Making Housing Affordable Again: Rebalancing The Nation’s Housing System
Introduction:
Unaffordable housing is now a prominent feature of the housing system, affecting all tenures and all parts of England. It is at the heart of the wider housing crisis, which encompasses a growing list of related concerns and drivers – such as demographic trends, economic geography, and social disparities – and placemaking issues, such as transport connections, livability, design and the quality of the public realm.
The Commission is aware of how all these demand and supply issues overlap, with housing affordability also shaped by the political landscape, macro economy, state of the public finances, and public attitudes. Housing unaffordability itself also has multiple components, involving personal circumstances and preferences, attitudes and stigma, as well as a range of relationships: between landlords and tenants, lenders and homeowners, housing providers and funders, house builders and planners.
Why is housing affordability so important?
Housing unaffordability is a significant cause of many of the nation’s social and economic ills. It is the lack of affordable housing that so often lies behind the problems of poverty, homelessness, debt, family breakdown, mental and physical poor health. Housing stress also has negative effects on people’s life chances – as well as on local communities, business, the wider economy and public spending. The Commission’s findings show that:
• Rent arrears, debt and financial exclusion are major issues for many – because struggling renters are trying unsuccessfully to pay their rents.
• Improvements in standards of living are being held back – because housing costs for increasing numbers absorb such a large amount of their income.
• Many working people are frustrated that they cannot achieve home ownership – because it is impossible for most tenants to save a deposit when rents consume so much of their income.
• There has been an increase in the number of young adults reluctantly staying with their parents – because the only housing available is in the PRS at rents they cannot afford.
Rebalancing the housing system:
This tenure shift has been accompanied by major changes within the social housing system itself. As mentioned, over two decades the sector has been transformed from supporting social rented housing for low to mid-income households to supporting housing models that are aligned (and priced) to the market. These market-based models require less subsidy but are more expensive for tenants.
Rent rises:
The long-term increase in the amount of incomes absorbed by rent has been a feature of the tenure shift. The median housing costs to incomes ratios was around 8% for private renters in 1980: today it stands at 33%.20 This is probably a product of stringent rent controls which were reformed and eventually abolished in the 1980s. Taking 1990 as the baseline, median rent to incomes were 24% – still significantly below today’s levels. Indeed, if rent levels had stayed the same, then the number of households paying over a third of their incomes in rent would be 60% lower today.
The case for social housing system:
The evidence presented to the Commission was unequivocal: the country needs more homes (and many more affordable homes) and more of the right type of homes in the right places to meet household growth. The critical nuance to this is that we also need many more social rented homes. Without them, improving housing affordability for millions of struggling renters will be an impossible task.
Wider benefits of social housing system:
There are wider benefits of social rented homes to consider. More social rented housing, for example, can help boost the overall supply of housing and spur private development. However, we have only built at rates approaching 300,000 homes a year when social housing providers played a significant role. Since the 1980s the big gap has been the absence of social housing, with private housing remaining fairly stable since then at around 135,000 homes a year.
Conclusion:
The Commission welcomes the growth of build-to-rent homes and wishes to see the sector expand in order to provide additional affordable homes. The government should consider tax changes to remove barriers to growth, including ending the stamp duty surcharge for investors in build-to-rent.
The Commission calls on the government to support (through extra funding) the scaling up of schemes to enable social landlords to buy existing properties and empty homes for social renters, especially non-decent homes in the PRS. Such programs can help improve housing conditions, bring the benefits of regeneration to an area for lower costs than demolish/rebuild models and can contribute to the revitalization and levelling-up of areas outside of cities.
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