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The 'Bi-polar' English Housing Market

Updated: Apr 9, 2021

Written by Alex Talbot

The DSM-5 describes bipolar disorders as a group of brain disorders characterised by their tendency to cause extreme fluctuations to a person's mood, energy and ability to function[1]. Periods of manic high and crushing low typify the portrayal of the condition in popular culture. It is this dichotomy; the tale of two utterly different experiences that I want to argue characterises the current state of the British housing market. Split neatly between its most prominent cleavage of ownership and renting, the experience of both, while always comparatively stark in a nation 'obsessed' with ownership, has seldom been as stark as now.

The Historic Housing Landscape

The UK, like all advanced economies, has two main types of housing tenure; ownership-based, and rental based. Banks provide mortgage credit to households so that they, combined with a portion of equity in the form of a deposit, can buy their home either to live in themselves or to act as a landlord and rent out. On the rental side, households can rent a property either from a private sector landlord or from the state (Councils), or registered quasi-charitable bodies known as Housing Associations, this is known as social housing and is typically reserved for low-income households.

The mixture of these three types, owner-occupier, private rental and social rental has varied quite considerably over the last century.

Source: Savills, 2015[2], this data is for the UK but broadly mirrors the English experience

The type of housing tenure also varies considerably by region.

Source: House of Commons Library; Homeownership and renting demographics, 2017

There are two additional and important points to grasp about housing tenures in England. Firstly, for a variety of reasons, some economic but most cultural, the majority of UK residents aspire beyond nearly all things to own their home. Renting, has for a long time, been heavily stigmatised both by both politicians and the media. Owner-occupying, even when financed by extremely high levels of mortgage credit by international standards, allows something that renting doesn't, buying at one price and selling for another, hopefully, higher price. This act of 'flipping' one's home, riding the waves of speculation, has fittingly been described as a "national sport"[3] in the Anglo-American world.

Secondly, and most certainly relatedly, has been the consistent pandering of politicians to both current and aspiring homeowners. As the graph above shows, owner-occupation has had a steady rise to become unquestionably the 'tenure of choice' in England. In parliamentary democracies, such as Britain's, majorities matter. As Downs[4] so eloquently demonstrated the policy preference of the medium voter matters and in England that median voter owns rather than rents their home. This single fact has important implications for both government and opposition policy. In short:

  • It's the reason that the majority of government subsidy for housing flows towards the owner-occupier market despite it being home to the wealthiest sections of English society

  • It's the reason that England has some of the weakest rules protecting private renters in the developed world[5],[6]

  • It's the reason that one of the longest-running, most popular and most frequently spun-off policies in England is one that allows social renters to buy their Council home at eyewatering discounts (a policy known as Right-to-Buy)

  • And it's the reason that housing policy was in fact quite difficult to distinguish as the Government of the UK switched from Conservative to Labour and back again between 1996 and 2011[7]

This is, of course, an oversimplification but not as much of one as it should be. It's essential that this point is grasped as we now consider what's currently happening in the English housing market.

What's happening now in 2020?

Rental Sector

Turning first to renting, the situation looks bleak. Households renting either socially or privately (there are differences, but the average holds) are most likely to be younger, in less secure forms of employment, more likely to work in a profession unable to work from home, and much less likely to have access to any form of significant savings that could help them smooth a transition of joblessness[8]. The implication? That for both the private and social sector renters are both more vulnerable to the effects of this deep and increasingly long-lasting recession, while also being critically less able to mitigate those effects when they do arise. Considered together, the expectation is for at least 30,000 additional evictions, a doubling of rental-areas owed to private landlords (a key cause for eviction), and around 6% or 120,000 of those renting building up rental arrears, many with no savings[9]. Between private and social tenants around 2.5 million are worried about paying their and a shocking 70% have cut back on essentials in order to get by[10].

What protection has been afforded to renters? The English Government's primary approach has been to ban landlords from seeking repossession in court. Through what can only be generously described as unorganised, the Government extended this ban twice – the second time only coming into effect hours before the ban expired. From the 20th of September, court proceedings for evictions have been allowed. The Government has also changed rental terms to now make it mandatory for the majority of private tenants to receive 6-months' eviction notice period up from 2 previously. This is unquestionably a welcome change but do bear in mind that housing campaigns have been lobbying for this since the introduction of assured shorthold tenancies (which are almost ubiquitous in the private rental sector) - that was in 1988! However, this has essentially kicked the can down the road with the situation still looking extremely serious for many as we now await March when those 6-month notices will expire. Indeed the only thing looking likely at preventing mass evictions come March looks set to be the “mess” of the court system[11] - hardly a cause for celebration. Much more can be written on this topic, but I'll leave you to decide how much you think Government is prioritising the 36% of the population that rent.

