The new prime minister has quite the bulging inbox on arrival in Number 10.
Not since Thatcher’s time in office has Britain faced such high inflation (forecast to hit 20 per cent by early next year if you believe Goldman Sachs) and widespread worker strikes. Then, there’s the issue of blackouts due to gas shortages which means that even keeping the lights on in Britain this winter could be a struggle. And that is before she even gets to the housing crisis which really ought to be rebranded as a housing emergency as it collides head on with rising living costs putting a growing number of people at risk of rent debt, missed mortgage payments and homelessness.
People’s homes are where all this meets. The cost of keeping a roof over their head is most people’s largest outgoing and it is getting more expensive too: mortgages for those on trackers or coming to the end of their fixed term going up by hundreds of pounds a month, private rents are spiralling and social rents are, even with government intervention, going to increase by hundreds of pounds annually.
Boris Johnson’s replacement, either Liz Truss or Rishi Sunak, takes office at a time of unprecedented, historically high house price inflation, rising interest rates, private rents which are rising above inflation (by 20, 30 and even 70 per cent) according to some of the stories flooding my inbox and social rents which, even though the Government is moving to cap them, could go up by 3, 5 or as much as 7 per cent in the next financial year.
The numbers of people affected by each of these hikes are huge: of the 24.7 million dwellings in England alone, 6.8 million (28 per cent) are owned by people with a mortgage or loan, 4.8 million (19 per cent) are privately rented and 4.2 million (17 per cent) are social rented, mainly from housing associations.
It’s impossible to overstate how “scary”, to quote a usually conservative housing market analyst I spoke to recently, the economist turbulence coming down the track is. Combined with rising food, petrol and energy bills, rising housing costs could not only force those on low incomes into rent debt but those on middle incomes to fall behind too.
Evictions from rented properties by bailiffs are already up 39 per cent in the last three months, and, compared to the same quarter in 2021, landlord possession claims have increased by 160 percent from 6,997 to 18,201. The end of no fault (or Section 21) evictions promised first by Theresa May and then reiterated by Michael Gove remains stuck in the long grass. Will the new prime minister expedite it through parliament to prevent a homelessness crisis?
Throughout the leadership race Liz Truss, the leadership frontrunner, has said little about renting reform (aside from that she wants rent payments to be counted in mortgage affordability assessments for first-time buyers) and focused on the need to increase homeownership. But, curiously, she wants to scrap what she called “Stalinist” building targets which housebuilders have warned could lead to fewer homes being built. Rishi Sunak, too, has said little on rent reform.
Perhaps there is room for cautious optimism. Experts like Shelter and former Housing Secretary Michael Gove agreed that the only way to solve Britain’s housing crisis was to build more truly affordable social housing at scale. This leadership contest has been about winning over the Conservative Party and insiders tell me that Truss was an ally to Gove during his time as Secretary of State for Levelling Up, Housing and Communities when he attempted to push Cabinet on the need to build more social housing. So, once in office, Truss could change tack.
Britain still urgently needs more social homes, but they could never be built quickly enough to provide security for those on low incomes amid rising inflation.
With every week that goes by now, the warnings from housing experts, poverty experts and homelessness charities such as Shelter, the Joseph Rowntree Foundation Crisis (JRF) which cross my computer screen get more and more urgent. “Homelessness rises by 11 per cent,” said Shelter the other week.
“We are genuinely scared” because housing benefit doesn’t cover rents Crisis told me. Escalating housing costs are now so serious that a large scale support package similar to furlough is needed, said a JRF policy adviser when we spoke last week.
All told, the picture is bleak and drastic action is needed in the short-term. But there is another very dark economic cloud on the horizon in the shape of the housing market.
House price growth has finally slowed but prices are still climbing. Experts like market analyst Neal Hudson don’t expect this to last long and are warning of a potential housing market crash. First, he has warned the housing market will likely stagnate as buyers struggle to meet high prices. This, he says, will contribute to “a weaker economy through all the various businesses directly and indirectly associated with housing transactions.”
For that to become a crash, Hudson adds, “would require a large number of forced sellers” and “unfortunately, the cost of living crisis increasingly looks like it may lead to that”.
“The scale of the crisis and the absence of any significant government support makes a large fall in house prices increasingly likely,” Hudson has concluded.
“Scary”, indeed. So, whether the new prime minister has the chops for the housing mess that will be inherited not only from Boris Johnson – who sacked Gove just as major long-awaited reforms to renting and social housing were making their way through parliament – but from the last few governments since the last 2000s which have failed to build enough affordable housing, allowed private renting to become precarious and expensive while celebrating rapidly rising house prices blindly, remains to be seen.
Maurice Saatchi: I used to adore capitalism – then I had lunch with Margaret Thatcher