People who rent in the private sector get short shrift in British politics. Renting is rarely talked about and when it is, it is almost always in the context of it being seen as inferior to owner-occupation. It is as if a private renter is simply someone who has not been successful or lucky enough to become an owner-occupier.
As I wrote last year:
People who live in private rented accommodation rarely catch the attention of politicians or political journalists. It’s odd, because so many people working for MPs or media outlets, particularly in London, spend a good number of years in shared private rented accommodation and normally the problem is that politicians place too much attention on people they are immediately familiar with rather than too little.
The neglect of the private renter is seen most often when the housing market is discussed, where it is frequently not only taken as a given that home ownership is what it is all about but also very little attention is given to making the private rented sector work better. You can fight through a bulging email folder of press releases from politicians wanting to make mortgages easier, cheaper, safer and more numerous before you find one that talks about tackling any of the issues renters face.
This neglect means that the interests of renters get far too little attention, whether it is a matter of electoral registration (differences in registration rates between renters and owner-occupiers dwarf the relatively small differences from class or ethnicity) or low-earning people striving to make a better life.
The underlying assumption that owner-occupation is what everyone should aim for is unusually strong in Britain compared to other countries. In fact, via Tim Harford come these striking figures reported by Tyler Cowen:
I saw an El Pais spread on this, which I cannot find on-line. Here are the European countries with the highest owner occupancy rates:
1. Romania, 97.5%
2. Lithuania, 93.1%
3. Croatia, 90.1%
4. Slovakia, 90.0%
How about the lowest rates?
1. Switzerland, 44.3%
2. Germany, 53.2%
3. Austria, 57.4%
Get the picture?
No wonder he headlines his piece “Is a high home ownership rate a sign of a successful country?”.
* Mark Pack is Party President and is the editor of Liberal Democrat Newswire.
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16 Comments
Owning your own house is security and it should decrease inequality.
I would argue that those percentage figures of ownership in various countries is more due to the cost and availability of property in those countries than that owning your own house prevents a country becoming successful.
I think homeownership in the UK is strongly associated with financial security. The prospect of renting in old age remains unappealing to many. In recent decades, it has made economic sense to get on the property ladder as a means of escaping from an ever-rising future rent burden.
The private rental sector has grown substantially in the last decade. Investment in property remains a potentially better alternative to individual pension funds as a means of providing for retirement over a long term time horizon.
Howver, if hinde capital are right about the direction of travel of mortgage interest rates and property prices, we are likely to see a considerable volatility and a continued decline in home ownership ratios for the forseeable future.
In the UK we face the problem that private renting is more expensive than a mortgage, and provides little long term security, stability or control over people’s own living environment.
This is important for the development of stable communities.
Social housing addresses some of these problems, but is in short supply. While we restrict growth in social housing to new builds only, we will not solve the issue.
While in the UK people seem obsessed with using property as an investment I get the impression that in Germany a profit on a house sale is a dirty word. Is that just a cultural thing?
One person’s security is another person’s prison, so it could be interesting to ask the electorate rather than make assumptions based on our own limited experiences. Asking could be done by polls such as YouGov. Advantages of renting might include
> more freedom to move somewhere else
> less bother – less need to care for the house or garden
> cheaper and more professional maintenance if the landlords are good
The first might be particularly valuable, for example, to professionals startng out in the career and expecting to switch job locations a few times before settling down. The second and thrd can be more valuable for busy people and for people who find maintenance difficult, which might include older ones.
One person’s unaffordable housing is another’s very profitable investment.
Good post, Mark. It’s worth noting that Ireland, Spain, and Italy all have very high home ownership rates.
Also it’s worth noting that only around 50% of people in London own their own home, falling to 25% in Islington and Hammersmith and Fulham, to name but two. When we get to 25% of Londoners in general owning their own home, then we might finally see politicians responding to the increasingly urgent calls from (mainly younger at the moment) voters who see the opportunities granted to their parents get further and further out of reach.
To answer the question posed in the title: No, but correlation doesn’t imply causation either. Selective data at the top and bottom doesn’t imply much correlation either. There are more than 40 countries in Europe – the data for the top 4 and bottom 3 may hide the pattern for the majority.
There’s also a big difference in the experience of a private tenant in Germany than in the UK.
I’d like to get our housing market where the selection between renting and buying becomes a lifestyle choice, but that is far from the case in its current mess.
An interesting blogpost on US homeownership vs economic growth:
http://www.theatlanticcities.com/jobs-and-economy/2012/06/homeownership-means-little-economic-growth/1379/
Duncan – It shows no correlation between economic growth and home ownership in the US.
However, I wonder if this will change now that people require such high deposits. Perhaps those areas that already have high home ownership will have better economic performance (more disposable income) and those where people are trying to save a deposit while paying high rents will have lower performance .
Across Europe, house occupancy is clearly, a balance between flexibility/mobility, and security. But home ownership in Britain is also a symbol. A sigh of relief. Of boomers ‘having made it’. ‘An Englishman’s home is his castle’. But maybe there is something else happening here? Present government policy appears designed to sustain, unsustainable house prices.
