Generation rent, the cliché that keeps on giving, but what happens when even that becomes out of reach for ordinary Londoners?
If recent figures produced by the Ministry Of Justice are anything to go by then this is exactly what’s beginning to happen, with some 42,728 forcible evictions in England and Wales alone in 2015. This represents a 2% increase on 2014 and an incredible 53% in the last 5 years as austerity bites harder than ever. To quantify these figures, this represents an estimated 170 tenants evicted a day in 2015. London, true to itself as always, tops this ignoble chart, with 16 of the 20 worst affected boroughs within the capital. Even more predictably it ‘boasts’ the worst hit borough throughout England & Wales in Newham, with the rate of repossessions equivalent to 191 per 10,000 households in the borough.
All of which rather poses the question why? More importantly what can be done to make things better?
Lets begin with the why, broadly speaking causation boils down to the same three sources which have received such high media coverage of late.
Firstly the housing stock available to first time buyers remains woefully low, even with the introduction of ‘right to buy’ initiatives under the current administration. Indeed the past few years have seen the building of affordable homes slump to a post war low of 135,500 homes in 2012-13. Nor has there been a marked increase in the years following with 141,000 built in 2013-14. A little over a decade ago now the Barker Review of Housing Supply noted that about 250,000 homes needed to be built per annum in the UK to avoid a critical shortage of homes (and the consequent spiralling of costs). Aside from the Labour Administration in 2006-2007 (219,000) no government has come close to this target, even Labour’s effort came pre financial crash. While the financial crash makes this failure understandable it does not alter the likelihood that until more affordable homes are built increasing numbers of the population will be forced into expensive and unstable rented arrangements.
Leading on from this is the lack of controls upon private landlords. The viability of rent controls is something which has been much debated recently in media circles (more on which later) but the logic which sparked the debate is irrefutable. It’s a simple case of supply and demand, less housing naturally means higher rents and greater competition between perspective tenants. While this doesn’t necessarily produce Dickensian landlords, even the most altruistic lessor is going to rent at market value safe in the knowledge that if the tenant can’t pay, someone else will. When market rates are inflated high above stagnating wages, we have a problem.
Admittedly culpability does not solely rest with private landlords, with 19,093 evictions in England by social landlords in 2015. This actually supports rather than counters the evidence of a wider malaise, when social housing becomes unaffordable the system is failing in its most basic of functions. To suggest that this is purely down to spiralling rents however would be a mistake, although Shelter puts the average housing association rent at nearly £90.00 a week in 2013. More important is the affect of successive cuts to welfare which have come to characterise post-crash Britain. Without the vital safety net welfare provides, society’s most vulnerable are going to struggle to maintain rent in ever increasing numbers.
For evidence of how disastrous this situation has the potential to be look no further than Shelters Rent/Mortgage v Savings figures for 2013. These figures include such highlights as 44% of working families who would agree with the statement that they could not pay their rent or mortgage for more than one month using savings were they to lose their job. That’s working tenants potentially one pay check away from eviction and homelessness, not those dependant solely on welfare. This figure grows steeper still in London with 49% of those surveyed stating they could not maintain their mortgage or rent payments for a month were they to become unemployed. Without sufficient savings to cover even a months rent and with an ever contracting welfare system, what safety does the modern tenant possess?
So far, so gloomy, but short of an unlikely end to austerity or a with inflation rise in wages there are other potential solutions.
The first is obvious and can be condensed into 3 words: build more houses. Whilst private development is steadily churning out new builds, housing associations continue to lag behind. Compare 2014’s figures, 115,000 new houses built by private developers, a paltry 23,000 by their social counterparts. To put that figure in perspective, given there are around 1,500 housing associations in England and Wales alone that represents an average of 15 houses a year per association. Not only this but as Ross Clark of The Spectator pointed out in an article last year, housing associations have received £23 billion in central government grants in the period 2001-2015, enough to cover the construction of 230,000 homes a year. This represents a systemic failure on the part of the government to incentivise the associations to get on with the mucky business of actually building some houses. If we’re to avoid a very real crisis in the next decade this needs to change.
Another option is the imposition of rent controls on private landlords, the case is often made that this would empower tenants and tip the balance away from landlords. The ‘German Model’ is often cited as a successful example of this, with charging rent over 20% of the rate for similar properties illegal in many jurisdictions. On the face of it, this appears a relatively simple to implement and ‘catch all’ policy, to head off the threat of a renting crisis. The caveat however is that economists of every hue are in rare unanimity that in practicality rent controls will produce the opposite of the desired effect. Simply put caps give home owners less incentive to rent out a room and developers less likely to build rental property. Meaning in the long term, less rental opportunities, a more competitive market for tenants and ultimately higher average rents. Hardly the answer either!
What is clear is that a systemic problem requires a systemic solution. Successive governments have failed to meet housing targets, have slashed much of the welfare which acted as a safety net for low income tenants and failed to incentivise the construction of social housing. All of which points to an elephant in the room, which if not addressed, threatens to cause a very real housing crisis in the third decade of this century.