Buy to Let & Letting

Why The Obsession With Generation Rent?

You can’t read a property article today without reference to the teeming underclass of Generation Rent.  And private landlords are demonised for pushing up house prices and locking out a generation of wanna-be home owners.

But memories are short and statistics are skewed.

In 1945 most people in Britain rented their accommodation.  Home-ownership accounted for just 40% of all households.  Until the mid-1950s the private rental sector was bigger than both the owner-occupied and social rented sectors.

The proportion of homes that is privately rented has fallen significantly from 33% in 1961 to 14% in 2008.  Generation Rent refers to the more recent increase in the private rented sector which has risen from 9% in 1991 to 14% in 2008.

And this is the rise which has become the obsession of our nation.

But the furore of Generation Rent masks the most remarkable development of the UK housing market.

The recent history of the housing market shows NOT that people cannot afford to own their own property – but the fact so many more people now do.  In fact, every year between 1981 and 2006 there was an increase in the number of owner-occupied dwellings in the UK – an increase of 49%.

But this significant shift towards owner-occupation which now sees the majority of households living in their own homes rather than renting, doesn’t make such good headlines.  The fact that 68% of people in 2008 owned their own homes compared with 43% in 1961 does not fit with what the country wants you to think.

private property

You are a home-owner you are rich is what they want you to believe.

But a Joseph Rowntree Foundation study demonstrated that half of all people living in poverty are home-owners.

Owning bricks and mortar does not equate to wealth.

But it is an asset – and it’s an asset which the government need you to have.

The simple economic truth of promoting home ownership is that the government need you to have assets in your old age.  If you don’t own your own home you are going to sponge off the government in the form of housing benefit and longer term care and they have no way to claim that money back from you.  And the Exchequer can’t afford a population of renters: the housing benefit bill will be colossal.

Which is why they promote home ownership.

property ownership

Home ownership means you have an asset which you can live in without the government having to foot the bill.

Home ownership means you are more incentivised to save for retirement.  Means-tested housing benefit doesn’t reward savers so you need to spend your money now if you want to claim.

Home ownership means you are less likely to go into care earlier – and when you do go into long term care – you have an asset which can be sold to pay for it.

Not to mention the taxes associated with home ownership.  Just how would the Exchequer survive without the raft of taxes extracted from property ownership?

It is a simple economic truth that the government needs you to own your own home.  That is why they come up with so many varied schemes to get people on the housing ladder.  They need you to be on the housing ladder.  Without your home as a future asset for them to claim – the Exchequer will have to foot the bill.

You may think home ownership has many benefits for you – but most of all – home ownership is beneficial to the government.

  1. Richard Watters

    Spot on!
    Which is why Help to Buy has been introduced, primarily to soak up the 6 year queue of frustrated first time buyers before they get any older (average age is now around 38 I believe).
    And why the Government are happy for inflation to run well above target even in a recession because this in turn inflates house prices and the equity created provides the pot for old age.

      1. Richard Watters

        I think it all comes down to the criteria required to qualify for Help to Buy. I think they will be quite strict, i.e. good credit record required, size of loan based on affordability, etc. If so I think it’s a good way of helping First Time Buyers in particular.

        1. Sam

          I understand, however I am concerned that this style of thinking promotes housing affordability as the only indicator of how to live. People shouldn’t be encouraged to over-borrow just because they can afford to on paper.

          1. Richard Watters

            I agree it shouldn’t be the only indicator of how to live but I do think there are a lot of social and economic benefits to home ownership. For example the right to buy a council house gave a lot of people the chance and the motivation to improve their lives. Why not give responsible hard working people the opportunity to buy their own home whether through Right to Buy, Help to Buy or whatever the scheme of the day is?

          2. Sam

            Yes Richard I agree that home ownership is one route to self improvement – I just don’t think this should be our ‘holier than than thou’ route!

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