speri.comment: the political economy blog

Budget 2017: Facilitating Homeownership to build political support

The recent Budget showed the Conservatives following Thatcher’s example of facilitating homeownership as a means to build political support

James Wood, Teaching Fellow in International Political Economy, King’s College London

James WoodThe 2017 Budget introduced a series of policy measures aimed at tackling Britain’s growing owner-occupied housing crisis, which, at its core, is a crisis of affordability. Since the 1980s, house prices have increased in Britain at a faster rate than in any other G7 economy, resulting in median house prices that are currently almost eight times median earnings in England.

The rising cost of private housing has had differentiated consequences between those who own their homes, who are invariably satisfied to see the value of their primary financial asset rise, and those who want to purchase homes but cannot afford to do so. The disparity of access to private homeownership has translated into a wide range of social, demographic and geographic inequalities in Britain, underwritten by the stratification in the distribution of wealth. For example, those under 35 hold 3.3 per cent of all net property wealth in Britain, which contrasts strongly with the over-55s who hold 63.3 per cent.

Such a divide between those being able to access the social norm of private homeownership and the financial gains from the home as a financial asset could have potentially negative consequences for the Conservatives, who have had a long-standing commitment to establishing a nation of homeowners in Britain. However, rising house prices have excluded many young people from the property ladder, and in the 2017 general election nearly two-thirds of those under the age of 30 voted for the Labour Party, who championed several measures to widen access to owner-occupied housing. Therefore, according to Lord Macpherson, former Permanent Secretary to the Treasury, the housing policies in last month’s Budget are largely ‘about shoring up political support’ for the Conservative Party by widening access to homeownership.

The demographic generational divide between the holders of housing wealth mirrors a similar demographic divide on the voting patterns of the 2016 referendum decision to leave the European Union. The referendum results highlighted a fractured social base within the British state, with clear fissures emerging between Leave and Remain voters, as 67 per cent of under 35 year olds voted for Britain to stay in the EU, whilst 63 per cent of over-55s voted to leave.

Widening access to private housing has been used as a means to establish a functioning social formation out of a previously fractured social base. The 1970s was a period of social and economic crisis in Britain, characterised by militant trade union activity motivated by the desire to maintain living standards in the face of spiralling inflation. The Thatcher government that took office in 1979 strongly promoted private homeownership at the expense of social housing, which contributed to the understanding of the poorest (or unsuccessful) in society being associated with social housing, whilst private homeowners were understood as the wealthiest (or successful) in society.

The positive promotion of private housing by the Thatcher government resulted in a shift of aspirational demand towards homeownership in Britain. In order to meet the new aspirations of home ownership, the Thatcher government implemented the Right to Buy programme, which gave social tenants the statutory right to purchase their home from the local authority, and deregulated the mortgage market. These policies enabled low-income social tenants to become private homeowners, which allowed those previously excluded from the gains of liberal capitalism to understand themselves as playing an included and important role in British society, thereby generating bottom-up support for Thatcher’s neoliberal policies.

The recent Budget announced a £44bn investment in housing policies (in the form of capital funding, loans and guarantees) which are designed to increase the supply of new homes to 300,000 per year. However, the independent Office for Budget Responsibility (OBR) has suggested that these supply-side house-building policies would be largely ineffective, as low household income levels still render homeownership unaffordable for most families. The 2017 Budget did seek to address housing affordability issues by abolishing stamp duty for first-time buyers on properties below £300,000, and removing stamp duty on the first £300,000 for all home purchases below £500,000. Although the reduction of stamp duty is designed to widen access to homeownership, the OBR estimates the policy change will lead to an increase of only 3,500 first-time buyers. Therefore, the cost of the policy equates to a subsidy of £160,000 per additional first-time buyer in 2018-19, rising to £190,000 by 2022-23.

The high cost of these policies relative to the number of first-time buyers they will help demonstrates the political importance of private owner-occupied housing in Britain, which has its legacy in the Thatcher government’s Right to Buy programme. The Thatcher government promoted private housing as the preferred housing tenure, then implemented policies to widen access to owner-occupied housing, generating bottom-up consent to the other policies that formed part of their political vision. Similarly, the current Conservative government has reinforced the positive aspiration of private homeownership in Britain (as demonstrated in Theresa May’s 2017 conference speech). Therefore, the subsidisation of owner-occupied housing can be understood as a means of meeting the aspirational demand for private homeownership for the younger demographic who are increasingly facing the threat of becoming permanently excluded from the housing market.

Incorporating the younger demographic into the political support base of the current Conservative government is crucial, particularly given the high support from young people for remaining in the EU and opposing Brexit. Therefore, the current Conservative government can be thought of as taking a play from the Thatcher era, by promoting the ideal of homeownership and implementing policies to meet the aspirational demand for owner-occupied housing, with the specific aim of generating bottom-up consent to their wider, less popular policy of pushing through Brexit, whilst still maintaining a functioning social formation.

Private homeownership is central to the particular British model of economic growth, which is highly dependent on persistent house price increases.  The recent budget measures aimed at widening access to housing whilst maintaining high-house prices suggest that the contradictions of Britain’s homeownership-based growth model are going to remain central to the government’s post-Brexit economic and political strategy.

Print page

Categories: SPERI Comment | Tags: , , , , | Leave a comment

Articles and comments posted on this blog reflect the views of the author(s) and not the position of SPERI or the University of Sheffield.

Leave a reply

Required fields are marked *