The growth of the buy to let market has locked over 2 million families out of homeownership, preventing younger generations the chance to become part of the property owning democracy, according to a new report by the campaigning think tank Onward.
The report authored by leading Conservative MP, Neil O’Brien, argues that the government should limit the demand for property as an investment with a crack down on landlords tax relief for future rented properties. The paper also calls for councils to be given more powers to limit overseas purchases of new homes. At the same time, the think tank calls for a radical set of policies need to be implemented to increase the supply of new homes.
France has built roughly twice as many new homes each year as Britain since 1970. France built 7.8 million more homes than the UK between 1970 and 2015 – a difference equivalent to every home in Greater London, Scotland and Wales put together. As a result, real house price growth in France has been just half the rate the UK and the proportion of people who spend more than 40% of their income on housing is less than half the rate in Britain. Some densely populated countries like the Netherlands built at an even faster rate than France.
The cost of renting has risen dramatically and nearly half of young men are now forced to live with parents. New analysis from the House of Commons Library included in the report shows that from the 1960s to the early 1980s private renters spent on average around 10% of their income on rent in most of the country, and around 15% in London. Today they spend over 30% and nearly 40% respectively. Meanwhile between 2000 and 2017, the number of 18-30-year-olds living in their parents’ home increased by about 1.1 million. Nearly half (48%) of men aged 22-26 now live with their parents.
Developers and landowners are benefiting most from the current system. Between 1950 and 2012, 74% of the increase in Britain’s housing costs was accounted for by increases in the cost of land. The value created when planning permission is granted overwhelmingly accumulates to developers, meaning communities are missing out on up to £9 billion of land value uplift created each year. Meanwhile many large developments go ahead without anything being contributed anything to the wider community. 7% of developments of over 1,000 homes had no developer contributions charged on them in 2016/17. For developments of between 100 and 999 homes, 26% made no contributions.
The growth of buy to let has locked 2.2 million families out of ownership. If the ratio of privately rented to privately owned homes had remained the same between 2000-2015, and we had built the same number of homes, we would have ended up with 2.2 million more homes in owner-occupation.
The report argues that while building more homes is important, homeownership is unlikely to return to previous levels without action to stem further growth of the rented sector. It notes that while the number of privately-owned homes has grown by 165,000 a year over the last decade, ownership has still declined because this has been outweighed by the 195,000-a-year growth in the number of properties in the private-rented sector.
Source: London Loves Business