How housing polarizes politics

by David Adler

The skeleton of the Grenfell Tower stands still in West London – a powerful symbol of the plight of Britain’s social tenants. In the two months since the tragedy, criticism has focused on the long history of neglect that led up to fire in June, from the introduction of Margaret Thatcher’s Right to Buy policy in 1980 to the installation of ‘combustible’ cladding in 2015.

But this is only half the story. To understand the politics of housing in Britain, we should look not only to its losers – but to its winners, as well.

Housing markets are unique in their zero-sum dynamics. On one side are property homeowners, and on the other are property renters. Rising house prices deliver gains to the former at the expense of the latter. Rising rents incur losses for the latter and reap profits for the former. In the case of Britain, the astronomical house price inflation of the last two decades has generated large amounts of wealth for homeowners while forcing renters to pay an increasing percentage of their income on rent.

Or consider evictions. In my recent research for tenants’ rights organization Generation Rent, I examined trends in Section 21 evictions – so-called ‘no-fault’ evictions – by which landlords may remove a tenant without citing a grievance. My findings were twofold. First, evictions and house prices move in almost perfect tandem. As house prices rise, landlords use Section 21 to evict to free up their properties and raise their rents. As they fall, landlords’ bargaining power falls, and evictions do, too. Second, these trends have nothing at all to do with tenant arrears: evictions have increased at an alarming rate in Britain even as tenant arrears have fallen. In other words, prosperity for homeowners implies insecurity for renters.

This housing cleavage cuts directly through Britain. In London, the homeownership rate is literally 50 per cent – half and half. It was not always so: homeownership has fallen to a 30-year low, as house price inflation pushes the property ladder out of reach. Where most renters once expected to save toward a mortgage as they moved into adulthood, renting has become a life-long tenure, and the housing cleavage has hardened.

What are the political consequences of this transition?

My research suggests that the housing market is generating political polarization. As house prices rise, homeowners become more conservative in their preferences over social policy. Property serves as a form of private insurance, in turn reducing their demand for public insurance. This is what Ben Ansell calls ‘the political economy of ownership.’

Renters move in the opposite direction. As house prices rise, renters prefer higher levels of social spending and greater intervention in the housing market. There remain large differences between renters that expect to buy a home in the near future and those that expect to rent for the long term – the former being more politically aligned with existing mortgagors than with their tenant neighbours. Overall, however, renters’ negative experiences in the housing market are driving them to call for radical changes to the housing market and wealth distribution more broadly.

This conflict poses a challenge to political parties. Whose preferences will they represent? Which winners will they pick in their policies, and which losers will they leave behind?

The Conservative answer appears clear. Over the last three decades, the Tories have established themselves as the party of homeowners. In 1979, Thatcher dreamed of a ‘property owning democracy.’ In 2015, Cameron launched a ‘crusade’ for homeownership. Renters receive little sympathy. Chancellor George Osborne’s austerity package directly targeted support for struggling tenants. The Bedroom Tax, for example, raised levies on social tenants deemed to be occupying too many rooms. Housing Benefits have long been on the Conservative chopping block.

These policies are not the product of pure political calculation. Rather, they reveal something important about Tory ideology applied to the housing market. In my interviews with members of the Kensington and Chelsea council – the council now under investigation for its role in the Grenfell Tower fire – equity was clearly not the priority. ‘Not everyone can live in Kensington and Chelsea,’ they told me, glibly. Theirs was not a passive neglect of Grenfell’s residents. It was an active selection of homeowning winners.

And what of Labour? Whose side are they on?

My research suggests that Labour leaders reject the premise all together. There remains a deep commitment in the Labour party to ‘broad church’ politics – the pursuit of win-win solutions that can both benefit homeowners and aid renters at the same time. At the end of all my interviews, I asked Labour councils, MPs, and ministers one question: How would you like house prices to behave over the next five years? Their answers were almost all the same. ‘We would like house prices to keep going up, of course,’ they told me. ‘But also to solve the affordability crisis.’

It is a paradox worthy of pause. For many years, Labour has been in denial about the distributional dynamics of the housing market. Prime Ministers Blair and Brown oversaw a rapid rise in house prices that seemed to float the whole British economy – at least until the crash. At the same time, the housing benefit bill expanded rapidly to cover renters’ rising costs. It was a temporary win-win, buying time before a much bigger collapse that looms today on the horizon.

There are winds of change. Theresa May’s government has been much more frank about the human costs of high housing costs. Jeremy Corbyn’s opposition has been much more vocal about the rejection of austerity policy and the introduction of robust protections for tenants.

But no change in British housing politics can come about without an honest conversation about winners and losers. References to a housing ‘crisis’ in Britain obscures the fact that, for millions of families, homeownership has been the avenue to financial security – a source of income through equity release, an important complement to pensions in retirement. Retirees withdrew over £2 billion in equity in 2016 alone.

Progressive housing reform should compensate those families for the losses they will incur as a result of the long overdue price correction in the housing market. More robust pensions, for example, can directly offset a decline in housing wealth.

These reform packages are necessary not only for the health and sustainability of the British economy. They are also necessary to bring together the broad coalition of voters to support the reforms in Parliament. Something, in any case, must give.

Britain is becoming a nation of renters. Britain’s political leaders can no longer afford to ignore them.

About the author

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David Adler is a Rhodes Scholar in the Department of Politics & International Relations at the University of Oxford.
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