Generation Rent

Why You Can't Buy A Home Or Even Rent A Good One

Chloe Timperley

• Publisher: Canbury
• Year: 2020
• ISBN:
  9781912454273
• Topic: Law
• Subtopic: Housing & Urban Development Law
• Index: Law

' 'The housing crisis is just getting started, ' warns Timperley in this important book. ' – MARTIN CHILTON, THE INDEPENDENT

'An essential read about a broken housing market.' – PETER APPS, INSIDE HOUSING

'A lively account of arguably the country's biggest social and economic problem.' – MARTIN WOLF, FINANCIAL TIMES

For millions of Britons renting a home privately is the only option. By 2025, more people are expected to rent than own their own homes. Even members of Generation Rent with good jobs and skills have been priced out of the property market.

In this razor-sharp account of how a nation of homeowners gave way to a generation of insecure renters haemorrhaging cash, Chloe Timperley tackles the myths and mysteries belying so many attempts to 'fix' Britain's broken housing market.

She reveals who's being shafted, who's cashing in — and the radical steps we must take to give everyone a good home, whether rented or owned.

A fast-paced jaunt around both buyingand renting in Britain, Generation Rent is the essential guide tothe UK's ruinously expensive property market.

Revealing how the UK came to have runaway house prices, Chloe Timperleydispels the notion held by some older people that the current generation of young people can't buy homesbecause they are feckless and squander theirmoney on avocado toast.

First, she charts the rise and fall of councilhousing. From the early 20th Century onwards, high-quality public sector homes provided plentiful affordable homes that mixed social groups well. Then Margaret Thatcher's Right to Buy sold off local authority housing and the number of council homes for rent crashed. Some council estates became known as 'sink estates', killing the municipal dream of post-war planners.

As a result, from the 1980s onwards, more renters in Britain have come to rely on the private rental sector. Backed by generous incentives from successive governments, renting has become a lucrative form of investment and credit has boomed. Buy to Let pensioners and privateequity companies have moved into the market, buying up and renting out houses and flats. Most would-be first-time buyers have been outcompeted and priced out.

For those who can afford to buy, Generation Rent reveals that 'entering the kingdom ofhome ownership' may not beeverything they expected, as a resultof small properties and huge mortgages. In this concise book, Chloe Timperley tackles the surprising truth about housebuilding, including land agents, housebuilders' profits, and the leasehold trap.

She delves deeply into the world of private rented accommodation. Like Tenants by Vicky Spratt, Generation Rent charts the real problemsfaced by ordinary tenants, fromextortionate rents for fleapits to no-fault evictions. We hear from tenants on the end of harassment from landlords and landladies and who struggle to afford booming rents.

And we get to know those who are about to lose their home through eviction and the causes and extent of homelessness.

But we also hear about housing from the other side - from the small investors who have retreated into renting property amid successive pension scandals. To research the book, the author goes undercover at a Buy to Let conference and landlord seminars.

Generation Rent is for anyone who wants to understandthe reality of private renting and the practice and pitfalls ofhome buying. It's foranyone who wants to know why they can't afford to get on the 'housing ladder' and why rent eats up half their wages.

And it reveals a way out of the mess, rooted in the work of economist HenryGeorge.

About the Author

Chloe Timperley lives in Sheffield. For Generation Rent, she interviewed MPs, economists and activists, went undercover at a property investment conference, joined a tenants' union, and attended seminars on everything from ending homelessness to evicting tenants. Most importantly, she listened to the stories of hundreds of tenants.

Extract

Generation Rent is ultimately the story of how the UK turned its youth into an asset class. Over the latter part of the 20th and early 21st centuries, housing went from being a basic good to a financial asset. As it did so, our homes went from being a store of wealth for occupiers, to a store of wealth for landlords and speculators.

This trend goes beyond the behaviour of buy-to-let investors, and begins in the popular imagination. Before we can restore justice and decency, we must change the cultural view of our homes as personal trophies, pension pots and money-making machines, rather than basic necessities for a normal life.

Britain's housing crisis is a vast, sprawling and multi-layered story. In order to make this book concise, some research and case studies had to be left out. I have tried to weave together the most pressing issues faced by today's young (and not so young) renters and parental home dwellers, and place these stories in a wider narrative that affects us all. I have dug out and presented what I believe are the most credible solutions. And I have called for neglected debates to be re-opened – most importantly, on land and credit.