Owner-occupier Sector

What then is happening in the owner-occupier market. On the protection side, the Government, through the financial conduct authority and working with all mortgage creditors, rapidly put in place 'mortgage holidays' of up to three months for those unable to pay their mortgage. That still applies until 31 March 2021, meaning it was enacted before and has lasted considerably longer than the ban on eviction court proceedings. While the end of the scheme will mark a period of less protection of owners, they on average are far more likely to have savings, and there is a strong expectation that Government will put extreme pressure on creditor's to limit repossessions to an absolute minimum[12], as happened post-2008.

But what about in the market for buying homes? Well if you speak to anyone in the business of selling homes, they'll probably tell you they've never been busier. Rock bottom interest costs are making mortgages much cheaper for those that can get them. Furthermore, the chancellor announced in early July that stamp duty (which is a tax paid upon purchasing a home) would be exempt for the first £500,000 of a home purchase for anyone, raising the threshold from £125,000 previously. The result has been a turbocharge to demand, which was already strong due to months of pent-up lockdown demand. Such strong demand, even with a considerable uptick in homes coming to the market, has fed into strong price growth with record highs both month-on-month and year-on-year.

Will the party ever end? Well, yes. Most commentators do expect some re-adjustment, particularly after the temporary stamp duty threshold ends come April. The end of the mortgage holiday and sustained pressure on paying their mortgage might cause some forced sales, which will likely put downward pressure on prices, but as already noted, the Government would likely put exceptional pressure on mortgage lenders to limit repossessions so it seems unwise to overestimate the effect this will have. Taken on balance, Savills, a major property consultancy and estate agent, are expecting at worst flat prices next year with a significant uptick in following years across all regions.

What's driving the difference?

How can the purchase market appear so buoyant and seemingly unconcerned with the deep recession caused by COVID-19 and the uncertainty of a possible no-deal Brexit looking at least 50:50 right now? How can vulnerability to the effects of this recession be seemingly so heavily concentrated amongst renters?

The answer, as is often the case, rests on demographics. Who's buying all these houses? On the whole more affluent households, often with roles that allow them to work from home, who are insulated (at least in the short-run) from the crippling effects of regional lockdowns[13]. Not only can we see this in the market analysis of buyers, but also in the types of houses coming onto the market and being purchased. The director of Zoopla, Britain's most prominent online property portal, noted the average price of a home is up 12%, primarily driven by a glut of more expensive homes coming onto the market, increasing the average[14]. This is a clear signal of which sections of the market are active.

Another feature of this market is that first-time buyers, often younger households, are increasingly being shut out as the market for what are called high LTV ratio mortgages contracts. In effect, banks are eyeing the prospects for younger households, who are more likely to be concentrated in sectors hit hardest by lockdown restrictions and are taking the bet that they are too risky. The effect has been a collapse in the number of mortgages available to people without very large deposits (the kind you only really get after selling a home).

Taken together, and it's little wonder then that "In every region of the UK, prosperous buyers have accounted for a larger proportion of total sales in the past three months than they have in the five years prior"[15]. In short, the purchase housing market is doing so well because the people buying are relatively insulated from the effect of this recession, unlike after 2008.

Meanwhile, as already noted the situation for renters is either one of extreme precarity as real income contracts and unemployment rises, with arrears mounting and the only protection a 6-month eviction notice period and chaotic court system. Alternatively, for those still with stable jobs, the outlook of escaping the private rental market looks as distant as ever, as the high LTV ratio mortgage market contracts and the cost of obtaining any of few remaining high LTV mortgages ballons. The situation for social tenants is less acute, but only because their landlords are considerably more understanding of rental arrears. In England, the most vulnerable and lowest income households typically access this form of renting so while forced evictions are less likely the population who live in social housing is equally feeling the financial strain, dramatically affecting both Council and housing association revenues and expenditure.

The preverbal elephant in the room is the Government stance to both these sectors. Through the support given through generous mortgage holidays, the stamp-duty exemption and the two latest and let me blunt, frankly insane ideas, to allow increased loan-to-income ratios[16] and early raiding of pension pots for deposits, show a Government ideologically wedded to propping up owner-occupier market and its sky-high prices. This is in part because of the voting power of owners, but it's also because the UK and particularly England has such a high proportion of its total wealth captured in its housing and particularly the land that housing sits on[17]. What this means is that house prices matter hugely for the economy as so much of citizens overall wealth is capitalised in their properties. As house prices rise, consumers feel confident to spend and in England's consumption-driven economy, that means economic growth. The effect of both this political and economic incentive is that politicians of all ilks have for decades prioritised rising house prices beyond a whole host of other housing imperatives. The effect you ask? Well while renters, particularly those on low incomes, are disproportionally dying, getting sick and facing destitution as a result of poor housing quality[18] in the face of the worst recession since the 1930s the biggest question on many homeowners mind is whether to buy in Brockley, Bromley or perhaps even Bognor Regis.

