After 13 or so years of Conservative rule the Conservative promise of a stable home owning democracy has failed to materialise. They have got themselves into a bind over housing.
Potential home buyers find it impossible to afford a deposit as well as pay interest rates that are double what they were last summer, while renters can’t even find suitable homes, let alone reasonably priced ones.
Writing for Business Times, an international business journal, Alex Wickman says:
“Every Conservative leader in living memory has made the same basic promise to UK voters: work hard and you will earn more, buy a bigger house and one day pass it on to your children. Thirteen years after the party returned to power, some allies of Prime Minister Rishi Sunak fear the dream is dying.”
The Conservative’s commitment to build 300,000 houses per year goes back to October 1950 when Winston Churchill declared to a packed hall of delegates, this would be the target, a programme that was credited with securing the election for the Conservatives in 1951.
Move forward seventy-one years, with net migration reaching 500,000 and rising, and these targets have never been met. Mortgage rates are spiking and huge numbers of deals have been withdrawn. Unless your earnings are high enough, or you’re luck enough to have the “bank of mum and dad”, first time buyers can forget about securing an affordable mortgage.
Now Rishi Sunak has decided to drop compulsory housebuilding targets to avoid a nasty backbench rebellion, a capitulation which comes bang in the middle of a national housing crisis and which many Conservative MPs worry that it shows weakness.
That leaves renting as the only option for many people. But renting is becoming unaffordable as well. In the major cities where most job opportunities exist for young people, rental prices are getting beyond the reach of many, that’s if they can secure a rental at all.
Recent governments have seen social housing decline, leaving the private sector to take up the mantle of housing low income families. But at the same time the Government has squeezed the profits of private landlords (Section 24 removed mortgage interest relief), and imposed increasingly strict regulations, including giving tenants greater security of tenure. That’s not to mention the cost and disruption involved in bringing older properties (by far the majority in the private rented sector) up to the proposed EPC rating level “C”.
All of this, along with the latest tax changes like the reduction in capital gains tax allowances, and landlords are selling up in droves.
Individual Conservative politicians are in dispare: they watch in horror as the housing market in the UK slides inexorably into a deeper crisis. As Wickman says, “…some party strategists and MPs worry that won’t just mean defeat at the general election expected in 2024, but could mark a generational shift in British politics.” The slide would end the hopes that Rishis Sunak can turn things around to salvage the Conservative vote.
Higher interest rates and fewer properties will make buying a house even harder, and with landlords selling up and others passing on their higher costs to tenants, millions of younger voters will be stuck with soaring rents and nothing much to show for it. Stepping onto the housing ladder is going to be harder than ever.
The genesis of the UK housing crisis is well known. Many years of house price growth during a period of cheap mortgages and a scarcity of housing have pushed the cost of the average English home up to around 9 times average annual earnings. This compares to around 3.5 times in 1997.
The supply of homes available to buy rather than rent remains well below the level of demand, while around 15 per cent of the homes that do get built do not even meet the government’s decency standards. Basically new UK housing is overpriced, scarce and often of poor quality.
A fall in house prices due to increased mortgage costs will not solve the crisis either. The underlying shortage will limit the fall and the continuing exodus of landlords will keep rents high.
