The ticking housing time bomb and investing in new homes

Victoria Winckler, Director of the Bevan Foundation, looks at the long-term future for housing in Wales

At Community Housing Cymru’s recent governance conference, Claer Barrett, consumer editor at the Financial Times, gave an outstanding keynote speech on the housing crisis. Claer provided much food for thought on the current UK position, shocking and amusing in equal parts. But it was her thoughts on the likely legacy of the current crisis that should make us all sit up and think.  

End of the road for home ownership? 

Owning their own home is the dream of the vast majority of people, and for understandable reasons. It gives greater control, from everything to what colour to paint your front door to whether you have a pet; it is often cheaper than renting; and for some it is a way of building equity and acquiring an asset. But it also comes at a horrendous cost – to individuals and society. 

Claer reminded us that owner-occupation is not really about owning a home but about taking on debt for most of one’s working life. She suggested that the schemes to help people to buy a home, such as shared ownership or Help to Buy, have masked the fact that the home is essentially unaffordable for its would-be owners. Even worse, some of these homes have become prisons for those who bought, with massive service charges (which cannot be challenged) or the new-build premium making resale difficult if not impossible.  

Along with this, Claer highlighted the risks of the rise in long-term – 30 or 40 year – mortgages. Not only are mortgage holders paying huge amounts of interest over this period, but they may well face repayments into retirement. Nearly a quarter (23%) of first-time buyers took out a mortgage with a term of 35 years or longer in 2023. With the average age of first-time buyers being in their early 30s, that’s a lot of people facing repayments in their late 60s and 70s. At the same time, Claer noted that many home-owners have cut their pension contributions in order to afford their mortgage repayments or rent at the moment – adding to the difficulties some could face in later life.  

For those fortunate enough to own their own home outright today, many are now subsidising the housing costs of their children, either by gifting deposits, helping with high rents or allowing adult children to live at home rent-free. In other words, they might no longer have a mortgage but they still have housing costs!

Few alternatives 

The options for people unable to afford to own a home are limited. Social housing is pretty much out of reach for anyone but those in the direst of housing need. And while the Welsh Government has set ambitious targets to increase supply, as in England progress is falling short. Relying on developers to provide affordable homes through s.106 agreements looks increasingly risky, Claer pointed out, as big housebuilders’ profits are squeezed. Expect more and more to try to pull out of their obligations.  

Private renting is a mixed bag. Some landlords offer decent quality properties and charge a fair rent, but not all. Very little privately rented accommodation offers the kind of housing security that most people want – three, five or even seven year contracts are the norm elsewhere in Europe but not in Wales or the rest of the UK.

Hardly surprisingly, homelessness is at record levels, costing billions and scarring lives.  

The whole debate about housing needs to be reset. 

People who work in housing and related fields are familiar with the argument that more social housing needs to be built. Claer reminded us that the general public are not au fait with this view, still seeing owner occupation as the best option for themselves and their children and quietly resisting plans for new social or council housing on their doorstep.  

Rather than talking about ‘the costs’ of social housing, she suggested shifting the narrative to ‘investing in new homes’. Interestingly, Claer suggested that some financial institutions are also concerned about the long-term viability of housing based on ‘lend, lend, lend’ and are looking for different solutions. She called for new investment products that would be more sustainable and affordable, as well as hinting at more flexible tenures that were a better bet than shared ownership.  

Crucially, the housing crisis is now something that affects everyone. It is not just those surfing on sofas or wiping mould off their walls who have an interest in a better housing system.  It’s in the interests of private renters, overindebted mortgage holders, and outright owners subsidizing their children, to achieve a step change in housing provision.  If not now, then when?