I don’t often agree with Will Hutton, but this comment is attributed to him.
“Having enjoyed a life of free love, free school meals, free universities, defined benefit pensions, mainly full employment and a 40-year-long housing boom, they [the boomers] are bequeathing their children sky-high house prices, debts and shrivelled pensions.”
Will Hutton is right on this. And I think the next big war, is not international, nor civil ; it is intergenerational. And if we do not acknowledge this, and address it, we boomers have only ourselves to blame.
John Dunn – it is not an “intergenerational war”, it is the erosion of civil and social protection for ordinary people, by vested interests.
cp – I understand what you are saying. But please reflect on the recent events in the Greek election.
The Greek ND party has an acknowledged voter base on the age 50+ voters. Syriza, who came a very close second, were essentially aged 45 and below.
What does this tell you?
The 50+ want the good times to continue.
The 45’s and below, realise that they will have to pay for it.
The Greek boomers have enjoyed the ‘Mercedes years’, but the young will not pay for it.
There is trouble ahead.
There is a self-fulfilling spiral here. We care little about improving the conditions of people in private renting because we assume that the real solution for them lies in buying their own home. This makes renting worse and so owner occupation relatively better.
At the other end of the spectrum we care much more about providing social housing then about making market housing less of a rip off. This is because we see social housing as the solution for the poor. This makes market housing less affordable and so increases the need for social housing.
The private rental sector in this country is a hell of our own creation. Obviously this is bad for the people who don’t actually want to move into either Social Housing or Owner Occupation, but its also much worse for those who do want to move but can’t AND it makes this group much larger. However, nobody is committed to sorting this out because they see getting people out of the sector as the solution.
Well said Simon.
It seems that nobody wants to admit that the real problem is that market house prices are absolutely disgusting and that renting isn’t at all encouraged (unless you live in London or are a student), an attitude that basically encourages landlords to rip people off. We need more social housing yes – but it certainly isn’t the sole solution to housing problems.
As someone who has owned and rented in two EU countries (the UK and Belgium), I’ll throw in my half-penny:
Despite Belgium having slightly higher home ownership than the UK (some 2010 figures say 71% versus 69%) and tax relief on mortgage interest, tenants have far stronger rights in Belgium and contracts are usually of longer duration. A typical contract is (for an unfurnished place; furnished is different) is 3-6-9, so the minimum duration is 3 years and the maximum is 9. As long as the tenant is well behaved, the landlord cannot get rid of him/her during the 9 years unless a member of their immediate family will live in it or they sell the property to someone who will live in it themselves (if the buyer is a landlord, then they have to respect the contract of the sitting tenant).
During the contract, each year the landlord can increase the rent using a formula t hat is linked to the Belgian retail price index. Any higher increases have to be justified by serious renovation work e.g. a new kitchen was installed.
Contrast this to the UK, where it’s nigh on impossible to get a contract that is for more than a year, so each year the landlord *can* (not all of them do obviously) put up the rent as much as they like. This also gives tenants no stability as they do not know for sure that they can live in the property for more than a year. They have no incentive to invest in the property even in a minor way, not knowing whether they will be able to enjoy the benefits. In fact in many rented properties, you’re not even allowed to hang a picture (in Belgium you can, but you have to undo any damage caused when you move out or be charged for it).
When you move into a property in Belgium, it is supposed to be “remise a neuf” (made new), which usually involves being re-painted and any minor damage being repaired e.g. resurfacing wooden floors every few years, removing stain marks from steel sinks and work surfaces etc. This does not happen in the UK. You are lucky if the flat is cleaned properly when you move into it, even if there has been a couple of weeks between the previous tenants moving out and you moving in.
In my experience in the UK (in the professional tenant rental market), most landlords don’t bother to do any cosmetic renovation whatsoever, but instead just makes sure that all damage caused by previous tenants is noted to reassure you that you won’t be charged for it when you move out. A good landlord (I have one now) does however fix problems with the flat (smoke alarm, dripping taps, boilers etc) very quickly, but not everyone has a good landlord.
This means that over the years, the appearance of the rented property gets further degraded and ends up shabby.
That is why, in the UK you can often tell whether a property is rented or lived in my its owners, the minute you walk through the door. In Belgium, I cannot tell the difference.
So here are some simple ideas:
– longer rental contracts (3 years perhaps?) with possibility for landlords to raise rent as per some formula linked to the RPI
– Requirements for landlords to keep properties well maintained from both a cosmetic and safety/practical aspect. i.e. not to do what most do now which is just make sure everything works and nothing is dangerous.
If done well these changes could also be of benefit to landlords as they could have longer term tenants, so more secure revenue streams and lose the hassle/cost of constantly having to find new tenants. Although perhaps this might not be good news for estate agents!
Having stricter requirements might also drive the cowboys from the market, thus freeing up their downtrodden properties to be renovated and then either bought by owner occupiers or by a better quality landlord. But perhaps I am being too hopeful there.
I’m afraid that my experience in the UK means that I would always choose to buy if I could. That isn’t a great endorsement of renting in the UK, sorry : (