Landlord Owned Housing Wealth Outstrips Owners with Mortgages

The report measures the net housing equity (the value of the portion of each property owned by individuals after mortgages) owned in the UK, and shows who owns what portion of it. According to the report, £1,067 billion is currently held by owner occupiers living in mortgaged homes, while a larger £1,077 billion is held by private landlords.

Combined, these two figures make up around half of the total housing equity in the UK, with the rest (£2,097 billion) being held by owner occupiers without mortgages. This latter portion is held mostly by older households who have owned their properties for a while, benefiting from rising prices unlike younger people who are fighting against house price inflation in the on-going battle for home ownership.

Further, it has been revealed that for the first time, more money is spent in the UK on rent than is spent on mortgage repayments. Last year, £73.2 billion was spent on mortgage repayments, compared to £74.8 billion on rent (in both the social and the private sector).

The figures have raised questions about the government ‘s ability to combat this trend and boost home ownership, as they have been trying to do recently. The government ‘s current approach has been a two-pronged one – on the one hand implementing changes like boosting stamp duty to try and curb the numbers of private rented accommodation; and on the other, promoting schemes like Help to Buy in order to try and boost levels of home ownership at affordable rates.

However, as these latest figures have shown, they have their work cut out for them. Savills ‘ head of research, Lucian Cook, described the government ‘s task as akin to “turning a very heavy battleship.”

Mr Cook did say though that once interest rates start to rise, then the balance between the amount spent on rent and the amount spent on mortgages could shift. A hike in the base rate would see mortgage payments increase, and a recent survey of landlords showed that in the event of a rate rise, only around 13% would actually increase their rent costs.

But even with a balance shift there, it would not (at least not directly) affect the portion of the equity owned by landlords rather than owner occupiers with mortgages. If anything, it may even slow the shift down, as mortgages take longer to pay off so the size of the equity in each house grows at a slightly slower pace.

The hope is that increased stamp duty and reduced tax relief for landlords should do some work to tilting the balance in favour of home owners over time.

Additionally, the Help to Buy scheme being extended to London, and the introduction of the Starter Homes scheme offering a 20% discount on new builds for first time buyers should promote the same end.

The Help to Buy scheme will help many overcome ever tightening rules governing the issuing of mortgages (particularly with decent loan-value ratios), but fighting against both that and rising prices generally is something of an uphill battle at the moment.

Cook said that while he feels that these initiatives “will help part of the marketÖthey are unlikely to reverse the trend wholesale.”

He said that there is still “a policy tension with the Bank of England trying to ensure there isn ‘t a debt-driven housing market boom.”

This seems to be the general consensus: that the government ‘s latest initiatives and policy changes will do some work, but that there is a mountain to climb and we ‘re only approaching base camp.

Gavin Smart of the Chartered Institute of Housing said that the draft of measures introduced “might help at the margin but there is more work to be done in terms of housing policy.”

“To a very large degree,” he went on, “the affordability problems in the housing market are driven by a lack of supply, and the long-run answer is to think about how one can deal with that. The government is working hard at this.”

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