I wrote this book while living and working in Sheffield. Consequently, some of the case studies here are from my hometown, but the outlook is national and the material spans the length and breadth of the country. Many of the trends are found, to a varying degree, in other Western countries.

My hope for Generation Rent is that we can break free from the simplistic narratives that dominate the current debate about housing. I want us to leave behind tired binary arguments like 'boost regulation v cut red tape, ' 'build more homes v control immigration, ' and 'help people get on the ladder v tell them to stop buying avocado toast.' Instead, I want to start talking about what really drives our current shameful situation. I don't profess to have all the answers. But if this book can at least start to change the national conversation on housing, I will consider it a success.

SECTION IV. A NATION OF RENTERS

123

17. Helping out the landlords

In the 1970s, thanks to the post-war success of council housing and political consensus on the heavy regulation of the private rented sector, ‘the private landlord’ was on course to be ‘as extinct as a dinosaur… within a generation.’ In 1974, the Conservative Political Centre made the prediction, adding that there was ‘nothing that could be done about it.’1

The economy, however, was stuttering. Unemployment was rising, inflation was heading towards 25 per cent, and industrial action was putting pressure on energy supplies. Traditional trades and industries, especially coal mining, started to decline as Britain struggled to keep up with global competitors, yet unions were demanding increased wages to cover the soaring cost of living. The largest-scale labour strikes in Britain in 50 years took place over the 1978/79 Winter of Discontent. In short, huge numbers of people were poor, cold and miserable – and housing supply was about to be squeezed.

Thanks to the post-war baby boom, demand for housing and public services continued to rise, but the economic slowdown hindered both the government’s and the market’s ability to provide them. 124

At this point, the Overton Window of political ideas was thrown wide open. The Overton Window refers to the range of ideas a politician can promote in public without being considered a lunatic. Often in times of crisis, the window opens up to let in ideas that might once have been considered ridiculous or even dangerous.2 Any political strategist worth their salt knows that the number one priority of a revolutionary is to pour everything into being in the right place at the right time when this happens.

Enter: Neoliberalism. The intellectual groundwork for the neoliberal dream was laid in the late 1940s by Fredrich Hayek and Milton Friedman’s Mont Pelerin Society, a group of disgruntled academics and businessmen whose overriding belief was that Big Government was the root of all evil. What they envisioned was essentially a society in which as many government functions as possible were replaced by free enterprise.3 Margaret Thatcher’s 1980s government, elected after the unrest of the 1970s, put these ideas into practice.

Council housing had no place in this Brave New World. As property of the state that provided a service outside the free market, it would have to go, and it did go with Right to Buy. But Right to Buy wasn’t the full answer. Some people were so intractably poor and helpless that they couldn’t even afford to buy the grimmest tower block apartment, even with maximum discounts reaching a staggering 70 per cent for those who had been living in a council flat for 15 years or more.4 How could the state go about washing its hands of these people? Thatcher had a plan.

Her government did not share the pessimism of the previous Conservative administration towards that now seriously endangered breed of capitalist: the private landlord. It embarked upon 125a conservation campaign to protect and nurture this neglected creature, and in return, the private landlord would dutifully go around with a bucket and mop up all the non-homeowners, nomadic job-hoppers and dole recipients on social housing waiting lists. Private landlords would also provide low-cost homes for young strivers to bide their time in while they saved up for a deposit on a house. Problem solved. The day where the last miserable, dilapidated council house would be sold off was, finally, on the horizon.

However, there was a problem. Landlords didn’t want to do it. Or rather, people with money didn’t want to become landlords, and people without money couldn’t access the finance to become landlords. Private landlordism has a long tradition5 of being associated, as Victorian housebuilder Thomas Cubitt said in 1840, with the ‘little shop-keeping class of persons,’ adding that ‘persons of great capital have very little to do with [private renting] at all.’ Even now, in 2020, Capital with a big ‘C’ is only tentatively grappling with rented housing (and as we’ll see later, its focus is mainly on the wealthiest tenants). In the 80s, very few ordinary people had the funds to buy additional homes without mortgages. Therefore, if the small ‘c’ capitalists were going to step in, they were going to need financial assistance.

