The UK Housing Review published its Autumn Briefing Paper this month, with the document making for uninspiring reading for both private renters and aspiring homeowners looking to plant their first foot on the property ladder. The report, which acts as a supplement to the main spring review, identified a number of vital issues yet to be fully addressed, even as top officials like Housing Secretary Robert Jenrick scramble to face a second wave of the coronavirus pandemic that could drive the housing sector even further into crisis.
For one thing, homeowners and prospective homebuyers alike are facing significant problems. Mitigatory measures like the Chancellor’s holiday on stamp tax duty don’t go far enough to aid the most vulnerable individuals and families looking to buy or sell a home, while many people whose transactions were disrupted during the spring confinement are left with little recourse under current government policy. Meanwhile, rising prices, more stringent lending terms, and falling wages are all contributing to the greatest measure of inequality the housing sector has seen in a decade, putting mortgages now impossibly out of reach for many younger Britons.
At the same time, there’s the prospect of a looming crisis in the rental sector. This has until now been somewhat staved off by certain protections, including a moratorium on evictions. As these measures lapse, furlough agreements end, and job losses mount, only the government can ensure the healthcare crisis isn’t augmented by one in the rental market.
Stamp tax shortcomings
Chancellor of the Exchequer Rishi Sunak has delighted in rumours of a supposed mini-boom in the housing market after he announced a stamp duty holiday until March 2021. While that holiday may make as many as 9 out of 10 current transactions exempt from the tax, the initiative is not without its own criticisms. The ruling, effective from July 8th, will not be backdated, meaning many people whose deals were disrupted prior to this date have been left in limbo. Indeed, it was the government’s own kibosh on the property market back in March which resulted in the pandemonium; it’s believed nearly a third of those affected may not be able to recover their exchange deposit, solicitor’s fees, or mortgage offer as a result of the economic crunch.
First-time buyers have reason to feel even more aggrieved. Those born towards the end of the 1980s are earning 9% less in real terms than those born a decade earlier, and they’re more likely to be employed in the sectors hardest hit by the pandemic, such as hospitality, retail, and travel. Now, the withdrawal of mortgages of higher loan-to-value (LTV) ratios from the market means buyers are forced to produce a higher deposit to stand any chance of acceptance. The stamp duty holiday is just the icing on the cake; since first-time buyers are already exempt from stamp duty on the first £300,000 of their purchase, they gain little from the measure. In fact, the single slim competitive advantage they once held against other bidders has now been removed altogether.
Renters at risk
The rental market is facing a brewing crisis as well. Rents across England hit record highs just as lockdown measures were announced, with a median amount of £700 per month (or 27% of income) paid across the country. In London, that figure hit an eye-watering £1,425, or 47% the monthly wage.
It’s little wonder that, with many industries coming to a standstill, one in four renters expressed concern they would not be able to pay their bills. Aware of the possibility of an impending disaster, the government stepped in with several expansive but regrettably short-lived measures, such as furlough support, small business loans, and a moratorium on evictions. While those initiatives served as a temporary sticking plaster, the wound is starting to smart afresh. Eviction cases resumed again last month, with 170,000 tenants already threatened with eviction and 230,000 in arrears since the outbreak of the virus.
A pandemic of homelessness
Of course, thousands of people found themselves with no fixed abode even before Covid-19. Thanks to rapid government action, an estimated 15,000 people were temporarily housed in hotels, hostels, and social housing in England. However, the ‘Everybody In’ scheme was a short-term stopgap with no exit strategy. Given at least 20% of those sheltered (and as much as 50% in London) are asylum seekers with ‘no recourse to public funds’, there’s a potential crisis on the horizon. The government has set aside £266 million to tackle the problem, but the resignation of chief advisor Louise Casey has prompted fears of a leadership vacuum just when a steady hand on the tiller is needed most.
The government has long targeted the construction of social housing to deal with the national issue of homelessness, and now potentially thousands more could soon find themselves on the streets. The Affordable Homes Programme is set to receive annual investments of £2.44 billion until 2025/26, which the government has not been shy in reminding its constituents is the highest level in a decade. What they fail to mention is that all 10 of those years have been spent under their own tenure. The most recent Labour investment in 2010/11 was 20% greater (at £2.97 billion) and, of course, even higher still when adjusted for inflation.
Crisis around the corner
All these circumstances weighing on the UK housing sector could come to a head if new restrictions are put in place over the next several months. With millions of Britons already staring into the abyss, the government’s threadbare safety nets are on the verge of disintegration.
The Autumn Briefing Paper is the starkest warning to date of the dangers that lurk around the corner for citizens struggling to keep afloat in a post-pandemic world. The government has reiterated its intention to “build back better”, but to add substance to that lip service, it’ll need to ensure it not only builds sufficient housing for the millions of British residents in dire need of a residence, but also puts in place a concerted and well-considered strategy that futureproofs both the housing market and those embroiled within it from the perilous waters that lie ahead.