The dirty big
secret of the home
The Scottish people need an outbreak of candour, honesty and courage from our politicians on housing realities. We need an end to the heroic delusions of a property-owning democracy that is based entirely on the 'little platoons' of owner-occupiers. We need an end to a narrative that regards the rented housing sector with disdain and even vilifies those housed in that sector.
The Scottish house market is a regional component of the UK housing market. The current status of the UK market is: has suffered a severe and prolonged downturn as a consequence of the 2008 credit crunch; remains in a deep and severe recession; a chaotic marketplace with over-high prices with a paradoxical lack of buying funds; and a mid- to long-term prognosis that is uncertain and unstable with, on the more optimistic assumptions, real house prices not to exceed their 2007 market peak until 2015.
Political debate and media comment is pre-occupied with the inability of young first-time buyers to get in their foot on the first rung of affordable ownership. 'Tackling housing market volatility in the UK', from the Joseph Rowntree Foundation (JRF), included estimates that on current trends it will not be long before only one in four couples in the UK will be able to afford to own a home.
PWC in its authoritative UK Economic Outlook noted that a consequence of the tightening of credit conditions since the onset of the financial crisis is that mortgage approvals have dropped from just under 250,000 in 2008 to fewer than 100,000 in the quarter ending April 2011.
According to the Council of Mortgage Lenders in Scotland, as reported by the Scottish Government, there has been a sharp decline in Scotland in mortgage advances to first-time buyers, from 35,300 in 2007 to 17,600 in 2010, a fall of over 50%. A 2011 survey, 'The Reality of Generation Rent', produced by Halifax and the National Centre for Social Research (NCSR) included the statement: 'Two thirds (64%) of the non-homeowners we spoke to can be defined as "Generation Rent" – a generation with no realistic prospect of owning their own home in the next five years and who lack the long-term saving mentality that most need if they are to get on the housing ladder'.
The authors of these reports go on to make recommendations about 'what can be done'. These vary from the JRF's improving housing supply and taxation measures, to the NCSR's suggestion that 'it would be worth banks exploring offering further advice services to prospective mortgage applicants'.
The Council of Mortgage Lenders in Scotland, meantime, has welcomed the Scottish Government's award of £250,000 to allow trades body Homes in Scotland to take forward proposals on a mortgage indemnity scheme 'to help first-time buyers and others aspiring to purchase a new home'. That scheme comes on top of a long series of Scottish Executive and Scottish Government commitments, including a range of measures to assist prospective purchasers into home ownership.
Politicians for most of their careers must tack and trim to accord with the fickle centre-ground of the electorate. That centre-ground, in turn, is risk and change averse.
We should stop at this point and ask why there is such a preoccupation with assisting first-time buyers into a form of tenure that is already entrapping many tens of thousands of existing households in an increasingly precarious and financially stressed situation. The dirty big secret of the home ownership delusion is that increasing numbers of owner-occupier households are experiencing poverty or are vulnerable to factors and circumstances that can pitch them into poverty. The evidence of this phenomenon of owner-occupation poverty is strong and deeply troubling – and it arises from a range of sources. A few examples:
1) In the Guardian (June 2011) Richard Banks, the chief executive of the country's fifth largest mortgage lender, UK Asset Resolution (UKAR), spoke of a potential 'tsunami' of homeowners who will fall behind on their mortgage repayments as soon as interest rates begin to rise. He confirmed that 23,000 of Ukar's 750,000 mortgage holders are more than six months behind with payments. Banks's organisation was set up to run the nationalised mortgages of Bradford & Bingley and parts of Northern Rock following the banking crisis;
2) A Shelter UK survey indicates that one in four mortgage holders have no idea what the UK base rate is. These mortgage holders are playing with significant financial risks while being unaware of their exposure. Data from Legal & General indicated that maybe 90% of UK mortgages are on variable rather than fixed rate of interest. That's up from 60% from 2007. In something of an understatement, Shelter UK said that when the Bank of England does raise rates, this could push risk-ignorant owner-occupiers and those assuming permanently low interest rates, into a 'spiral of debt and repossession';
3) Housing expert Henry Pryor predicted that only one in three of the houses currently on the UK market will sell this year (or in other words, that two in three will not sell). Analysts like Capital Economics believe house prices are still 20% too high. The resident owner-occupiers are entrapped and unable to move to new job opportunities – when unemployment is in the first place what is forcing them to seek work elsewhere. The TUC's 'Can Housing Work for Workers?' research casts doubt on what is described as the myth that owner-occupation and financial stability go hand-in-hand;
4) Data such as that collated from the Scottish Housing Conditions Survey for JRF's 'Monitoring poverty and social exclusion in Scotland in 2010', demonstrate time and again that Scottish pensioners in owner-occupation are often worse-off than those in social rented housing. The DWP's 'Households Below Average Incomes 2008/09' revealed that a staggering 40% of the UK working population in poverty were in the owner-occupied sector.
If some of those sources are a bit leftist or do-goody for some, then they can look to the right-wing Adam Smith think tank's 'Home ownership: the end of the affair'. The authors note: 'During the past year, both the Conservatives and Labour have reaffirmed their commitment to extending home ownership', and go on to declare: 'Many commentators and much of the political class are in denial'.
Politicians for most of their careers must tack and trim to accord with the fickle centre-ground of the electorate. That centre-ground, in turn, is risk and change averse. Every so often, however, along comes a momentary possibility of fundamental change. The issue in such a situation is whether there are politicians with the intelligence to identify the opportunity – and with the courage to demonstrate the necessary leadership to effect momentous change. Those who do are rewarded with the power of popular electoral mandates and legitimacy.
For over half a century, a UK cross-party consensus favoured public sector rented housing over owner-occupation. Margaret Thatcher comprehended that that was a consensus which had lost resonance with the middle-ground voters' aspirations. Her 'Right to Buy' (RTB) statute ended the, seemingly outmoded, consensus and seduced the voters with discounted public assets. Margaret Thatcher had identified the opportunity and, as the 'Iron Lady', wrought momentous change. She was rewarded with an extensive reign of power (albeit, to the chagrin of most of civic Scotland).
We are, arguably, at another point of potential momentous change: the centre-ground voter is increasingly well-knowing about the foolishness and falsity of the home-owning democracy myth; the actual facts reveal that new home ownership, especially among the young, was steadily declining even before the 2008 credit crunch; and the gradual, tentative, dismantling of the previously cherished RTB has not led to any popular revolt.
Can Scotland's current cache of politicians produce anyone with the acumen and courage to perceive and grasp the moment and declare 'the game's a-bogey, the man's in the lobby?'. If none of our politicians demonstrate the necessary acumen and the courage, there will be 'nae lobby' for many Scottish families; because they will have lost their entire home as a consequence of being encouraged, and even assisted, to get entrapped in inappropriate and unsustainable home ownership.
Edward Harkins is a knowledge and research independent consultant specialising in regeneration, affordable housing and social enterprise