/ Home & Energy

Why we should worry about becoming a ‘nation of renters’

Woman sat in run-down flat

Reports that Britain will become a nation of renters thanks to high house prices and restricted mortgage lending may be right – but we’re worried about this for all the wrong reasons…

A generation of Britons is close to giving up hope that they’ll ever own their own homes, according to a report out this week. It’s a depressing finding – but if it surprises you, you must have had your head buried in the sand (or a very interesting and long book) for the past few years.

The claim, from a study conducted on behalf of Halifax, found that of 8,000 20 to 45 year olds, more than three quarters who do not already own a property would like to. However, 64% of the would-be homeowners put their chances of ever buying a house at nil.

If it sounds as though I’m being glib about these statistics, forgive me: this is a serious issue, and one of those would-be homeowners is me.

But I can’t help thinking that our national discussion of ‘the first-time buyer problem’ is focused on entirely the wrong issue. It seems we’re worrying about the emotional and psychological impact of people’s failure to step foot on the property ladder, rather than the practical implications of millions being stuck in poor quality private rented accommodation.

The trouble with renting

I’ve lived in rented properties since the age of 18, and have had unequivocally zero positive experiences with the various landlords I’ve known. I’ve lived with a rotting, crumbling bathroom in a flat that cost £1,000 a month to rent. And before that, I co-existed with a squirrel who scratched in the attic of my first-floor apartment, the owner of which stole £400 of my deposit when I moved out.

Elsewhere I’ve put up with mice, insecurity of tenure, rents that can rocket yearly on the whim of landlords and – when problems have arisen – ineffective, unreliable and unhelpful ‘handy’ men. Quite frankly, the state of much private rented accommodation in Britain is abysmal.

The industry is unregulated, and whilst there are many scrupulous landlords there are also lots whose only interest is in making money from their second property. To them, renters are glorified squatters, handing over wads of cash each month for ‘borrowing’ properties that are destined to become pension funds. They aren’t customers deserving of a service, or consumers who have solid rights in return for all the money they pay.

A ‘two tier’ housing system?

Nobody seems able to answer the question of how we help more first-time buyers onto the property ladder. Loosening mortgage lending doesn’t seem to be an option – and even the young people frozen out of the market seem to agree that restrictions on lending are needed, as I recently reported for Which? Money online.

A house price ‘correction’ seems the best case scenario for people in my position – but with house building apparently at a standstill, I can no longer see the promised crash happening.

The gut reaction prompted by the thought that Britain could become a nation of renters is horror. But it’s horror at the thought that people won’t enjoy the comforts, privileges and pride that go along with home ownership – when it should be horror at the state and expense of the properties many will be forced to pay through the nose for if they remain renters.

More people renting their homes in future doesn’t necessarily mean the creation of a Dickensian ‘two tier’ housing system – in fact it could see conditions improve for some renters, if we act to regulate the private rental market appropriately.

It’s time we woke up to the facts. If property ownership is going to be the preserve of fewer people in future, renters need to be in decent, secure, properly-managed places they can truly call home.

Sophie Gilbert says:
2 June 2011

There is this preconceived idea in this country that owning a home is something you should be proud of and renting one is something you should be ashamed of. It doesn’t necessarily follow, and I find the latter premise particularly hateful. It is akin to the classic remark, attributed to Thatcher, that “a man who beyond the age of 26 finds himself on a bus can count himself as a failure”. Balderdash.

I completely agree therefore that we must act to regulate the private rental market appropriately. We wouldn’t treat animals the way some tennants are treated. Guilty landlords should be severely punished, where it hurts, with severe fines, what their property is worth for example?

The rental market doesnt need more legislation, it needs effective legislation. In other words, make it illegal to rent out a house where a comprehensive inventory has not been provided. Make the deposit protection scheme actually become more proactive (considering how much money they are making for doing nothing) and make it so that any agreements during the tenancy (damage to carpet/walls etc) are noted to the protection people so that disputes are easier to resolve.

I find that the landlords who provide a comprehensive inventory are the ones that can be trusted.

