The average wage of the top 1% in Britain rose to £13,770 a month in December. Jeevun Sandher, an economist at King’s College London, points out the very richest saw their incomes rise the fastest during the pandemic. This group were also likely to have been able to save the most while Covid raged. Where do the very wealthiest spend their cash? One place is housing, for which there is a low level of stock being released on to the market. The result is rising house prices. Over the past 12 months, asking prices have gone up by 9.5%.
This has a knock-on effect for renters. UK rents rose by 8.3% in the last three months of 2021. For would-be first-time buyers, the situation is as bad if not worse, with the current average price of £277,000 nearly £25,000 higher than just a year ago. Those looking to have a roof to live under will find little solace in official figures. These record an 11% drop in the number of total homes added in 2021 compared with the year before. The number of new affordable houses that began being built dropped 16% year-on-year. Shortages of labour and materials, as well as planning delays, will make it harder for the 11th Tory housing minister since 2010 to meet government targets for new homes.
Britain’s housing stock is being turned into an asset class as a consequence of the excessive financialisation of the UK economy. For those who own their homes, these buildings serve a dual purpose: they provide shelter, and function as investments. For around 2.5 million landlords, who between them accounted for 18% of all property purchases in 2019, they are only investments.
If the underlying problem is a lack of homes, then one solution may be to build more. But if the problem is landlords, and the fact that property owners are incentivised by rising prices, as well as their desire for more space (a desire that may have been augmented by the switch to home working), to buy as much of it as they can, then building more homes won’t help. It could even make matters worse, by creating more opportunities to extract exorbitant rents from those who have an income but lack the capital for a deposit, or the confidence to take on a huge debt.
Over recent decades, ballooning property prices have served home owners well, especially in the south of England. The form of inequality this has created currently appears to be generational. Older people are more likely to own their homes than younger ones. City firms are ploughing billions of pension savings in “build-to-rent” developments that could see a transfer of wealth as younger people end up paying the pensions of older people.
The Labour party could be bolder in dealing with the property haves and have-nots. Its housing policy is for first-time buyers to get priority in new housing developments and to ban foreign owners buying up new properties. But hoarding by commercial landlords that hurts young renters and many homeowners needs tackling. One suggestion by housing barrister David Renton is for “right to buy” to be extended to the private sector – say to where landlords own a minimum of five properties. There may be outrage from those who regard rent as economic growth. This surely must change. While Korea makes consumer electronics and Germany makes cars, Britain churns out buy-to-let landlords. There’s little to envy in such “success”.