Why does it matter from a planning perspective?

One might reasonably ask the question – how is this linked to planning? Well, in quite a lot of ways actually, and in the interest of brevity I'll tackle a few headline points:

Revenue Pressure for Council Budgets

In England, responsibility for planning mainly rests at the local authority level. As it happens, responsibility for helping homeless households also rests entirely with local authorities. The single biggest cause of people seeking a homeless duty from their Council is eviction from an assured shorthold tenancy (remember that type that everyone in the private rental sector has). With hundreds of thousands of people currently only avoiding eviction because there's a back log in the courts, demand for homeless provision from Councils is expected to increase dramatically. But Councils have also never been in a weaker financial position since the post-war era after years of austerity combining with the unmet costs of dealing with the first COVID-19 wave. Planning services in Council's have already seen some of the deepest cuts since 2010, and given the projected increase in demand for homelessness services coming from looming evictions, there's no reason to think that they won't be cut further still.

The tenure balance of new development

This is still an unknown to an extent; however, new build housing is overwhelmingly delivered by the private market in England. The private market builds what consumers want to buy, and drastic changes in market dynamics have the potential to see developers pivot towards different tenure forms. These may, but equally may not, be what is deemed required by the strategic assessment undertaken at both the local and regional (where they exist) planning authorities. Planning authorities may have little ability in the short-run to stop an oversaturation of one form of tenure; however, the socio-spatial implications, as with all built-environment interventions, will be inherently longer term.

Embedding wealth and intergenerational inequality

Who gets involved in participatory planning initiatives? Homeowners (particularly the retired type) are overwhelmingly more engaged in opportunities to shape planning decisions. These groups are more likely to object to new housing in their local area, even in the context of an acute shortage of homes, particularly in the London and the South East region. The current situation threatens to embed this dynamic further. As homeownership appears ever more unattainable for younger households currently renting, the feeling of dejection grows, and allows the same anti-new-development groups to continue to dominate - creating a vicious feedback loop with detrimental impacts that drive health inequalities and undermine the UK's productive potential.

What's the Solution?

I've already gone on far too long, and the solutions to such problems are numerous, interconnected, sometimes abstract conceptually and frankly require books to articulate. However, I will say that at its core, the solution rests, much like in treating bipolar disorders, in stabilisation medication. That is, in providing a greater degree of balance between the two major classes of housing in England. That, like all housing and planning related interventions, will create winners and losers, but it is my firm position that in this case, the cure is most definitely not worse than the disease.

Suggested further reading



[1] American Psychiatric Association. (2013). Bipolar and Related Disorders. In Diagnostic and statistical manual of mental disorders (5th ed.). [2] Savills. (2015, July 17). The Housing Crisis [Blog Post]. Retrieved on 19th of November 2020 at [3] The Horrible Housing Blunder, The Economist, viewed 23rd October 2020, [4] Downs, A. (1957). An economic theory of democracy. New York: Harper and Row [5] Bailey, N. (2020) Poverty and the re-growth of private renting in the UK, 1994-2018. PLoS ONE, 15(2): e0228273 [6] See here for an accessible cross-national comparison [7] Cowan, D., & Marsh, A. (2001). New Labour, Same Old Tory Housing Policy? The Modern Law Review, 64(2), 260-279. [8] Judge, L. (2020). Coping with housing costs during the coronavirus crisis. Resolution Foundation Report, viewed 23rd October 2020, [9] Whitehead, C & Holman, N. (2020) Where Now for the Private Rented Sector? Trust for London Report [10] Baxter, D., Casey, R., & Earwaker, R. (2020). Struggling renters need a lifeline this winter. JRF Briefings, viewed 1st November 2020, [11] (Ibid. P.G. 3) [12] Hudson, N. (2020). Market Commentary – September 2020, viewed 23rd October 2020, [13] Hammond, G. (2020, September 10th). Britain’s housing ‘boom’ obscures a divided market. Financial Times, viewed 23rd October 2020, [14] (Ibid.) [15] (Ibid.) [16] You may remember that encouraging riskier lending practices was at the heart of the 2008 great financial recession. [17] ONS, 2017 - [18] In England, a full 1/3rd of private rented homes fail to meet Government standards, which by international standards are low anyway (see here)

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