How high rents trap would-be homeowners

Britain’s housing crisis continues to deteriorate. The latest twist was the revelation that the cost of renting in the private sector has risen for the fourth month in a row. Average rents now stand at their highest ever recorded level.

It seems almost insane, but nowadays most homes being advertised for rent are often more expensive than what the equivalent mortgage repayments would be on the same property.

Consequently, large numbers of would-be owner-occupier’s are trapped and unable to get a foot on to the first rung of the property ladder. The high rents leave insufficient disposable income to save for the huge deposits demanded by banks and building societies to obtain a mortgage.

The absurdity of this situation was highlighted in the Resolution Foundation’s ‘Squeezed Britain’ report earlier this year. It found low and middle income households would need to save for 22 years for a deposit on an average first home, compared to three years when Tony Blair was prime minister.

The same report found that nearly half of all low and middle income earners aged under 35 are renting. This represents a threefold increase since the late 1980s when the figure was only 14 per cent. And in the past six years the number of home owners in this age and income group has plummeted from 51 per cent to just over a third.

Margaret Thatcher’s 1980s rhetoric about a property owning democracy has turned into a 21st century sick joke for millions of aspiring home owners. The Government’s shamefully pathetic and counterproductive response to this calamity is destroying people’s hopes and dreams.

Its reaction to rising rents is to impose a housing benefit cap. But it was a previous Tory housing minister, Sir George Young, who in January 1991 said:

“If people cannot afford to pay market rents, housing benefit will take the strain”.

And Government has set its new definition of ‘affordable rents’ at 80 per cent of market rents, which in some areas is actually above its own housing benefit cap. Consequently, even people living in social housing in these areas will find it increasingly difficult to save for a deposit to buy a house on the open market

Downing Street’s solution to the woefully inadequate supply of social housing is to endorse a rightwing think tank’s recommendation to build cheap houses by selling off council houses in expensive areas. But such an approach would undermine balanced communities and would not release anywhere near enough funds to deal with the scale of the problem.

In one of the more affluent suburbs in my home city of Derby for example, there are only around 30 council houses, and all of them are occupied. Even if those tenants were forcibly evicted and rehoused elsewhere in the city, the capital receipts from selling these homes would make little impact on Derby’s council housing waiting list.

It is time for a radically different approach. We need action to address the scandalous mortgage drought, a determination to build desperately needed homes and an end to the ideologically driven attacks on low and middle income households.

Chris Williamson is the Labour MP for Derby North