My first job out of university was as an estate agent. Perhaps not the natural career choice for a music and theology student, but it seemed like a great way to pay off my student loan!
I was out of place in this industry and soon left to join the charity sector. Regardless, it was a fascinating ‘behind the scenes’ look at the UK’s (broken) housing market and I'd like to share a story from those days, which is now 13 years old but remains disappointingly relevant.
One day a nice new Porsche pulled up outside our office and parked on the double yellow lines. A man got out and swaggered in, clearly wanting everyone to notice him. He greeted my boss with mutual alpha male respect and quickly got down to business. He was a serial property investor who owned some of the rental properties that we managed. He was a very successful businessman and spent several months of his year living a holiday lifestyle abroad.
On this particular day, this investor was inquiring about new property prospects to add to his portfolio. Typically, he would buy at the cheaper end of the market (e.g. flats and starter homes) and he was interested in one that had recently come on for sale. At this point, I need to share a parallel story….
A young couple desperate to escape crippling rent had been looking to purchase their first home. There wasn’t much available that they could afford, but they had found one flat that they were clearly excited about buying. However, they were negotiating the sale slowly, partly due to some trouble securing a mortgage offer and partly because buying a first home is a big decision.
Meanwhile the property investor was looking at purchasing the same flat as this young couple and, without too much thought, he made a cash offer to buy it. So, two offers were received for this flat: one from the young couple and one from the investor.
The investor’s offer was actually lower than the couple’s, but he was offering cash and he had a reputation as a good buyer. Also, the sale to the investor was favoured by us, the estate agent, because even though we would receive a lower rate of commission on the sale we were likely to manage the property as a rental, meaning an ongoing monthly income on top of the sale fee. So, the investor won the deal and the couple missed out.
Now, this isn’t an unusual story so far and there are lots of similar first-time buyer stories out there. But, here’s the twist and the reason the story has stuck with me…. This property investor was also the couple’s current landlord.
The investor/landlord had done nothing legally wrong here, so shouldn’t be condemned – he was just playing real-life Monopoly and playing it well. Also, I don’t believe that he knew he was competing against his tenants for this sale. But, the fact that this game is allowed to be played so freely in a country with housing shortages is, quite simply, destroying lives and communities. It is preventing young couples from starting families; it’s forcing parents to return to work shortly after having children in order to pay the bills; it’s causing relationship breakdown due to financial pressures (and therefore a need for more housing as couples split); it’s forcing families to live in cramped conditions; and in recent years the single biggest cause of homelessness in England is the ending of a tenancy in the private rented sector.
Data from the ONS shows that the private rented sector continues to grow and so too does the number of families living in temporary accommodation, 'sofa surfers' and rough sleepers. Is this a coincidence?
The UK is now rife with properties that are not lived in by the owners. While this is not necessarily a problem in and of itself, it seems morally unacceptable when properties are rented out at cripplingly high rates and/or left empty when there are major affordable housing shortages.
Having a home is among the most basic of human needs and a 'home' is not necessarily the same thing as a house or property. Home is, by definition, somewhere offering a long-term or permanent residence - i.e. a place with a sense of security - and, as referenced above, the private rented sector is frequently guilty of not offering that much-needed security.
Without homes, societies suffer awful consequences. One striking example to highlight this point is this: the words 'of no fixed address' frequently appear next to the description of the people responsible for terrible crimes (try this link to see my point). I've spent several years working in the homelessness sector and I've seen the desperation caused by homelessness which, in turn, often leads to crime.
So, what’s the solution? Before attempting to answer that, here are some stark and contrasting figures:
- At the last count, the number of vacant homes in England increased to around 600,000, with more than 200,000 long-term vacant (i.e. empty for more than six months). By contrast, almost 80,000 households live in temporary accommodation, at great expense to the taxpayer.
- More than 11,000 homes in the UK have been empty for more than 10 years. By contrast, there are around 5,000 rough sleepers in the UK.
- There are approximately 28m domestic properties in the UK with a total of around 84m bedrooms (2.95 beds per home on average). By contrast the population of the UK is 66m.
I may be accused of over-simplification by contrasting these statistics, but my point is this: the problem does not seem to be an obvious lack of properties, but a problem with distribution. What is to say that building more properties and new estates will not just result in a more unfair distribution of wealth and more problems for society? What is there to stop landlords from preventing their tenants from purchasing their own home (as in my example story above)?
I'm not saying that ‘build more’ is not a valid argument, nor am I saying that the UK does not need more homes; but I am saying that building more homes will not solve the UK's housing crisis (and the broken communities crisis for that matter) while property ownership remains so attractive to investors.
There have been some tax and policy changes in recent years that have attempted to curb the property investment, but it remains to be seen whether they have made any significant difference. Surely more can be done and, I wonder, have we seen any desperate measures in these desperate times?
I'll take a risk and propose some potentially unpopular solutions here. I'd love to hear why these will or will not work and alternative ideas (please click to expand the thoughts):
Next up… time for my one-year scan.