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By Ben Leonard

Co-Founder, FirstHomeCoach

OTHER FEATURES

Back to the future? A home ownership crisis

With this summer marking forty years since Margaret Thatcher came to power, her legacy continues to invoke both celebration and consternation in equal measure. 

Whilst all Thatcher’s policies were arguably contentious, no truer is this than in housing. Her landmark property legislation, the 1980 Housing Act, sought to address the slump in home ownership in the UK through Right to Buy.

Yet despite its apparent success, home ownership today is back in freefall – a situation that not only serves as a blight on our society but is compounded by the growth in home ownership rates of our European counterparts. 

How have we got here? What can learn from Thatcher’s Right to Buy plan? And how might we as a society approach the problem this time around?

Now versus then

“There is in this country a deeply ingrained desire for home ownership. The government believe that this spirit should be fostered,” Michael Heseltine proclaimed in 1980. 

As the figures show, he was right: home ownership levels during Thatcher’s tenure propelled from 55%, to 71% following the introduction of Right to Buy.

Today, however, levels have fallen back to 63%. For the younger generations, the picture is even bleaker: home ownership has slumped from around 65% to below 30%, whilst the latest English Housing Survey reveals only 25% of social tenants feel they will be able to buy in the future.

Despite initiatives such as Help to Buy and the Lifetime ISA we are, in essence, heading back to 1979. Clearly more is therefore needed to help the young and the least able in society.

Lessons learnt

Firstly, we must consider the pitfalls of the original Right to Buy scheme which, despite being well intended, had major shortcomings. 

The government failed to re-invest proceeds into new housing, as councils did not receive enough of the windfall. As a knock-on impact the policy also drove up social rents, which rose more than 50% relative to income over 10 years. 

The policy also failed to include and engage all those who were eligible to participate; feedback from a 1988 study showed 10% of council tenants were completely unaware of the scheme, whilst the vast majority of the remaining 90% only had ‘sparse and often inaccurate’ information.

Sadly, this information void hasn’t much improved with the recognition of LISAs and Help to Buy loans today not what they should be. Recent research from Aldermore Bank showed 47% and 52% of people respectively did not understand these schemes. 

Furthermore, whilst stamp duty tax receipts fell in 2018 to around £8.7bn they were still almost three times the £3bn of guarantees offered to Housing Associations for affordable housing. As Paul Hackett (G15 Chair) recently said, “a new funding deal is imperative if the Government wants to hit its target of 300,000 new homes a year.”

Unintended consequences 

In creating new policies, products or procedures we need to be careful that any well-meaning initiative doesn’t actually increase social inequality; elements of the Thatcher Right to Buy plan did exactly this, and there are some signs that this is being repeated today.

Take Help to Buy loans, which have been undoubtedly well received by first-time buyers yet also responsible for driving up house prices. Shared ownership and innovations in mortgage borrowing, like family guarantees, also offer hope to buyers.

Yet staircasing runs the risk of limiting buyer mobility, whilst the Bank of Mum and Dad might expand the wealth divide. The reality, therefore, is that young people need more help to buy, not Help to Buy.

This shouldn’t stop new ideas. However, we need to reflect on the lessons of the past and develop a fresh approach to home ownership. This should consider both how industry and government can work better together, as well as fully utilising new technological and data developments. 

Improving housing supply

It is clear more houses are desperately needed (around 300,000 each year, according to the Treasury), yet central government cannot provide these alone.

We therefore need a collaborative approach - between house builders, housing associations, councils, business and government - coupled with new strategies to create the right conditions for housebuilding. Technology is also key. 

Funding initiatives like the Housing Growth Partnership - supporting SME Housebuilders - are a good start and the increased use of modular housing is also promising. The recent announcement that Japan's largest housebuilder is investing into Manchester-based modular home company Urban Splash is a great step forward. 

Alongside this, we also need to help housebuilders - big and small – gain a better understanding of the shape of future demand. In doing so they can be smarter and more adaptable, using data rich insights along with techniques like modular construction to improve the speed of delivery.

These trends should help us get closer to building the right houses at the right time, and dampen the cycle peaks and troughs that undermine long term house building plans.

Accessible financial services

We now live in the data economy, a world in which our digital footprint enables hyper personalisation and – in equal measure – a threat to our privacy. Our data does however hold the keys to more accessible financial services. 

How? Because personalisation enables people to better understand their credit profile, check their affordability and can support smarter, faster savings as well as access to cheaper products and services.

Critically, we can also use a personalised home buying service to drive education and awareness, addressing past failures and taking some of the stress out of the process.

Looking forward

There remains a lot to do but some early signs are promising. The G15 (representing the largest Housing Associations in London) and the Building Society Association both talk about creating better outcomes for homebuyers, fostering greater collaboration and a bigger focus on innovation. 

We need to build on this, to come together as a home buying industry to define a clear vision for greater homeownership. This needs to be shared mission and, critically in my view, must be a social and financial one.

It will need government to play a meaningful role, as it did 40 years ago, albeit this time with a focus on convening and supporting building rather than selling off homes.

*Ben Leonard is co-founder of FirstHomeCoach

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