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Could we become a 'nation of renters'?

Becoming a 'nation of renters' could be a better alternative to spinning the housing roulette wheel once again and obsessing over home ownership, writes Linton Chiswick.

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by Linton Chiswick on Jun 02, 2011 at 00:01

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Becoming a 'nation of renters' could be a better alternative to spinning the housing roulette wheel once again and obsessing over home ownership, writes Linton Chiswick.

According to data amassed by the National Centre for Social Research on behalf of the Halifax, two-thirds of renters between the ages of 20 and 45 don’t believe they’ll ever secure a foothold on the property ladder. The survey – somewhat masochistically – blames the lenders, in particular unreasonable or unrealistic deposit demands and a culture of excuses and refusals. A Halifax spokesman described the results as ‘unduly pessimistic’, but publicised them nonetheless, and the resulting media spin was that the UK’s a single generation away from becoming ‘a nation of renters’. This was indeed the view of almost half the respondents, who believed the UK was in the process of following some western European countries’ leads where renting is more widely accepted as the norm.

This – the tone of the report and the majority of the subsequent press suggested – is a terrible thing.

When renting ruled

But not that long ago, we were a nation of renters. Less than one in ten owned property a hundred years ago. By 1953, owner-occupiers still added up to less than a third of the UK population. It wasn’t until the start of the 1970s when home-ownership came anywhere close to the 50% mark. The idea of home-ownership as the “norm”, or as somehow the number one signifier of social, economic or professional success (or simply as part of becoming a grown-up) didn’t happen until the Thatcher-era land grab, the consequences of which are driving the ‘pessimistic’ headlines today.

Social housing stocks, of course, vanished into private ownership. On the plus side, people were encouraged to feel as if they had a literal, physical stake in the country, by owning a little bit of it. On the negative side, it was the kind of stake that didn’t give much back. There wasn’t an ethical or creative (of culture or jobs) side to owning bricks and mortar. Furthermore, it left anyone who didn’t own a property feeling excluded, as if they didn’t have a stake in the country, and those who could afford to buy (or raise the debt to buy) more properties, misguidedly thinking they’d secured a bigger one… the results of which are obvious today in the lopsided generational wealth gap, the perceived pain and suffering of a frustrated generation of would-be first-time buyers, and the mountains of bad debt.

False sense of superiority

It’s amazing that the Emperor’s Clothes reveal of 2007/8 has managed to do so little to reduce the sense that there’s something socially superior about owning, despite all the debt, deceit and uncertainty associated. Renting worked, here, until relatively recently and in some European countries it continues to work.

An analyst from the National Centre for Social Research points to the wider risks associated with the squeeze on the first-time buyer: too little money spent on new-builds might slow the rate of future building, which would be bad for the housing market. Too few first-time buyers mean too little fresh money on the bottom rungs, which is… bad for the housing market. Anything bad for the housing market must be bad for the economy, because if people don’t feel property-wealthy they don’t feel wealthy at all, and can’t remortgage and spend money they don’t have in the shops.

Germany, a ‘nation of renters’, is outgrowing the UK in leaps and bounds. Money not invested in property is invested in areas that create jobs. The workforce is more mobile, and can answer the demands of economic change much quicker.

Help

It’s depressing that a generation has to go through so much turmoil and disappointment. For some people, buying is the right option, and it seems only reasonable that it should be attainable. But there are things that could be done to make renting more pleasant and increase its status, and so take the pressure off the market. Longer tenancy agreements and rent controls would give tenants a sense of control over their own lives. Enforced minimum standards and the licensing of landlords, and some institutional investment creating ‘branded’ lets would help too.

But the solution on the table, it seems, is to make cheap money as available as it used to be, and get the roulette wheel spinning once again.

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14 comments so far. Why not have your say?

Longer tenancy agreements? Well I would love to but the lenders won't let landlords do this. So think again. And in any case my tenants can stay as long as they like - the longer the better in fact as it is more profitable for me if they stay put - so this article above is talking rubbish - again

And if you think that rent control will expand the rental sector you are having a laugh...unless you want to impose controls on all the costs of delivering, managing and maintaining rental housing too. Rent control invariably causes shortages of rental stock as landlords leave the industry and encourages a black market in illegal sub-letting and gangster behaviour - the opposite of what we need - Rackman et al did well during the rent control era - we do NOT want to go back to that

Rent control also causes a lot of landlords to leave property empty as it is more valuable with vacant possession than with a low-paying tenant so think again guys...

And finally...if you want rent control...how about WAGE CONTROL for journalists???

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Well said Landlord X

Rent control was a total pain and was one of the reasons that people were forced to buy as landlords just weren't going to risk having an uneconomic tenant that they couldn't ship out.

There are still a few of the old style tenancies out there usually on houses that have been poorly maintained as the landlord can't justify spending any money on a property that's costing him money but that he can't get back until the tenant dies.

Linton the rest of the article is fine but you really did go off the rails on that point

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Linton - you forgot to mention mobility of labour. Renting allows you to move jobs, do contract work and climb a career ladder more quickly. Also allows flexibility for emigration and "trying out a new area".

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Very sensible article.

The Government should introduce tax and planning breaks for large institutional landlords of the type that operate in other places ( pension funds etc) on the one hand, and better tenant protections (longer tenancies, rent protection and minimum standards) on the other.

The amateur BTL landlord should be discouraged as a matter of policy. They are generally undesirable socially and economically.

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BTL`s would not welcome more controls or longer tenancies, as they may want or have the need to sell quickly. The sooner these amateurs leave the scene the better.

