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6 December 2022

Why is my rent so high?

The failure of the state to build homes is the biggest cause of the affordability crisis, not restrictive planning laws.

By Michael Walker

Such is the power of mortgage-holders in Britain that they brought down a government. Yes, there were other self-inflicted errors by Liz Truss and Kwasi Kwarteng. But would they really have been booted out of office so quickly had their economic experiment not landed Middle England with mortgage hikes? Indeed, it can seem as if there is little that has more political sway than the interests of Britain’s homeowners.

It’s an influence that other groups of voters can only aspire to wield. Renters have long been in housing distress – and their condition is only getting worse – yet this has created barely a ripple.

Of course, this is nothing new. Compared with mortgage-holders, renters have had a raw deal for decades in the UK. On average, housing consumes almost a third of their pay package. For mortgage-holders, the corresponding figure is only 18 per cent. 

And for renters, this is all in exchange for zero housing security. Unlike in most European countries (and more recently, Scotland), private renters can expect only short-term tenancies in England and Wales. It doesn’t matter how consistently you’ve paid your rent, you can be asked to pack up and leave at two months’ notice.

It’s this reality of ultra-high rents with no accompanying security that motivated me to begin a podcast series on Britain’s woefully under-discussed rental crisis. Having been whacked with a 15 per cent rent hike in Hackney this summer, it was also personal. But what I’ve learned in interviews with tenants, estate agents and experts is that the situation is even worse than I realised – and, I believe, it is reaching breaking point.

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One of my bleakest discoveries is just how hard it has become to find a new home. In London, mass viewings of rental properties of up to 30 people have become commonplace. Flat-hunters have to compete with other tenants to prove their attractiveness to a potential landlord. In this contest for the right to a home, bidding above the listed price is expected.

What’s even more shocking is that some flat-hunters have had to pay for the “privilege” of seeing a home. One young woman I spoke to reported being asked to pay as much as £1,000 in holding fees as a condition for attending a viewing. In her case, she refused, but confessed that if the request had been made a month later, she might have been too ground down by a fruitless search to say no.

This intense difficulty in finding a place is, unlike ultra-high rents and insecurity, relatively new. It also destroys the final shred of legitimacy possessed by cheerleaders of our deregulated system. They long pointed to the difficulties involved in securing a flat in cities such as Paris or Berlin as an argument against increasing renters’ rights. But the increasingly dystopian task of finding a place to live in London means we’re left with the worst of both worlds.

As I’ve noted, the rental crisis has not brought down governments. Yet its intensity – and the fact it’s now impacting the upwardly mobile middle class – has at last made it harder to ignore entirely. One response, promised by the Tories from Theresa May’s leadership onwards is the Renters’ Reform Bill. First touted in early 2019, it would abolish no-fault evictions and introduce long-term contracts. The reforms would bring Britain into line with its European neighbours, and would have been broadly welcomed by housing charities – but it has been repeatedly postponed.

Yet even if it is eventually passed, the bill will do little to solve the UK’s housing supply problem. This is where a growing “Yimby” movement (“yes in my backyard”) has gained influence. Yimbys blame the planning system and local democracy for the failure of construction to keep up with demand. They argue that existing homeowners have been able to distort the planning process to block developments in their neighbourhoods. Tweets from Tory MPs celebrating the protection of nondescript fields are shared to support their point, with deregulation their remedy of choice. 

But though there is some truth to the Yimby argument, the origins of the housing crisis lie elsewhere. If it is the planning system and local democracy that caused the affordability crisis, why did the situation begin to deteriorate in the 1980s?

The statistics paint a picture. In the three decades between 1949 and 1979, there were only eight years in which fewer than 300,000 homes were built in the UK. In the four decades that followed, Britain didn’t once exceed 250,000 new homes a year – and in the majority of cases we built less than 200,000.

Readers won’t be surprised to hear that the defining change to housing policy in the 1980s wasn’t a strengthening of planning laws and local democracy. Rather, Margaret Thatcher’s contribution was Right to Buy, which radically depleted council housing stock (2.5 million homes have been sold off) without replacing it. As a consequence, public sector construction disappeared almost overnight. Soaring house prices, driven by easy credit, could not persuade private house-builders to make up for the deficit.

This suggests that the second piece of legislative reform proposed by this Tory government is unlikely to be a panacea. The “Levelling-up and Regeneration Bill” has been touted as a way to streamline the planning process and unlock more land for developers. Its Nimby opponents on the Tory benches have, in turn, been castigated by government supporters for condemning future generations to housing penury. Yet recent history shows it wasn’t planning laws that caused our housing crisis, but rather the retreat of the state. 

What’s more, we don’t need to look too far afield for an alternative. In Vienna, while the Western world moved away from social housing, the city doubled down. Now, 60 per cent of its residents, from all class backgrounds, live in social-rented homes that are considered beautiful, sustainable and affordable. The success of the model is so apparent that even the free-market Economist magazine’s analyst group has recognised the Austrian capital as the world’s most liveable city. 

As we look for an escape from our current housing crisis, it’s models such as Vienna that we should look to.

[See also: The Tories are leaving the housing crash for the next government]

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