What contributed to my concerns about this proposed legislation was the implication that vast numbers of tenants actually wanted to move to owner-ship on the basis that this was preferable to renting.
Housing foundation is, or should be, three-pronged – like the tripods used by professional photographers or theodolites by chartered surveyors. Take away one of these prongs and the structure collapses.
The three prongs underpinning housing stock are: owner-occupation, private renting and social housing. For some people the middle of the three is often the best option and they rent, on a long-term basis, through choice, not because they cannot afford to service a mortgage.
Rather than “priced out of the market”, some long-term renters will have a relatively well-paid professional career and may also have assets through direct shareholdings or within a pension. They may even have a property of their own which they let out – and to which one day they may retire. But for now they are happy to rent because, ironically perhaps, the greater the quality of the rental (in terms of location, space and facilities) the cheaper it becomes pro rata. For example, a typical two-bedroom flat has, in recent years, been more economic to buy than to rent although that is already changing as a result of the increase in interest rates. However go higher up the scale and properties which people would not normally buy become affordable, to them, as rentals. One example of this can be found in Edinburgh’s New Town where quality garden flats have become popular with couples and families who prize this particular location and the lifestyle it offers and for whom renting makes them affordable.
Other lifestyle issues play a part in many decisions to privately rent. Not just in terms of home comforts but also depending, for example, on whether or not someone has, or ever intends to have, children; or if their job is of a transient nature; or if they just don’t want the cost of maintenance, repairs and the ongoing internal refurbishments needed to make a house or flat marketable.
If the UK market was more aligned to that found on the continent I believe many more people would be willing to take up the rental option. On the whole private landlords (who own more than 80 per cent of the UK stock) provide an excellent service, often in difficult circumstances, but so much more could be achieved with larger-scale private renting, backed by institutional funds.
Perhaps the biggest practical advantage would be a reduction in costs brought about by economies of scale. But it’s not just about money; such a scenario would transform attitudes towards renting. In Germany, a well-paid executive may buy or rent his luxury house – it’s his choice, which will depend on a number of factors in his life. What matters is the quality and location of the house not the way it is financed. A decision to rent, rather than buy, is considered normal, whereas in Britain renting rather than buying would be considered bizarre in the circumstances.
A similar attitude would be welcome here. Largely for cultural reasons, owner-occupation will continue to be the preferred choice for a majority of the UK population, although it is often forgotten that a century ago most properties were privately-rented. Alongside owner-occupation and social housing we need a comprehensive private rental stock, extending the range, from budget to luxury, beyond what is currently available. Wider rental choice would also curb house-price inflation within the owner-occupied sector which hurts first-time buyers the most.
This is why the government decision on housing association properties and mortgage finance for people on benefits, sends out the wrong signals with its suggestion of buying good, renting bad. Not everyone needs nor wishes to buy. If so, they surely have a right to the same choices already open to those who do.
David Alexander is managing director of DJ Alexander