Will ‘Generation Rent’ become ‘Generation Labour’?

By Charlie Cadywould
5 December 2017
United Kingdom United Kingdom
How can a Labour government square the circle of building more affordable housing while keeping its base of social tenants happy?
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For many onlookers, the British obsession with home ownership is difficult to comprehend. It was the dream of home ownership and the vision of a ‘property owning democracy’ that helped Mrs Thatcher to win over a chunk of working class voters in the 1980s. The controversial ‘right to buy’ policy allowed those living in public housing to buy their home at a discount price – a lifechanging event for which the Conservatives could be given sole credit.

Difficult though it may be for those in countries where renting your home is the norm,  understanding the stalling of the realisation of the UK’s home ownership dream is crucial to understanding what’s happened in British politics in recent years.

So popular was the right to buy policy that Labour felt unable to unpick it during its thirteen years in office, despite the fact that the building of new council homes had declined significantly in the preceding decades. The decline, which started before the Thatcher government, can’t solely be attributed to this policy, but there is no doubt that it acted as a disincentive for councils, who could no longer rely on long-term rental incomes to recover the cost of their investments.

Right to buy is just one part of the story of how Britain – and particularly London – ended up with such a dire shortage of affordable rented housing, combined with an increasingly out-of-reach home ownership market. The typical UK property for sale now costs almost 8 times the average annual salary.

Once again though, housing is near the top of the political agenda, and is having an important electoral impact. Homeowners have traditionally leaned towards the Conservatives, while those in social housing and the private rented sector have tended to favour Labour. As John Burn-Murdoch pointed out in the Financial Times shortly after the 2017 election, this gap had been narrowing steadily until 2010, but since then the gap has widened. This has overwhelmingly been driven by private renters flocking to Labour, with Labour’s lead among social renters – and deficit among owner-occupiers – holding steady over consecutive elections.

It’s no surprise private renters want change. In Britain, unlike much of the rest of Europe, renting is insecure, the market is poorly regulated, and it is prohibitively expensive. In London, where Labour now holds a 21-point lead over the Conservatives, tenants typically spend half of their pre-tax salary on rent.

This trend is storing up trouble for the Conservatives and has the potential to provide a long-term boost for Labour for two reasons.

First, the proportion of private renters is increasing dramatically, driven primarily by millennials who were already more inclined to vote Labour.  The proportion of under 35s in the private rented sector has doubled from a quarter to a half in the last decade, with just a third of that group now owning their home, down from half over the same period. Among 35-44 year olds, home ownership has fallen from 74 percent to 56 percent, with private renting rates trebling.

Most of this movement from these younger groups is from mortgage holders to private renting. Social renting has fallen only slightly, and very few in these groups were outright owners at this stage of their lives, even in the noughties.

This leads us to the second reason. Using data from the British Election Study, we can see that housing tenure is a significant predictor of voting behaviour, even after we control for other key demographic factors. However, what this shows – and we can’t see this from the FT data – is that the gap between homeowners and renters is larger for those who own their home outright, compared to those with a mortgage.

This means that when those in what has become known in the UK as ‘generation rent’ finally do put down a deposit on a home, there could be a further delay before the ‘homeowner effect’ kicks in and switch their allegiance to the centre right. That is, if the experience of prolonged renting in Tory Britain hasn’t already made them lifelong Labour voters.

Predicted probability of voting Labour at 2017 election, controlling for income, age, education, ethnicity and region

Source: Policy Network analysis of Wave 13 of the British Election Study

The Conservatives have clearly recognised the threat. In this year’s Autumn budget, the government announced £15bn of new financial support for the building of new homes over the next five years. The government is throwing out new housing policies – and re-announcing old ones – at every opportunity: in white papers, in the budget, and in the new industrial strategy.

However, even though the lack of supply has been evident for years, the Tories are unable to get over their addiction to demand-side measures, and are unwilling to do anything that might hit their core constituency of homeowners, who have grown used to holding assets that permanently rise in value. In the most recent budget the government announced a cut to stamp duty – the tax paid by the buyer upon the purchase of a property – which official estimates suggest will actually cause prices to rise even further.

Labour’s manifesto promises to build a million new homes, including 100,000 new council and housing association homes per year, though detail on how this would be achieved is scant, beyond a reorganisation of the civil service and prioritising building on ‘brownfield’ sites – previously developed land that is not currently in use. A significant chunk of Labour’s proposed £250bn National Transformation Fund for investment in infrastructure would presumably go towards delivery of the promise.

On its own, this is a big ask. On top of this, though, Labour is proposing to impose tough new requirements on new developments. All those who live on an estate that a council wants to regenerate will have to be guaranteed a home on the same site, on the same terms as before, and councils will have to hold and win a ballot of existing tenants and leaseholders before going ahead. Given the current lack of trust of residents in developers and councils, particularly in inner cities, squaring this circle is going to be a huge challenge.

Wishing to allay concerns about regeneration is understandable given the – often justified – consternation over ‘gentrification’ that has arisen over various developments, particularly in London. But this ‘triple lock’ (same site, same terms, referendum) is a move in favour of existing tenants over those on waiting lists. Effectively, Labour is falling into the same trap as the Tories, unwilling to do anything that might upset its own core constituency – those renting from local authorities and housing associations. It might be more morally justifiable because the group being privileged are generally not well off, and the problem it attempts to solve is very real, but it is still a hindrance to solving the wider policy problem of delivering enough affordable homes.

The problem with the ‘triple lock’ isn’t that it gives residents more say, it’s how you do so. My research into community-led housing developments shows that giving local residents more control over the shaping of new housing developments as proposals are being drawn up can help to increase local support, and helps get proposals through the planning process. Handing more veto powers without active participation will most likely have the opposite impact. It could also have a chilling effect, with councils and developers unwilling to put resources into proposals unless they are confident they can pass the referendum.

This is a bind, and one that risks tripping Labour up on a key manifesto commitment should it come to power. The importance of personal housing circumstances on voting behaviour shows that if Labour can deliver on its pledges, it has a huge amount to gain in electoral terms. If it breaks its promises to the millions of millennials stuck in expensive private rented accommodation, a future Labour government could find itself in serious trouble.

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