, the housing associations could run properties for the financial institutions.

Under a much smaller scale scheme that could act as a model, Sir George will next month announce 17 designated housing associations to which landlords can apply to manage properties they want to rent out.