Despite the government spending the best part of a decade ripping off layer upon layer of financial red tape, the banks didn’t want to help. Their reluctance to lend money to humble shopkeepers, and thereby enable them to dabble in private landlordism, was compounded by the 1977 Rent Act. This Act lavished untold benefits on private renters, including that ultimate perk: security of tenure. Not only were you not allowed to kick your 12tenants out if they hadn’t done anything to violate their tenancy agreement, but removing problem tenants was incredibly difficult.

Officers at the Valuation Office Agency set ‘fair rents,’ which were invariably lower than ‘market rents.’6 Such rent controls stifled short-term profits. To make matters even worse for landlords, the 1977 Rent Act allowed tenants to pass on their tenancies to the next generation.7 So having a rental property often meant providing a long-term home for a family, which was a burden for the landlord. It was therefore imperative for the government to do away with these tenant benefits. As Mrs Thatcher remarked herself: ‘We have done much to help the deserving tenant but comparatively little to help the deserving landlord.’8

The first helping hand the government gave to landlords was the Assured Tenancy. Introduced by the 1988 Housing Act, Assured Tenancies more or less ended rent controls. Rents could be increased periodically, either by a valid rent review clause in the initial tenancy agreement or by issuing a notice under Section 13. The eviction process for troublesome tenants was strengthened and clarified under Section 8 of the 1988 Act. Assured Tenancies were made the default tenure.9

But that’s not all. The Act also contained an optional upgrade. For landlords who wanted more flexibility and control, there was the facility to offer another new breed of tenancy: the Assured Shorthold Tenancy, containing a revolutionary bit of legislative ammunition: the power to serve a no-fault eviction notice under its Section 21.

So, did the banks immediately jump on board with a landlord lending free-for-all? Curiously, no. The buy-to-let mortgage did not hit the high street until 1996. Why?

127The epic housing market crash of 1990 was one reason. Hundreds of thousands of people, mostly younger, more likely heavily mortgaged people, found themselves in negative equity, shackled to mortgage repayments with interest rates running into double digits. Banks were too preoccupied with repossessing and selling properties of defaulting borrowers to worry about extending exotic new forms of credit to a new set of landlords.

However, that’s not the whole picture. In 1996, under an amendment to the Housing Act, the Assured Shorthold Tenancy superseded the Assured Tenancy to become the default set of rules governing all new tenancy agreements. In other words, the Assured Shorthold Tenancy became something you had to opt out of, rather than opt into.10

Why was this so important for mortgage lenders? The Assured Shorthold Tenancy (with its all-important Section 21 rights) protected the banks from amateur landlords. Banks did not have to worry so much about whether a landlord had correctly issued the right sort of tenancy agreement. By default, no tenant would enjoy security of tenure.

The creditworthiness of the buy-to-let borrower became less important. If the landlord was suddenly forced to sell their rental property, they could serve a Section 21 eviction notice, shoo the tenants out the door, and put the property on the market. More to the point, Section 21 made it possible for banks to repossess rented homes without the risk that they would inherit the menial obligations that come with being a private landlord (it’s hard to imagine a NatWest bank manager showing up to fix the toilet). Repossessed homes would be more likely to fetch full market value upon resale, too, as they would not come with sitting tenants who couldn’t be evicted. 128

In short, Section 21 was a gift to banks and property investors and its importance cannot be overstated. A blog post published on the Residential Landlords Association’s website in 2018 paid mistyeyed homage to the 1988 amendment to the Housing Act, calling it a ‘game changer’ and ‘a vintage year’ for landlords.11

Section 21 lowered the bar of entry to the private rental market and filled empty properties with benefit claimants and young professionals alike. It helped to ‘take the strain’ of the social housing shortages created by Right to Buy. It helped the state roll back its obligations towards society’s most vulnerable. And it set the scene for today’s skewed letting market, where almost all the power lies with the landlord.

Notes

1. ‘the private landlord’… ’done about it’: Lund, Brian. Housing Politics in the United Kingdom, (Bristol: Policy Press, 2016), p.102

2. Often in times of crisis… even dangerous: Jones, Owen. The Establishment, (Penguin Random House UK, 2015), pp. 294-295

3. The intellectual groundwork… free-market enterprise: Jones (2015), pp. 20-21.

4. 70 per cent… 15 years or more: Murie, Alan. The Right to Buy, (Bristol: Policy Press, 2016), p.38

5. Private landlordism ...