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Time is running out for renters

At the eleventh hour, late on a Friday afternoon, the Government finally decided to stop ploughing ahead with reopening eviction cases in the courts on 24 August.

This news came as a relief to the many thousands of renters struggling to pay their rent due to the economic shock of Covid-19. However, a stay on evictions keep renters safe for now but it is just a sticking plaster. It is time the Government dealt with root cause and took action to end the rent debt crisis.

Even before the pandemic hit, two million households in the private rented sector were struggling to pay their rent – paying a staggering 40% of their income to private landlords on average. 

Already stretched thin and with no savings to fall back on, private renters now find themselves without work or at risk of losing their job. 

Having to rely on the welfare system, many for the first time, renters wait anxiously for money to arrive and are devasted when the housing allowance, even with the recent Government increase, nowhere near covers the rent they owe.

New research by Generation Rent found that just 12% of those who applied for benefits after lockdown have been able to cover their rent – meaning hundreds and thousands of renters have been forced to rely solely on their landlord’s goodwill.

With unemployment rising, the furlough scheme coming to an end, and an endless wait for an inadequate benefit payment, thousands of renters are at serious risk of losing their homes.

Renters like Elizabeth, Tim, Roy, Laura and Chrissie:

Elizabeth: ‘Our three-year contract is up. We informed our landlady we weren’t able to pay full due to cuts in our salaries due to Covid19. The landlady agreed – then the landlady gave us Section 21 eviction notice.’

Tim: ‘Covid 19 has meant that income has dried up. My landlord wouldn’t or hasn’t taken the three month mortgage payment holiday. I am 3+ months behind with my rent and frightened about receiving a Section 8 eviction notice from my landlord.’

Roy: ‘My landlord has been texting me once a month since this (pandemic) started telling me I’m going to be “out on my ear” if I don’t pay, trying to increase the rent while my income has halved and my savings are dwindling, I’m terrified for my children’s future.’

Laura: ‘I’ve been furloughed and the money hasn’t been coming in until the middle of the month so I’ve been unable to pay the rent on time. I haven’t slept I’ve been ill anxiety and depression levels have gone up.’

Chrissie: ‘We explained that we hadn’t been able to work for 3 months and we’ve rented for just under 30 years. The landlords agent said ‘well you know what to do, give the keys back if you can’t pay’. We’re not eligible for benefits as we own a retirement property abroad. We are both over 60.’

These stories break my heart. Sadly, Elizabeth, Tim, Roy, Laura and Chrissie are not alone. Their stories are just a snapshot of the renter experience Generation Rent hears every day.

Many have lived in their properties for years. They have children at local schools but now find themselves priced out of the area they call home. Some are behind with rent and others haven’t even been given a reason; their landlord has simply issued a ‘no fault’ eviction notice and asked them to leave.

Our research, carried out just a few weeks ago, has shown 1 in 5 private renters who has struggled to pay rent during the pandemic has already been told to move out, been given a rent increase or been threatened with eviction. Nearly half of struggling tenants were found to be already searching for a new home, with 59 per cent unable to find one they can afford or a landlord who will accept them – meaning homelessness will be the only option for renters as they find themselves with nowhere else to go.

Time is running out for renters.

In March, Robert Jenrick promised to keep renters hit by Covid-29 in their homes. He has to deliver on this promise. He has to put in place a permanent solution to alleviate the coronavirus rent debt crisis being faced by hundreds of thousands of renters. 

With Parliament back from the summer recess, Generation Rent are more determined than ever to help renters saddled with rent debt. 

That’s why we’re campaigning for an end to the rent debt crisis through lifting the benefit cap and increasing benefits to cover average rents, no rent increases until March 2021, and make grants available to cover the rent of the most financially vulnerable through our Coronavirus Home Retention Scheme.

We want to see an end to coronavirus evictions through emergency legislation to prevent ‘no fault’ evictions and evictions for rent arrears. This will ensure renters who have been hit by the pandemic do not lose their homes through no fault of their own.

And we want to see a permanent end to Section 21. Evictions for no reason were a leading cause of homelessness before the pandemic. Section 21 eviction notices are in frequent use and the pandemic has highlighted that the law is not fit for purpose. The Government has pledged to end ‘no fault’ evictions, and now is the time for it to honour this pledge. 

Without a permanent solution to the rent debt crisis and evictions due to Covid-19 thousands of renters are at serious risk of losing their homes when the ban ends.

Generation Rent will be doing all it can to stop private renters tipping over the edge into homelessness.  Homelessness destroys lives. Help us end the rent debt crisis – sign up at GenerationRent.org

<span class="has-inline-color has-accent-color"><strong>Alicia Kennedy</strong></span>
Alicia Kennedy

A leader in strategic planning and campaign organisation, Alicia has had a 25-year career operating at the highest level of national politics.

She worked with Prime Ministers, Cabinet members, hundreds of MPs, and thousands of Councillors and volunteers to deliver successful local and national election campaigns for the Labour Party. She was made a life peer in 2012 and is non-aligned.

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We cannot borrow our way out of the housing crisis: mortgage credit is part of the problem

We cannot borrow our way out of the housing crisis: mortgage credit is part of the problem

One of the key issues highlighted in my new book about ‘Generation Rent’ is how mortgage lending drives the UK housing crisis. I am far from the first person to point this out: my understanding of the problem is drawn from the research of the think tank Positive Money, IIPP economist Josh Ryan-Collins, property cycles expert Philip J Anderson, and many others.

