Harsh home truths

Ben Marshall Research Director

The long-running housing crisis has taken a new turn this year. Rising rents were joined by rising mortgage costs, bringing new anxiety to homeowners as well as renters. People found different ways to publicise their plight, but the message was the same – the rising cost of housing is holding us back and something must be done.

TikTok influencer Jess Geary shared an angry video in August saying, “Don’t move to Manchester…There’s no flats available. I’ve been on the phone every day, I’ve had no sleep, I’ve not ate⁴⁶.” James Marriott used his column in The Times to describe how high rents “really destroy that sense of optimism and hope that you have” about life in the future⁴⁷. And, in October, Scottish resident Alice Haywood told the BBC of the “gut wrenching” changes to her mortgage repayments⁴⁸.

The COVID-19 pandemic laid bare the inadequacies of Britain’s housing stock in terms of indoor and outdoor space, and the relationship between housing conditions and public health⁴⁹ while also boosting demand for larger homes and pushing up prices. But the cost of living crisis and autumn’s economic turmoil have shone additional light on a crisis of affordability.

The reality

Like many other facets of the housing crisis, the precarious nature of rental affordability was already well known. More than five years ago, Ipsos helped Shelter develop a Living Home Standard, a multi-dimensional measure of what a good home is. The affordability dimension was the biggest factor behind four in ten homes not meeting the standard in Britain; private and social renters were particularly vulnerable⁵⁰.

According to Rightmove, ‘bills included’ became the most searched term for tenants in August, having not been in the top five a year ago⁵¹ , while the BBC reported that four in ten people under 30 were spending more than 30% of their pay on rent, a widely used benchmark of affordability⁵². Rightmove and Zoopla put the pace of annual rental growth at between 11% and 12% in the third quarter⁵³.

Our Politics & Society podcast episode in July 2022, Housing – what needs to happen next?, discussed the real risk that rents would become an “ever increasing driver of poverty and destitution”⁵⁴ but the focus then was private renters. Since the mini budget in September, the circle of concern about housing has extended out beyond long-suffering renters to those borrowing to buy their homes.

In October, Ipsos found 36% of those with a mortgage reporting that they had experienced an increase in housing costs since late summer⁵⁵. This measure, however, came before the largest single hike in interest rates by the Bank of England since 1989. The Resolution Foundation estimated that 5.1 million borrowers will be spending more on their housing costs by the end of 2024⁵⁶, while the Joseph Rowntree Foundation (JRF) have calculated that if mortgage interest rates were around 5.5%, 400,000 people would be pulled into poverty over the next few years⁵⁷.

This matters because increases in household bills, rents, and mortgage repayments are consequential in two important ways. They perpetuate a desire to quit the tenure for something better, further motivating renters to get onto the housing ladder while simultaneously making that ambition even harder to realise. Homeowners will be unnerved if the property market stutters and will be more likely to stay put. This is important because a large and secure rental sector and a functional housing market encourages mobility which supports economic growth.

Concerns about housing leaves people feeling frustrated and hard done by. Ipsos has found three quarters of Britons recognising the reality that even if they work hard and get good jobs, today’s young people will have a hard time getting the right kind of housing. By a margin of six to one, renters don’t believe they will ever be able to afford to buy a home⁵⁸. They are stuck in the middle, concerned about house prices and interest rates - the preoccupations of owner-occupiers - as well as rising rents.

The response

What can Government do? The response to COVID-19 was to pull more levers including imposing mortgage and Stamp Duty holidays, eviction bans, and using the ‘Everyone In’ initiative to support those experiencing homelessness. This autumn, the introduction of targeted support for low-income mortgage holders was suggested as a policy option by the JRF.

In the recent Autumn Statement, Chancellor Jeremy Hunt announced the capping of social rents in England at 7%, but the Scottish Government had already gone further, faster, introducing a freeze on private and social rents in early October (something endorsed by Sadiq Khan who wants the power to do this in London) as well as a moratorium on evictions.

Ipsos has found public support for the introduction of controls so that rents in the private sector do not rise by more than the national inflation rate⁵⁹. However, economists tend to be more sceptical on the basis that this can discourage supply from landlords, an outcome which feeds through to future rent rises.

What else? Tackling the affordability of housing requires several strategic, long-term interventions including a less piecemeal, more whole-tenure plan covering renting as well as homeownership while making continued progress in terms of significantly expanding the supply of new, affordable homes. It will also be important to enact this year’s White Paper which “marks a generational shift that will redress the balance” between landlords and tenants in the private sector⁶⁰.

There are also some challenging tensions in public opinion which need careful management. For example, while there has been movement in favour of building new homes locally, 57% of people agree when planning new housing, ‘priority should be given to the views of local residents or protecting the countryside even if less housing is built’⁶¹. Between 2021-22, 14 local authorities adopted new local plans or neighbourhood plans which added 24,150 hectares in the overall area of land designated as Green Belt⁶².

According to Gavin Smart, Chief Executive of the Chartered Institute of Housing, there needs to be a concerted effort to change the tenure mix by expanding social housing and forging a better fit between housing and benefit/welfare policy including the Local Housing Allowance and the benefit cap. He told us that there are a “big set of pressures” including strategic imperatives to improve, expand and ‘green’ housing which will bring substantial benefits but also push up costs to landlords and government⁶³.

Many of these policies will take years to deliver results, requiring considerable political courage and patience. But many people can’t wait - renters will need immediate, short-term fixes and many mortgage-holders will struggle with the leap in their monthly costs.

The housing crisis has become bigger and uglier this year. This will be evident in the desperate testimonies of people like Jess, James and Alice.

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