WHAT’S SO WRONG WITH RENTING?

By Hattie Turner

As I’ve reluctantly inched closer to thirty, more and more of my friends have become homeowners. Some have now sold their first home and are onto their second. Consequently, I’ve always felt a little behind, still living in a rented flat while others pick out carpets for their spare bedrooms and discuss the merits of the £800 KitchenAid. My biggest purchase this year has been a milk frothier. I don’t even drink coffee, but just fancied having the odd ‘posh’ hot chocolate.

In the UK over the last fifty years, it’s been the default action for adults of a certain age to buy a home. In fact, since 1971 between 50-75% of employed adults owned a house at any given time. Politicians constantly talk about ‘generation rent’ but in reality, we are still largely a country of homeowners. It’s easy to see why. Living in a home that is yours is almost a cultural symbol of having made it. It’s the yardstick by which others measure you against. Come tooth and nail, people scrape together every penny to achieve that revered accomplishment. This is made easier still when government-backed schemes such as the Help to Buy ISA and the newly introduced 95% mortgages means you can essentially buy an entire house for just a few thousand quid. You just have to forget about the crippling 35-year mortgage repayments.

But more than prestige and financial motivation, living in your own space has many more untold benefits. Autonomy being one of them. If I wished to paint the walls bright pink or nail some questionable artwork to the walls, who’s going to stop me? Perhaps I’d like a husky for a housemate. That freedom, albeit acted upon in a slightly different way to these examples, is very liberating, and can be a huge plus for buyers.

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All these positives point towards buying being the logical choice as a long-term accommodation strategy, but - without wanting to sound too Carrie Bradshaw - I can’t help but wonder whether being a long-term renter is so bad? The average house deposit in the UK in 2020 was £47,838. The average rental price in the UK in the same year was £700 per month, meaning you could live in a rented property for nearly six years before you’d paid the equivalent as those with the deposit. That’s without even considering the mortgage repayments, repairs, solicitor and surveyor fees, possible service charges and leasehold fees, all of which hang heavy on the purse strings.

There’s also the argument that flexibility trumps security. When buying, you’re in essence committing yourself to a long-term loan repayment for many years. You’re planted somewhere for the foreseeable future and it’s difficult to just up sticks and leave on a round-the-world tour without worrying about whether the last-minute tenants you found aren’t disregarding your stringent coaster policy.

Besides, don’t think that flexibility only extends to jetting off around the world to find yourself. And whilst the pandemic has changed this a lot, it also used to make you more employable. Unless you’re happy to let your house out promptly, are you stuck to applying for jobs in your direct vicinity, knowing you can’t be too flexible as a homeowner? Perhaps renters and their adaptability give them somewhat of an advantage.

Channelling my inner Ray Liotta, problems are easy enough to solve as a renter:

‘Fancy exploring a different part of the city?’ ‘No problem, I’m renting.’

‘What about the busted boiler that needs fixing?’ ‘No problem, I’m renting.’

‘What about the sudden work transfer to New York?’ ‘No problem, I’m renting.’

Sure, moving house can be slightly arduous. You might look at your new shower and see a complex algebra puzzle. The previous tenants might have left some little surprises for you in the fridge. But when you’ve got a few suitcases full of clothes and a milk frother, it’s not all bad.

Hattie Turner

Hattie Turner

LEVELLING THE PLAYING FIELD FOR HOME OWNERSHIP

By Emma Best

I grew up during the era of Blair on an estate in a deprived area of London. What surrounded me was a generation of vulnerable families trapped on the drip tap of the state, demoralised and resigned to the constraints of life supported by welfare. This shaped my view of politics and the importance of empowering people through policy that, at the earliest point, gives them the opportunity to control their future.

My proposal aims to do this through a reformation of tax policy for young people that would not only make home ownership accessible but also incentivise employment. Under the working title of the ‘Youth Boost’ this policy presents the opportunity to truly put home ownership in the grasp of all young people.

“The cost of living for young people is made more expensive by government intervention and that by taking less away from young people through the tax system, then you would help them save for things like a house.” Chloe Westley

With strong voices in government and throughout the Conservative Party recognising the need to accelerate homeownership and not allow tax to make life unduly hard for young people, the time is right to pitch this policy to sympathetic ears.

The Youth Boost would effectively eradicate basic rate tax for under 25s up to the value of £10,000 by allowing them to claim back these payments for a deposit on a home. Once £10,000 had been accumulated they’d begin to pay basic rate tax again and any higher rate tax would still be paid in a tax year (even if the £10,000 cap had not yet been reached).

While schemes such as ‘Shared Ownership’ and ‘Help to Buy’ opened up the housing market to many who previously found it unobtainable they still exclude those living week to week, or month to month, unable to save at all. Help to Buy, whilst extremely successful, has faced criticism for inflating prices within the new-build market; putting money in the hands of developers as opposed to those looking to climb onto the housing ladder. The Youth Boost would avoid this and with Help to Buy winding down to its end in 2023, now represents the perfect time to invest in this scheme which would truly stimulate social mobility. 

Why £10,000?

The average 18 – 24-year-old earns £22,059 per annum. Over seven years paying tax on this salary your total tax bill would be £10,871. Via a 95% LTV mortgage or 5% deposit shared ownership scheme that would provide a budget to look to buy at £200,000 or, if in a couple, £400,000. The average price of all UK properties is £239,000 (Office for National Statistics, 2020) which puts starter homes within budget. With this price bracket in mind developers will more likely begin to bend towards the needs of young people. The feasibility of young people entering the housing market in large numbers with their purses (or wallets) full also means developers will look to appeal to their needs. In the 80s home ownership sky-rocketed from 57% to 68% by the end of the decade thanks in much part due to Thatcher’s revolutionary ‘Right to Buy’ policy. By the early 2000s home ownership was over 70% but has consistently dropped with the emergence of generation rent. On the watch of a Conservative government we cannot allow this to be our legacy.