Besides, most countries in europe aren’t as obsessed with home ownership as much as we are and they get on fine. I suppose that for us, the equity we make helps us to spend more in the shops and keep the economy growing.

This recession we are in is just indicative of this country without a massive housing boom. ie no-one is spending as much on frivolous products we don’t need because we aren’t making loads on our houses. All of a sudden there is massively reduced growth, inflation going mental etc etc.

We underestimate the impact the housing market has on our economy.

It is shocking how much rent has gone up in the last year. The market does seem to have completely reversed – where the competition for finding a decent place to buy used to be immense, it’s now the case for finding somewhere to rent. I totally sympathise with Laura’s predicament – and the many others in the same situation. There are too many landlords (and estate agents) exploiting the current situation and playing would-be renters against one another to get the highest rent, creating an artificially inflated market.

I’ve been both a renter and a landlady and luckily had quite positive experiences of both. But when I rented out my flat I was adamant that it would be in the condition I would want to live in – in fact, it was probably better because we fixed all the little things that we put up with when we lived there!

Laura – I couldn’t agree more. As a tenant I rarely had a landlord who treated me fairly, fixed things on time, or didn’t try to up the rent at any available opportunity. Now I’m no longer a tenant I *still* find myself battling the estate agents who manage the flat above from me. The tenants don’t speak great English, and their agents and the landlord are extremely difficult to contact, so simple things like a leaking pipe become really really difficult.

I think a lot of landlords forget that they have also signed a contract with the tenant – they have agreed to provide a decent living space. So many landlords now just expect the tenants to fulfil their half of the bargain by coughing up the cash each month, but refuse to hold up their side of the deal.

Kaloki says:
2 June 2011

My previous landlord never fixed anything. From the day we moved in we had problems, but we thought we’d be ok as we got it written into our contract that we needed certain things fixed.

Over time more and more things went wrong (including multiple gas leaks as the gas meter had been installed in such a dodgy way – National Grid fixed it for us and billed the landlord – he wasn’t impressed), but the last straw was when we had that awful cold snap. It rained, and wind howled, and we discovered that the reason our bedroom was always cold wasn’t the single glazing. It was that underneath the bedroom window was a hole, a hole that ran the width of the window, was an inch high, and led straight outside. We hadn’t noticed it previously as it had been covered by a piece of wood, glued on and painted to match the windowsill. Of course the wind, rain and snow had destroyed the glue, so the board had fallen off.

We then knew why it was so cold, and also why a mysterious damp patch had appeared in our living room, directly below the bedroom window.

We were less than impressed when we discovered that the landlord had no intention of fixing the hole as he planned on selling the flat at the end of our contract, and so didn’t want to spend a penny on the place until then.

Understandably we called Environmental Health, little did we know that this would worsen things for us. After all, surely it should improve things? But no, the landlord took exception, and turned up at our flat (without giving us the contracted 24 hours notice) to have a go at us, and threaten us for daring to get Environmental Health involved.

Two days later he returned again, and attempted to let himself in (luckily we’d installed a chain after an earlier break in attempt) and shouted and screamed abuse at us. From that point we were too scared to stay at the property we were paying for and had to find floors to sleep on.

We then tried to leave the tenancy early, using the logic that he had broken his contract multiple times, and that we didn’t want to find out what he was capable of. But couldn’t.

We ended up paying him for 3 months that we were not there, while also incurring the additional costs of not living in our own home. On top of that, we have still not got our deposit back. This vile man has taken two and half grand of our money. And we have no rights.

This is why being a nation of renters is so flawed, people like him can continue to destroy people’s lives. What’s worse, is that the reason we were with him is that myself and my husband are disabled, and rely on housing benefit to keep a roof over our heads. And this piece of work was the only person locally willing to take on HB tenants.

The rental market needs a huge overhaul. It’s disgusting the way things operate now.

Renting is the norm in Germany 0 you don’t see them bleating about it.

If there are less buyers, the price will drop as greedy estate agents (yes you) stop escalating prices to hike up their cut and the banks get real about fleecing customers with their dodgy mortgages.

