An Englishman’s Castle: his rented flat?

25th Sep, 2015

Another week, and the housing crisis has intensified a little further, as demand for (and no doubt the cost of) housing in the UK rises.

In the 1960s, only around 45% of people owned their home – either outright or with a mortgage, and much of the remainder was taken up by socially rented accommodation. As affluence grew throughout the second half of the twentieth century, home ownership became a realistic ambition for many, encouraged wherever possible by government policies such as Right to Buy. Today, 65% of people live in homes which are owned, and the proportion renting socially is now lower (16%) than those renting in the private rental sector (17%).

UK Housing Stock Composition; Institute for Fiscal Studies

UK Housing Stock Composition; Institute for Fiscal Studies

A failure to build enough homes since the 1980s, coupled with population growth are among the most obvious – and important – reasons behind the current crisis, driving the growing gap between the number of new buildings completed each year and the number needed. But welcome though the government’s recently announced target of 1m new homes by the end of 2020 is, simply chucking bricks at the problem may not be the solution. Other complexities, beyond the supply and demand disparity, are helping put home ownership out of reach for many.

Restrictive planning laws – designed in the 1940s and 1950s to prevent urban sprawl concentrate populations in now overcrowded (and prohibitively expensive) urban centres. Older people are the most likely to own their own homes, but over half are under-occupied – one factor in the rise of loneliness and isolation amongst the elderly. Not all would be willing to downsize but even those who are find insurmountable obstacles in the lack of adequate alternatives – and with many over-50s waking up to the possible cost of end of life care, many are reluctant to part with their most valuable asset. Elsewhere, so-called affordable housing (housing priced at 80% of market rates) is neither affordable for prospective buyers nor profitable for developers. The result? Not enough gets built.

Affordable housing is neither affordable for prospective buyers nor profitable for developers.

Polarisation of economic fortunes and the labour market means that demand is concentrated in the South East, London and a handful of other hotspots, while populations decline in poorer areas such as the North East (where housing, correspondingly, remains affordable). Buy to let and second homing concentrate new and existing properties in the ownership of people looking to get further up the ladder, rather than simply onto the first rung.

The question of where we live is fundamental to virtually any business sector, and the current situation creates a number of opportunities for commercial organisations to respond to and help alleviate demand. Financial services need to develop and communicate propositions that enable older people to realise the value of their housing while maintain security into the end of life. Twentysomethings stuck at home with their parents will need affordable Third Space venues to enjoy leisure time without mum and dad getting in the way (and the parents will need a break too). The rise of single person households – in smaller homes ill-equipped for large gatherings – are a key driver of multi-generational family breaks.

Perhaps the dream of home ownership is one that Generation Rent (those millennials currently aged about 21-34) will need to wake up from.  Only 24% of 26 year olds own their own home, while at the same age Generation X (those born from the late 1960s to the early 1980s) could boast 40% ownership. As the aspiration of home ownership has grown in the past few decades, the rental market is considered a poor (yet overpriced) relation. For Generation Rent, this attitude may need to change – although current experiences of renting need to change in tandem.

In many respects, the solutions to the current crisis may lie as much in policy as they do in construction.


All this and more was discussed at our Trends Breakfast held at The Happenstance on 24th Sept 2015. You can download the slides from that event here.