The era in which all Britons aspire to own their own home may be coming to an end, according to the Housing minister, John Healey. In a controversial speech, he suggested that Britain may be moving towards a European model, with renting on a roughly equal footing with buying. He said home ownership had fallen from 71 per cent of households in 2003 to 68 per cent today, noting that this trend began in 2005, well before the recession. "I'm not sure that's such a bad thing," he said.
Mr Healey, a close ally of Gordon Brown, challenged the assumption behind housing policy under both the Tories and Labour since Margaret Thatcher introduced legislation to allow council tenants to buy their homes 30 years ago this month. It led to two million homes being sold to tenants. "You don't need to be a grocer's daughter to know it is not a good idea to have all your eggs in one basket," Mr Healey told the Fabian Society. "Yet not even a drop in the housing market can convince people not to use their home as a store of wealth." He said almost a third of people rely on their home to top up pensions. "The property piggybank is unsustainable and unfair," he added.
The number of first-time buyers getting parental assistance has doubled in just three years to four out of every five.
"Increasingly, those without the property-funded 'Bank of Mum and Dad' are finding it hard to buy homes of their own," Mr Healey said. The gap has widened in the recession, during which the average age of first-time buyers getting parental assistance has stayed the same but the average age of a first-time buyer without parental help has risen from 33 to 37. "As housing wealth is passed from parents to children, inequality is compounded over the generations," he said.
Mr Healey stressed that a similar status between forms of housing tenure did not mean hostility to home ownership, and emphasised a need to find new ways to support those who wanted to become homeowners.
A new model with greater flexibility is needed, he argued, allowing people to change from buying to renting without moving home. "Not all or nothing, but a flexible system which suits the different stages in people's lives," he said. "In the future, I'd like to see it be just as easy to sell equity in your home back to the council, housing association or co-operative, allowing people flexible tenure in the same property that adapts to their circumstances. People may choose to release equity whenever it suits them and build it back up when they can and if they want."
The pre-Budget report, announced on Wednesday, included commitments to consult on how to increase the supply of housing for private rent. Mr Healey said decisions "about new institutions through tax changes and incentives" were likely to be made in time for the Budget next March.
The Government has recently started to allow more building by councils, while housing associations rent 2.2 million homes. Mr Healey wants to expand the number of homes built for private renting by encouraging smaller housebuilders, and seeks a greater role for co-operatives, mutual societies and other third sector providers.
The minister said: "We need new choices in tenure – more opportunities for everyone to have a decent, secure, affordable home. That means increasing the diversity of tenures, allowing people to move more easily between tenures and putting them on a more-equal footing with home ownership, as they are in other European countries."
Gains from rising house prices were tax-free, encouraging people to make their home their main investment, he said. He floated the idea of allowing people who rent tax-free savings bonds "to build assets and store wealth".
He went on: "Renting will be more stable, more secure, of a better standard, and probably more common an option. There will be more and new options for those on lower and middle incomes, those who are less likely to get access to social housing."
Martin Gahbauer, Nationwide Building Society's chief economist, said he did not think the era of people aspiring to own a home had come to an end, but added it would be "no bad thing" if renting became a stable alternative. "In Germany, over 60 per cent of the population rent their homes and stay in one rented property for many years, whereas here most people stay in one for six months to a couple of years. If renting makes sense in the long term, it's not necessarily a bad thing," he said.
Case study: 'Renting is my only option'
Owen Armstrong, 27, rents a property in Dalston, east London. The projectionist agrees that many people no longer aspire to buy a house, because the costs involved make it little more than a pipe dream
"I don't intend to buy a house, because it is actually cheaper for me to rent. The amount of money you have to raise to put a deposit down is ridiculous. A lot of people have to depend on their parents. I can't even imagine having the sort of money required – just the admin costs involved in finding a place are scary.
"I would appreciate the security owning a house brings, but the mortgage is prohibitive. Once you have a mortgage, you are tied down – I still harbour dreams of moving abroad so tying myself to a particular place is not necessarily a good idea; that is a generational difference.
"Trying to find something suitable in a large city, especially if you have a young family in tow, is very prohibitive. In order to afford something, you have to rely on someone else's income and move out towards the fringes of the city, which I would not like to do. In certain areas you are looking at £500,000 to buy somewhere; even then you are not always even getting a whole house. I don't want to lay out that kind of money for part of a house.
"Living in London, I would agree with John Healey's sentiments – it is just too expensive to buy and there are better things to spend my money on. But for a lot of people outside the city, I think the situation is different. They can afford to look around for a place and invest in something they really want to buy."Reuse content