London – The housing crisis is a complex issue where multiple factors come into play. These are not economic only but also, and primarily, political. Conservatives, traditionally, support existing owners’ interests though since 2010 introduced policies such as buy to let and first time buyers to ease new ownership through mortgages accessibility. These policies are the root cause of homelessness and rough sleeping.
After reports and figures of hundreds of thousands of homeless started affecting government’s reputation and credibility, changes in stamp duty and cut to mortgages interest tax relief (i.e. landlords can no longer claim all of their mortgage interest against income tax on rent) have been introduced. But as a result property investors/speculators leaved the buy to let market with consequent drop in loans approvals, shortage of houses available to rent and letting prices soaring.
Rents crisis has a tragic impact on homelessness: the majority of homeless in the UK come from rent evictions and more 55% of homeless families are into work. That proves low wages do not cover rents and welfare system does not provide enough help, so people end in temporary accommodations or sleeping rough.
The reported stages between falling into arrears, eviction and sleeping rough also expose how buy to let itself impacted lives so far: landlords using buy to let are not owners; they are on the way to buying through mortgage repayments. The high pressure of mortgage payments reflects on higher rent prices and precarisation of tenancy agreements. Shortlet tenancies and no fault evictions proliferated under buy to let regime in order for landlords to replace straightaway tenants in financial constrains accruing arrears and avoid this way the risk of paying fines or issues related to mortgage with the bank.
The political strategy behind the politics of housing.
The majority of voters are homeowners. Though home ownership declined in the UK over the past ten years, it still accounts for 63.4% of the total population.
Consequently it has been in the direct interest of the government favouring ownership through buy to let and first time buyers policies over the last eight years in order to broaden political consensus. As stated above, these policies resulted into homelessness. When homeless and rough sleepers rose exponentially and became a political shame for the government, 100mln pounds have been approved to tackle the extreme consequences of the rotten equation Landlords : Banks = Voters : Government clearing the mats behind the banks friendly politics of facilitation of access to mortgages: the mean by which Conservatives gained a relatively stable political support.
But the equation worked until its impact on society became politically damaging: homelessness grew by 169% since 2010 along with the uproar of public opinion, political opposition and media. The 100 million fund and the more recent 30mln fund to rough sleeping expose how government invests in it’s own short term political survival.
Currently the housing market is stuck. While there’s a slight increase in the construction sector, negative economic forecasts due to the exit from EU keep foreign buyers at large and the most of luxury apartments already built remain unsold, affordable houses are too few, rent prices are at record high and homelessness is rising.
If on the one hand building the hundreds of thousands new affordable houses UK needs is the only way out, on the other this would devalue existing properties and lower rent prices: owners would change their minds. A loss of votes the government is clearly trying to prevent.