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24 February 2024

It’s the housing market, stupid

The cost-of-living crisis hinges on one problem, and Jeremy Hunt’s 99 per cent mortgages can’t disguise that fact. 

By Jonn Elledge

Two stories this week caught my eye. First, the world’s tiniest violin was found playing on the pages of Thursday’s Times, in which a feature writer complained that her household income, well above the national average, was not enough to stop her feeling shabby and poor. She and her husband had only been on one skiing holiday in a quarter of a century, she noted. At one point a splurge on a £9 bottle of wine on a Friday night was enough to cause a “hair-raising domino effect”. “Depending on your viewpoint,” she continued, “we’re either rolling in wealth or barely scratching a living.” The living they are barely scratching has recently improved from £50,000 to £100,000 a year.

Also on Thursday, the Financial Times reported that Chancellor Jeremy Hunt was drawing up plans for 99 per cent mortgages: thanks to generous government backing, buyers would need only a 1 per cent deposit to buy their first home. The incredible thing about this latest intervention in the already over-priced housing market is how nobody, from any part of the property sector, seems to think it’s anything other than an utterly terrible idea, which will increase risk to buyers, banks and government alike while doing precisely nothing to improve affordability.

These two stories are, of course, the same story: both concern the fact that housing in this country has become far, far too expensive. Buried in that Times piece is the revelation that one of the couple’s three children – a decent-sized family, but not an unreasonable one – is currently sleeping on the sofa because they’re too old to share a room. A household on what is objectively a very good income cannot, in the current housing market, afford a room for each member. (A certain type of person will read that, roll their eyes and mutter, “Well why don’t they just move somewhere cheaper,” a question that ignores the fact that abandoning all existing familial, social and professional connections and starting again imposes its own, different type of cost.)

It is not merely that the government has made no moves to address this problem, besides repeatedly promising planning reform and increased building rates and then backing away again when it remembers its own core voters don’t want those things. It has enthusiastically made things worse, through inflationary schemes like Help to Buy or the mortgage guarantee scheme and now 99 per cent mortgages. Each of these policies may have made a handful of grateful voters more likely to vote Tory, in roughly the same manner as those who benefited from Right to Buy had once been. But by juicing demand while doing nothing for supply, they’ve made home ownership, and all the security that flows from it, even less accessible to vastly more people. And all the while the government has done nothing to mitigate the effects of any of this, showing no interest in rent controls or new social housing, promising reforms to make renting slightly less miserable and then not delivering because they might inconvenience landlords. Even those who did make it on to the ladder are now, thanks to the impact of higher interest rates and what one might term “Long Truss”, feeling the full cost of the homes they bought with cheap debt.

This is not the only thing this government has messed up, of course: it’s not even the only way it has gleefully conspired to make what should have been the next generation of Tory voters poorer (it did, after all, compound a long period of flatlining wages with insane marginal tax rates on new graduates). But housing underlies almost everything else. It’s the biggest single cost most of us ever face, a necessary foundation to starting a family or attaining financial security, a key component in the conveyor belt that turns angry young people into boring middle-aged conservatives. The Tory governments of the 1950s and 1980s made it such a huge part of their offering for a reason.

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And this lot have utterly failed.

Those of us who think about such things for a living can sometimes over-complicate politics, pretending to ourselves that this latest storm in a teacup might change things because we have column inches or dead air to fill. But most people, most of the time, find politics boring. Most people pay little attention to what governments say or do.

They do, however, notice whether they feel better off, and tend to vote accordingly. Thanks to this government’s failure to tackle the housing crisis, most people, well into middle age, do not feel better off. They feel financially insecure, even when they earn what look like – are – good wages. And no announcement of 99 per cent mortgages is going to disguise the fact.

Also on Thursday, incidentally, after another week in which pundits questioned whether Keir Starmer’s leadership was finally facing a crisis that would make the election competitive, a YouGov poll appeared showing Labour’s lead at 26 points. That’s the same story, too.

[See also: Liz Truss is lost in her own contradictions]

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