Robbie de Santos leads Shelter’s policy work on private renting and mortgage issues.

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When the Government launched the budget back in March, it was couched in terms of the ‘aspiration nation’. A cornerstone of which was about helping people achieve ‘that most human of aspirations’ – owning a home, via a new Help to Buy scheme.

It was the latest in a range of measures by the Government to address the housing shortage – and the consequent growing gap between what people have and what they want: to own a home of their own. We’ve already had extensive reforms to free up the planning system, there are high profile initiatives to attract more private investment in building new homes for rent, and the Spending Review pledged money to continue building affordable housing to 2018.

It’s not hard to see why the Government is focusing on this. In the last decade, homeownership has declined for the first time since records began. That most human of aspirations has started to look wholly unachievable for most hard working families.

The question is: will any of this be enough to significantly reverse the downward trend in homeownership?

The politics of housing

Firstly, we need to understand why politicians are worried about declining homeownership.

Politicians know that a growing number of voters are dissatisfied with their housing lot. Nine million people now rent privately –the highest number since the 1960s. Renting is often insecure and expensive, with short term contracts and high rents. People now spend many years of their lives renting, and a third of renting households are families with children.

Politicians don’t just have altruistic reasons to worry about these people and their dashed housing aspirations. Renting is now the main option for the ‘squeezed middle’ - a key swing voter group. Renters are more likely to be in work, and earn closest to average incomes. The areas which have seen the biggest increases in families renting resemble the swing seat map that will be troubling most political party strategists as they plan their 2015 campaigns.

Crucially, politicians know that renting isn’t where most people’s aspirations lie. 79% of private renters, and even 64% of social renters, would prefer to own a home of their own. Politicians know that if they want to offer something to tap into the public’s – particularly swing voters’ – growing concern for housing, it has to be linked to helping them or their children own a home

There are practical advantages of homeownership for policy-makers too. People who own their own home may cost the state less in housing benefit in old age, and have greater assets to draw on to support their retirement. Politicians know that homeowners are more likely than other groups to volunteer and participate in the community.

So what’s holding back our ‘nation of homeowners’?

Firstly, you might wonder why Shelter is concerned with policies to help first time buyers in addition to the most vulnerable people at risk of homelessness. One of the particularities of housing is that it affects everyone, all the time. So where middle income professionals are feeling the squeeze due to the high cost of housing, that pressure is hitting even harder further down the income scale.

Action on housing is therefore needed across the market to address the housing shortage, and Shelter is carrying out a range of policy and research work on how average families are faring at present. We recently showed that it will take the average couple with a child almost 12 years to save up a deposit to buy a local home.

Forthcoming analysis will show that it’s not just big deposits that are holding low and middle income families back from getting on the ladder. Rather, it’s the unaffordable cost of large mortgages required to meet high house prices that are stopping low and middle income families back from owning a home.

Our analysis will show that the average family can afford a mortgage on an average home in just 59% of England, but a lower quartile income family could afford the average home in just 18% of the country.

In short, high house prices are holding back ordinary working people’s aspirations.

So, will Government action help?

Building more homes has to be at the heart of Government’s efforts to address the housing shortage and to make homes affordable for people on ordinary incomes once more.

The jury is still out on whether the Coalition’s planning reforms will really stimulate the level of house building we need. Relying on private investment will only go so far – as the graph below shows; it is likely that more upfront capital is needed to get the homes built.

Holding all efforts back is the scarcity and high cost of land. It’s not clear whether the recent planning reforms will increase the supply of development sites or bring land prices down. But doing so should be a key policy goal, to make it easier to build more homes for sale at lower prices, as was possible when Garden Cities were built.

It’s also vital that the homes built are affordable for low and middle income swing voter groups. As our analysis of mortgage affordability shows, market prices are too high for this group in much of the country.

Schemes such as the Help to Buy mortgage indemnity scheme –where 95% mortgages are available - actually make mortgages more expensive because the repayments are higher as people are borrowing more. As a result, less of England is affordable to low and middle income families with a 95% mortgage than a 90% mortgage.

The other main part of Help to Buy – equity loans of up to 20% of the property’s value that are interest free for 5 years - brings mortgage payments more in reach of the better off families in the low to middle income bracket.

However, the Government estimates that the equity loan scheme will help just 74,000 people over three years – a drop in the ocean when you consider that 9 million people now rent. Our forthcoming analysis will show that shared ownership, where you buy and pay a mortgage on a proportion of a home and pay rent on the remainder, would be affordable to a much greater number of low to middle income families.

If politicians are serious about improving the housing choices of this key electoral group, they should adopt a strategy focused on building more homes, finding ways of making land more affordable for development, and making sure that the homes that get built are affordable, through intermediate options like shared ownership.

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