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Stable ties to a community create a wide-ranging plethora of social benefits and also increase one’s personal and financial security. In 2020, research released by Halifax showed that homeowners were up to £3,700 better off per year than renters, demonstrating that in the modern age the financial benefit of home ownership is not only realised in the future but also in the here and now.

The existence of large transient populations must be built on the desire to be free to move and live wherever – not an inability to form stable roots through financial insecurity. One of the main benefits of this policy is that it also incentivises entering the working world. For young people the employment market is often unattractive with a prominence of vacancies in inflexible, unstable and low-paid positions.  While there is no silver bullet for tackling the 7% fall in youth employment caused by the coronavirus pandemic, one issue that must be addressed is motivation to work which the effective pay- rise of this proposal provides.  

The big question, of course, is how can we afford it? It’s all well and good talking of spending money to solve an issue – but investing amidst the backdrop of recession recovery is another thing. We must invest in certain areas though, and as we look to ‘build, build, build’ our way to economic stability, this policy would certainly help stimulate the construction industry. The eligible ‘Youth Boost’ accumulated for one person over a year could range from £1 - £7,498. To come to some idea of what this means on a year- to-year basis I’m applying the tax payments from an average salary for under 25s to all 3.51 million under 25s in work. That theoretically presents a total of £6.8bn per annum (0.8% of the UK’s £828bn tax bill) that could – at some point - be reclaimed. The UK currently pays £783,734,400 in unemployment benefits to under 25s each year and this potential boost to employment could help reduce these costs significantly.

Additionally, the UK foots a bill of £18bn per annum for housing benefit. Home ownership provides families with financial security for generations and in decades to come the uplift in asset ownership could foreseeably cause a dip in these payments. The cost of Help to Buy has been £16.05bn so far. The Youth Boost could replace it with previous investment into Help to Buy redirected. It also is true that Help to Buy could begin to realise returns in the future which could be re-invested.

The government could look to separate the ‘Youth Boost’ tax payments and allow the UKGI to manage these in order to maximise potential of the fund before it is paid out. No doubt the scheme would have to be identified as a flagship policy worth investing in. However, even if this policy launched tomorrow claims for £10,000 from every young person in the country would not be made overnight. There’d need to be further modelling to project scale of claims in coming years, but this scheme could be steadily invested in over the next few years in preparation.  

Margaret Thatcher was a trail blazer who smashed down the barriers between class and home ownership with Right to Buy; the foundation of social mobility for a whole generation. It is within our grasp, as modern Conservatives, to take the next revolutionary step. I would implore you to consider the wave of change this proposal could allow for where the surface has only begun to be scratched in this article.

Emma Best

BUILD, BUILD, BUILD – FOR WHO?

By Grace Thompson

Boris’ has unveiled a new promise of ‘build, build, build’. Anyone who can recall Blair’s mantra of ‘education, education, education’ will know that the three-word slogan isn’t a new thing, and such slogans are often seen to be the magic recipe for change. It just didn’t seem to work with ‘Brexit means Brexit’ or ‘strong and stable’.

The stability of Boris Johnson’s ‘New Deal’ is in question, particularly for those in society who arguably need a ‘New Deal’ the most – the homeless. The £12bn for affordable homes is commendable, as are various other home-building measures outlined in the plans. None of them, however, seem to directly equate to housing those without a home, especially those who sleep rough or sofa surf from one house to the next. People staying in emergency accommodation aren’t usually at the stage of looking for affordable housing immediately. Nor are discounts for first time buyers usually relevant either. At the point of emergency, many simply want a secure roof over their head.

One positive aspect to come out of the Government’s plans is the use of £400m for 24,000 homes (the Brownfield Land Fund) at the discretion of the 7 regions it has been given to. Greater regional power is perhaps the hidden key to fighting homelessness in the future. Just as we are now tackling COVID-19 by imposing local lockdowns and concentrating on hotspots, we can fight homelessness by spotting patterns and drawing links in areas and demographics. Rather than labelling one root generic cause for homelessness, there will sometimes be different causes in different towns, cities, regions and countries. The introduction of City Mayors in the UK has done wonders for more direct oversight over regional problems. The ability is there to target resource on issues that may look very different in Greater Manchester, for example, than they do in West Yorkshire. Perhaps these powers will even be strengthened in the future.

To pretend we are not in a very difficult financial position as a country is unrealistic. As tens of thousands of people lose jobs, the need for a stronger welfare net is imperative and the risk of homelessness will undoubtedly rise.

Across the pond, Australia is already working innovatively, despite the pandemic, to begin to eradicate homelessness. In a Guardian article from June 2020 it is reported that New South Wales, for example, has already put up $36 million to secure homes from the private rental market, to try and get people out of the insecure hotel accommodation they were in previously.

Perhaps now is the time for homelessness policy in the UK to receive a creative boost. Housing First initiatives across the UK have been broadly successful, so perhaps it is time to think how to turn them from an experiment to a policy norm? Although this is definitely not the holistic solution to homelessness, we have to start somewhere. Though I would respectfully suggest that pithy slogans are not the starting point!

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Grace Thompson

https://www.linkedin.com/in/grace-h-thompson