But no-one in government seems to be taking it seriously. As a result, a dangerous policy proposal in the 2019 Conservative manifesto has gone largely unchallenged: the promise to support the mortgage industry in delivering long-term low fixed-rate mortgages for first-time buyers, which will ‘slash the cost of deposits’. This may sound like an enticing idea, but in practice it will only pour more petrol on the fire.

The truth about where mortgages come from

When you take out a mortgage, the lender conjures new money into existence. The money doesn’t come from other customers’ savings accounts, nor does it come from bank ‘reserves’: it is created from nothing.

The main constraint on mortgage eligibility is the borrower’s ability to repay the debt. Effectively, a mortgage is a large withdrawal from The Bank of Future You. And while you can typically only borrow 90%-95% of the property value, this does little to keep mortgage borrowing in check, as property prices can rise in response to expanding mortgage credit and vice versa.

When property and mortgages collide

When cheap and readily-available mortgage credit meets residential property, house prices shoot up. This is because the supply of land, which accounts for about 70% of the value of a home, is fixed. No market can produce new land in response to the demand for housing created by expanding mortgage credit. And you cannot take out a mortgage against a home that hasn’t been built yet.

So, what you get is an ever-expanding supply of money chasing after a finite amount of property. Maybe we should think of it this way: rather than house prices going up, the value of money itself has been systematically trashed relative to the value of property.

What if we pour new money into new homes instead?

This was the rationale behind the government’s Help to Buy Equity Loan scheme, which was reserved for new-builds only. The idea was that, because the new loans would be used to increase the housing supply, the scheme wouldn’t lead to house price inflation.

But since the scheme was rolled out via huge private housebuilders, these companies were able to control the supply of housing by hoovering up as much land as possible and drip-feeding their (often shoddy) new-builds onto the property market at a slow enough rate to keep sale prices artificially high. In consequence, housebuilders’ profits have swelled, and Which? recently reported a trend of Help to Buy homes falling in value, despite rising local house prices. Most worryingly of all, Help to Buy mortgage arrears are running at six times the ordinary rate.

A culture of land speculation entrenches the issue

Maybe the land-credit feedback cycle would be dampened if it were possible to take out a mortgage to fund a self-build property. But to acquire land, you normally have to satisfy a landowner’s price expectations (claiming vacant or unregistered land in this country is almost impossible). These expectations are likely to have been warped by the speculative nature of the land market.

Most landowners know that, under current rules, a piece of agricultural land can become around 92 times more valuable with a grant of planning permission for residential buildings. If the seller doesn’t like the price on offer, they can withhold their land indefinitely with no consequences.

A whole ‘land promotion’ side-industry has sprung up to enable speculators to share in the planning uplift, using legal mechanisms like ‘option agreements’ and ‘promotion agreements’ to reduce risk and increase profits. As a result, land is scarce and acquiring it is both costly and difficult, despite the fact that only around 6% of UK land mass is actually built on.

Why planning reform won’t solve the problem

Perhaps because land speculation is so rampant in Britain, the planning system is currently painted as the big bad wolf of the housing crisis amongst conservative thinkers. There is a belief that the land market will magically start behaving like any other free market if we scrap the 1947 Town and Country Planning Act. But for all its flaws, the planning system is not the fundamental issue here, even if there is a genuine case for planning reform.

In Victorian Britain, slum housing, rising rents and overcrowding plagued the Capital and other areas of rapid economic growth. This had nothing to do with rules and regulations (which were next to non-existent), and everything to do with the power that comes with land monopoly. The poor got poorer and the landed got richer: ‘twas ever thus.

We need to keep talking about land and credit

The only way to permanently stop the price of property ballooning out of all proportion is to tax the land beneath it. A land value tax could replace council tax (a ‘highly regressive’ policy that falls hardest on the least well-off), business rates and Stamp Duty Land Tax, and would disincentivise land speculation. It could raise much-needed revenue for public services hit by austerity cutbacks. Or it could even be redistributed in the form of a ‘citizen’s dividend’ or Universal Basic Income.

This idea has garnered support from across the political spectrum, but has traditionally been opposed by governments beholden to wealthy landowners and a predominantly homeowning public. So, since it may take some time to get the electorate to come round to the idea of a land value tax, a more urgent and politically possible course of action would be to reform the land acquisition process, so that local authorities can afford to build genuinely affordable social housing at scale.

In addition, the Right to Buy policy must be scrapped immediately to stem the loss of social housing – especially given that nearly half of the homes sold are ending up in the private rented sector and contributing to the soaring cost of housing benefit. The shortage of genuinely low-cost homes is acute; the number of people stuck on social housing waiting lists stands at well over 1 million.

For too long, spiralling house prices have been dismissed as an inevitable force of nature, or the product of too little housebuilding, or too much immigration – even though research from the Bank of England has concluded that the quadrupling of house prices over the last 40 years is ‘more than accounted for’ by falling interest rates. It may be dry, knotty and difficult to fit into a soundbite. But until we increase public understanding of the land and credit feedback cycle, the housing debate will only keep going around in circles.

<strong><span class="has-inline-color has-accent-color">Chloe Timperley</span></strong>
Chloe Timperley

Author of “Generation Rent: Why You Can’t Buy a Home (Or Even Rent a Good One)”. ORDER: http://bit.ly/2AX2LhE

Chloe’s professional background is in financial planning, which involves analysing pensions and investments. This led her to delve into how the financial sector sits at the heart of Britain’s housing crisis. During her research, Chloe went undercover at landlord events, spoke to MPs and activists, and joined a tenants’ union.

She also listened to the stories of scores of tenants who — like her — remain stuck against their wishes in the private rented sector.

Now, she wants to shift the housing debate away from simple narratives of supply vs. demand, and towards the underlying mechanisms that drive our dysfunctional land and housing markets.