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  1. New Times
9 January 2017

Can the new political divide between owners and renters be bridged?

Opinion polls have shown that most voters, in theory, favour a fall in house prices. But do they in practice?

By George Eaton

The story of British housing in the 20th century was of a nation of renters transformed into one of homeowners. In 1918, 77 per cent of households in England and Wales lived in rented accommodation. But from 1953 onwards, driven by wage rises, home ownership steadily increased. In the 1980s, after the Conservatives introduced the right to buy for council tenants, it surged. At the turn of the century, home ownership stood at a new high of 69 per cent. However, it has been largely in decline ever since.

In the 21st century, the UK is once more diverging into two stark groups: owners and renters. Ownership has fallen to 63.5 per cent, the lowest since 1987 and the fourth-lowest in the EU. The number of private renters exceeds 11 million (a larger number than in the social sector).

The same policies that initially promoted ownership later acted to reverse the trend. A third of right-to-buy properties fell into the hands of private landlords. With supply restricted, rents stayed high, leaving tenants unable to save for a deposit. The rise in ownership created a class of voters with a vested interest in ever-higher house prices. Both Labour and Conservative governments concluded that there were few votes in building more houses.

Accordingly, recent policies have propped up the market. The Help to Buy scheme, introduced in 2013, was presented as a means to stimulate supply (by increasing demand) and “help young people get on the ladder”. But the International Monetary Fund, the former Bank of England governor Mervyn King and the former chancellor Nigel Lawson all questioned whether it would merely pour fuel on an already overheated market. At a cabinet meeting shortly after the launch of the scheme, the then chancellor, George Osborne, declared: “Hopefully we will get a little housing boom and everyone will be happy as property values go up.” His remark epitomised the focus on homeowners: Conservative policy was consciously designed to enrich the propertied. Osborne also believed that an increase in house prices would create the feel-good factor necessary for Conservative victory.

While the Tories privileged owners, they neglected renters. The 2015 manifesto made no mention of private tenants. Social housing, Osborne and David Cameron believed, merely created more Labour voters. “They genuinely saw housing as a petri dish for voters,” the former deputy prime minister Nick Clegg recalled. “It was unbelievable.”

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Ed Miliband’s Labour, however, relentlessly targeted renters. The opposition’s manifesto promised a ban on letting agent fees, a cap on rent rises and mandatory three-year tenancies. Labour believed that its housing policy would give it the electoral edge. Polling by the campaign group Generation Rent found that 35 per cent of private renters were swing voters and that more than half (52 per cent) considered the cost of housing to be their biggest problem.

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But in May 2015 that was not enough to prevail. A nation where most voters were homeowners delivered a majority for the Conservatives. It did so despite the best efforts of renters: 39 per cent of those in private accommodation and 50 per cent of those in social housing voted Labour (compared to 28 per cent and 18 per cent for the Tories). Conversely, 46 per cent of homeowners and 39 per cent of mortgage-holders voted Conservative (against 22 per cent and 31 per cent for Labour). A sharp political fault line had been exposed.

The only electoral bright spot for Labour was London, where the housing crisis was most severe. The party’s policies helped it achieve a net gain of seven seats and 43.7 per cent of the vote – its best result since 2001.

Yet Conservative policy remained skewed in favour of owners. In October 2015, David Cameron promised to scrap the requirement for a certain percentage of new housing developments to be offered for rent at “affordable” rates. Instead, the Conservatives promised 200,000 “starter homes”, which would be sold at 20 per cent below market price (£250,000 in the UK and £450,000 in London). But research by Shelter found that the average family would be unable to afford them in 58 per cent of local authorities. Overall, the forced sale of council homes and the abolition of national funding for social housing was forecast to lead to 180,000 fewer affordable homes to rent or buy.

On 12 May 2016 the Housing and Planning Act was signed into law – but in the shadow of a Conservative defeat. A week earlier, for the first time in eight years, Labour had won the London mayoralty. Sadiq Khan’s promise of a “London living rent” and of more “genuinely affordable” housing helped him beat the Tories’ Zac Goldsmith.

When Theresa May launched her leadership campaign, she signalled a shift away from Cameron’s approach. “Unless we deal with the housing deficit, we will see house prices keep on rising,” she warned. “The divide between those who inherit wealth and those who don’t will become more pronounced. And more and more of the country’s money will go into expensive housing instead of more productive investments that generate more economic growth.”

The government has since banned letting agent fees (“They deserve credit for facing down the landlord lobby,” Dan Wilson Craw of Generation Rent told me) and announced an additional £1.4bn for affordable housing. “The important thing is to have an offer for both,” the Conservative housing minister, Gavin Barwell, told the New Statesman, assessing the divide between owners and renters. He confirmed a break with the Tories’ previous stance: “We inherited a situation where the affordable housing budget was focused on shared ownership. There was no submarket rent there at all.”

But the shadow housing secretary, John Healey, who held Barwell’s post between 2009 and 2010, told me that the government was “still way off track for meeting the targets in its manifesto”. Investment, he said, was “only half the level seen in the last year of the Labour government”, and he condemned the Tories’ refusal to cap rent increases. (Barwell retorted: “All it does, long term, is reduce the size of the sector and make things worse.”)

The divide between owners and renters, which will widen before it shrinks, may not be unbridgeable. Parents are troubled by the lack of affordable housing for their children (as are their bank balances). Opinion polls have shown that most voters, in theory, favour a fall in house prices. Brexit may test whether they favour it in practice.

This article appears in the 04 Jan 2017 issue of the New Statesman, Divided Britain