Andrew Kneeshaw says:
3 June 2011

The big problem for everyone – house buyers or renters – is there’s just not enough housing about. With a greater demand than supply, unrealistic house prices are supported and rents go up. House prices are high because land prices are high, and land prices are high because building land is rationed through the planning system. And now we have the localism bill, a charter for NIMBY’s which will make things even worse.

The only way is to free up land for buildings, but with planning committees run by middle-class, house owning councilors who will protect their view and house values, we are unlikely to see any change. The only way round it is to insist that the majority of people on planning committees are renters. Radical, but it may be effective.

I have just put a deposit down on a new house and by all accounts, they are all being snapped up pretty quickly. It is on ex green belt land right by the river (but above the flood plain). Brownfield sites are the best option really but with local transport systems outside London being pretty dire, building on brownfield sites not only increases cars in the centre, but costs the developer loads more due to the potential contaminants that they have to remove before building can start.

I just have to sell my house oop north though, anyone fancy buying a 1 bed terrace with a 4.7% rental yield? 🙂

May I point out out that it was Thatcher that de-regulated rents – and sold off the social housing – causing much of the chaos now experienced.

And it used to be normal for families to rent here – without any trauma attached. Sad that memories are so short..

We’ll be talking about this on the Money podcast, so keep these comments coming!

Chris Rimmer says:
7 June 2011

I agree that what we really need is for a drop in house prices to affordable levels. I’m convinced that the problem all along was that people were encouraged, and succumbed to the temptation, to borrow far more than they could afford to repay, based on the impossible premise that house prices can increase faster than people’s incomes in perpetuity. This has lead to absurdly high house prices, and people being weighed down by their debt. The problem has been temporarily covered up by the Bank of England base rate being kept ridiculously low (which is essentially giving free money from taxpayers to banks). But it can’t last forever, because it’s just causing price inflation, which, contrary to many people’s beliefs, does not help those with large debts. *Wage* increases help to cut the burden of debt; price inflation makes it even worse, as there is even less money left to pay the debt after buying the essentials. Mervyn King has made it clear that he’s happy for prices to go up by 5% per year i.e. for people’s incomes, savings and pension pots to be cut in half over the next 14 years, but that he will immediately act on any sign that incomes are increasing.

The only solution is going to involve those who got into too much debt admitting their mistake, and either paying off their debt at a realistic pace, which will involve family austerity or even defaulting on it through bankruptcy (causing the lenders to take the loss). What isn’t going to work is the current approach (throughout the world) of “extend and pretend” – keep interest rates low so that people can keep up their minimum repayments until a new group of people can somehow be persuaded to overpay even more for houses; and all funded by taking through inflation the wealth of the people who did the right thing and refused to take on excessive debt.

Once we start living within our means i.e. spending no more than we get in income over a lifetime, or to put it another way consuming no more than we produce, then we can have a sustainable economy. I firmly believe that we can have a high rate of home ownership, but prices must come down, and we must have an economy based on producing useful stuff, rather than on treating shelter as a speculative asset in a game of continually finding someone whom we can convince to overpay for it by more than we did.

I’m sure this point of view will not endear me to you if you have a large mortgage burden and are worried about the effects of higher interest rates. All I can say is that I honestly do not have any ill will towards you, and I feel very sorry for you. I worry about the effects on friends of mine. But ultimately we are responsible for our own actions, and we have no right to insist that someone else be forced to pay for a bad decision of our own making. And I am convinced that the approach of keeping interest rates low to keep house prices from correcting is not going to help that many people who overpaid for their houses to eventually clear the mortgage anyway – it is just dragging out the process.

I’ve just seen today that an MP has called for a register of private landlords which would mean landlords ***** not keeping properties up to scratch would be struck off the register and unable to rent. Though I’m sure this would lead to some sort of sub-prime rental market going on. But then I am rather cynical.


Kaloki says:
16 June 2011

Even if it did create a sub-prime rental market, it would mean that renters could find a property and be able to check that their landlord was registered. It would give them more of a chance.

Landlords can do references on their tenants (financial and speaking to previous landlords) but tenants can’t in most situations. This would go someway towards making the system fairer.