Half of millennials will rent rather than own their homes into their 40s, and one-third will rent into retirement unless there is a radical change in taxation, new funding for public housing and a reform of the private sector, according to a new report.
Under this pessimistic scenario — which assumes that recent economic conditions and trends in home ownership persist — researchers at the Resolution Foundation think-tank estimate that the growing unaffordability of accommodation will see the housing benefit paid to pensioners rise from £6.3bn today to £16bn by 2060.
In the last 15 years, the number of families living in assured short-hold tenancies has tripled to 1.8m.
The insecurity of renting, acceptable when childless, matters when schooling, friendships and support networks are at stake — and politicians are now taking note, according to Lindsay Judge, a senior analyst at the think-tank.
“There has been a sea change in attitudes to private renters because this generation is now growing up and having children,” she said.
Tackling the housing crisis has become a priority for all UK political parties, with ministers now pushing for housebuilding on a scale that will anger many of their voters. There is also a recognition that young people face particular problems: last month, the government scrapped a policy adopted in 2014 that would have stopped people under the age of 21 automatically receiving housing benefit.
But the measures proposed by the Resolution Foundation are far broader.
The report argues that the short-term priority should be reforms to make tenancies more secure, including indeterminate leases, rent rises limited to inflation for three-year periods, and a new tribunal system to resolve disputes swiftly and cheaply.
UK landlords would oppose such changes, the report acknowledges, but experience from countries including Germany, the Netherlands and more recently Scotland suggests that sensible ways can be found to protect their rights.
However, most people will still aspire to home ownership — and recent policies to help first-time buyers muster a deposit may well be counterproductive, serving simply to drive up prices. The report argues that tax policy should aim to reduce “overhousing” and so improve the relative position of first-time buyers.
It proposes increasing stamp duty for overseas buyers; maintaining the existing surcharge for those buying second homes; and cutting the duty for all others. This would make it easier for older homeowners to downsize. The report proposes that this could be funded by a reform of council tax — the overall effect making it “less attractive to be over-housed — but easier . . . to move”.
It will also be necessary to build more houses, even though the effects would only be felt in the longer term. But while the report suggests ways to help the market deliver more homes, it also notes that “it is simply not in developers’ interests to build out at rates that would have an effect on price”.
If the state is to fill the gap, the report argues, mayors should be given more scope to borrow and local authorities clearance to raise revenue in areas of high housing need.
Many of these proposals would be intensely controversial, especially given the fiscal implications. However, Ms Judge thinks the political debate may be reaching a “tipping point”, adding: “we are trying to animate that debate”.