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OK Michael Brooks, as soon as we can sell the properties for what we paid for them we'll leave the scene as you request. Oh dear, there's nowhere for the people who can't afford or don't want the expense and responsibility of owning a property to live now and they'll be on the street or friends' sofas. Great idea mate.

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Oooh I wonder why people want to buy their own homes in this country?

1st landlord, never fixed the damp when we told him about it (dodgy guttering) then would not reduce rent while we were forced to live in a building site when the front of the house nearly fell down because of the leaks.

2nd landlord never fixed anything and stole our deposit.

3rd landlord never fixed anything and tried to steal our deposit.

4th landlord, very good then 3 years in told us he wouldn't renew becasue he wanted to sell up. So funnily enough we bought a house or our own.

Yes, like the way all the landlords don't want further regulation.

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@ AT & Michael Brooks

Agree - amateur landlords out

Means more profit for me...less competition...the pick of the best tenants and properties...

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Well said, Linton. I've been saying the same here for months.

It takes little more than a generation in today's short-attention-span world for people to assume that a fad is an eternal verity. So it is with 'home ownership'.

Decades ago, when this fetish began to bemuse the Brits, I used to amaze my friends by pointing out that rich and dynamic countries such as Switzerland and Germany had high proportions of private renters among younger economically active people-- while UK rates of ownership were most commonly associated with impoverished peasant societies such as Bangladesh.

No, no! It can't be! We all know that the only rich country is a 'property owning democracy' (a phrase coined by one of our worst prime ministers, Eden) and that the only sort of property worth 'owning' (with debt like an albatross round your neck) is the sainted bricks and mortar of the suburban rabbit hutch or poky flat.

Even today we hear gripes about the ultra-soft loans you must shoulder to buy an education which will fit you for life, whereas mortgages are seen as a good bargain. A very perverse and destructive set of priorities, as though we would be content to starve as long as it was within our own walls. TV property porn scratches the itch, like porn for the impotent. But thank God it may at last be fading.

All through the 19th century, when Britain was the most dynamic, prosperous and powerful nation the world has ever seen relative to the rest, the majority of the middle classes who made our Victorian greatness were thrifty, self-reliant and sober. But they lived in rented houses. Go figure.

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When I was a young man my father in law advised me to purchase a house/home on the basis that it would cost little or no more than renting and would appreciate over a long period of time.

I am now in my 70's and can confirm that my father in law's advice was very sound and in the medium to long term property values have always risen.

Incidentally, I had enormous difficulty in pursuading a building society to loan me less than £3,000 to purchase a house and at times have struggled to make the repayments, but my house is now worth a smidgen more than I borrowed. It has also provided a home for our family throughout some 50 years, or so. Be brave and buy - why would landlords do otherwise?

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As a landlord I would not want longer fixed tenancy agreements. I had a really bad experience with a tenant who didn't pay rent after the first month and then had to take her to court to evict which didn't happen until after the 6th month. At least with 6months tenancy agreement I could take action sooner rather than later. This cost me thousands of pounds so it's not all profit for landlords. My present tenants have been in over a year with a rolling tenancy and as good tenants they can stay as long as they like but I want to have the option. If the tenancy agreements changed then I'd sell up.

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Excellent piece. And well noted on Germany. Investment in the UK goes on bricks and mortar, which creates no extra wealth at all, unless it is for new builds. But they are rubbish and massively over-priced. In London, you know expensive housing by the name: affordable homes.

Germany does not investment in briick and mortar, so has to invest elsewhere: result? The fast growing and the largest economy in the EU.

Britain, stagnant, debt-ridden, and what are the suggestions we so often hear? Get the propperty market moving again thru more lending. Utterly pathetic!

The re are two answers possible.

1 Restrict lending and prices will fall. they fall slowly only through the resistance of sellers. They remember higherprices and remain obstinate. That is markets, for you. not nearly as efficient as my university professor like the rest of his blinkered profession thought.

2. Improve tenancy regulations for tenants. That means five-year tenancies. The market will eventually live within whatever regulations you have however much bankers will whinge. It works, ask the Germans!

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5 Year tenancies? Not a bad idea really to give good tenants a bit of stability, but only if it were made easier and quicker to get the Non-payers and home trashers out. With 9 years previous BTL experience I know they are in a minority but the worst ones can really make life a misery for LL's and Neighbours.

A bit of give and take would be good in future legislation, make it too one-sided in favour of tenants and slowly but surely even the good landlords will sell up.

Having Large institutional landlords as AT mentioned is not always a good idea, just look at how slow some councils and HA's are at making repairs or sorting out other problems. AT, it did cross my mind if you may be socially undesirable too with the tone of your comment?

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Masson

Jun 04, 2011 at 16:43

Having rented in France for the past three years, then returning to the UK and renting for one year here, the difference is staggering. In France it is far more acceptable to rent, and for long rental periods, with straightforward lease agreements. Since being in the UK for one year, I have had to move 3 times, first the landlord after taking 6 months paid up front rent, kicked us out during Christmas as some friends of his needed somewhere to live, we moved into another house, took a 12 month lease to try and get some stability, within weeks discovered the house was riddled with damp, had no insulation, both got very sick and had sky high heating bills, broke this contract on health grounds, lost all our deposit, and now are in house number 3.

So after a year in the UK of endless credit checks at £225 a go plus all the related moving costs we are feeling totally used. So if I could I would definitely buy as being a tenant you are at the mercy of unscrupulous estate agents and landlords.

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