Tags
house-blocking, housing, housing ladder, housing market, intergenerational conflict, older people, social housing, young people
A government White Paper published today indicates (on p63) that the government will be exploring ways to encourage older people to ‘downsize’, with one rationale being the freeing up of housing for the market. The underlying assumption is that older people are ‘under-occupying’ their properties. The proposals in the White paper fall well short of the widely trailed idea (advocated by some civil society groups) that the government might consider offering tax and other financial incentives to the elderly to downsize. The argument for such incentives is that if all these under-occupied larger houses come onto the market, the additional liquidity will stimulate the market in such a way that younger people currently struggling to get a foot on the housing ladder will be able to find suitable, affordable homes. Since all of these properties will (or could) come onto the market when the last occupant dies, what we are really talking about here is potentially accelerating that process. Is this part of the right solution to the current and future problems in the UK housing market?
The conceptualisation of older people as the problem is deeply flawed, and the idea that under-occupying home-owners of a certain age should be singled out for tax advantages or other financial incentives at best lacks a philosophical or ethical basis. At worst, it fuels the feeling of generational injustice, of older people being singled out for financial advantage at the expense of the young, and in the end serves a discourse that is very damaging to some of the more vulnerable in society, by legitimising things like attacks on pensions and disability and other benefits for older people.
I appeared on Money Box live to talk about some of these issues last week, and it was clear from the responses and the listeners who called in, and the many news stories that have appeared in the press about this issue this week, that this is a substantial and emotional issue for many people and their families. I think it’s helpful, in the context of this debate, to set out what we know about residential mobility in later life, and then ask whether this means that providing financial and/or other incentives to those above a certain age to sell and move is a sensible idea. I’ll set out the sources of information at the end of this blog, if anyone wants to read more.
Here, I think, are six main points.
- First, this debate is not about specialist housing for the elderly. About 93% of over 55s live in mainstream housing, with the other 7% living in mainly specialist housing with care and support, mostly within Housing Associations. The best evidence we have is that about 3% of the over 50s move each year, about 1 in 4 will move within any ten year period. Although on average people move to lower value houses, they do not all downsize. About 70% move in the same locality (where they are perhaps embedded in communities, family and civil society), others move further afield, perhaps to a more rural area, to the seaside, to a bungalow, or to be near to and support adult children and grandchildren. About 40% reduce the value of their property by more than 20%, but about a quarter increase the value of their property by more than 20%, and about 35% move to houses within a 20% margin of the value of the house they are in. So lots of people do move already, without any financial incentives, and much of this is about finding a more suitable home for their later life, for many reasons.
- Evidence suggests that many more would move if the right housing was available. There seems to be a collective failure of vision and imagination as to what this is, and the current public debate focussing on specialist care and supported housing illustrates this. Many research projects have now shown that what people want and need is homes built to lifetime standards – i.e. homes they can imagine growing old in and that can support their needs as they age. These may include accommodating adult children and grandchildren who they provide care for; perhaps a place to work since many older people now continue with paid work including rises in self-employment, and are increasingly expected to do so; they need to be able to continue with hobbies, to keep pets, to have a garden (but perhaps a smaller one), and to have enough storage to live comfortably. They want to live in efficient houses that are easy to maintain and cheap to heat. They may need extra rooms for carers towards the end of their lives, and many couples sleep apart, so this may mean three, and not two, bedrooms. Very importantly, most people want to live in MIXED AGE neighbourhoods, and they don’t want to (and perhaps shouldn’t – for a host of social and health reasons) leave an area where they are socially embedded. They don’t want to live in a tiny one bedroom apartment with no room to swing a cat and sequestered from an ordinary community. As the public response to this debate is showing, many people have said they would have moved and would move, were such housing available. So lots more would move, if we didn’t have such problems in our housing stock and our housing markets, again, without financial incentives.
- We are facing a serious problem of a growing sense of welfare insecurity. Research has shown that housing gives people a sense of economic security and the more we talk about things like a crisis in social care, an economic crisis, extended or indefinite periods of low returns on savings, with increasing political attacks on things like the uprating of pensions and the receipt of benefits, and so on, the more hanging on to your house, an increasing asset (and one free of capital gains tax) is not only an emotionally understandable option but also economically sensible. People who have held on to ‘under-occupied’ houses, especially in London and the South-East where housing shortages are most serious have so far done pretty well out of doing that. Why would you give that up to put your money in a virtually zero-interest account?
- What perceived problem is this trying to address? One problem, that underlies the White Paper, is that young people cannot get a foot on the housing ladder. We need immediately to stop seeing this as a generational problem and re-frame this as a problem of inequality. Why can’t young people get on the housing ladder? Where are they living? Many are living in rented housing. Who owns the houses they are living in? In a fascinating article last year in Critical Housing Analysis by Richard Ronald, the answer to that is that we have seen a huge rise in landlords. There are now 4 million properties in the private rental sector, and 90% of these are owned by private individuals, 78% of whom let out a single dwelling. Interestingly, 1 on 10 of these inherited the property. Now the peak age to own such rented-out properties is 45 – 64, and 80% of people see these second (or 2+) properties as supplementing their income and pension. The yields are good, and generally better than other assets especially bank savings. But for 80% this supplement is providing less than a quarter of their income, i.e. they are already well off. This is a have’s and have-nots problem, not a generational problem. If all of these landlords sold their properties to the younger people living in them, then the younger people would be on the housing ladder.
- Why target older people? If we re-frame the problem as one of inequality within generations, we can identify plenty of “under-occupiers” who are under 55. Research by the Joseph Rowntree Foundation showed that there are 7.3 million such households under 55 and only a little more than that (8 million) over 55. Why are only old people the subject of policy attention in this realm of downsizing? Why not give the support to a single, divorced mom who has been struggling to keep her children’s home going for them while they were growing up, but now they have left home, and she could and might want to move somewhere smaller and with lower bills? Why not give the entrepreneurial couple whose business is now struggling in the current economic climate the incentives to move to a smaller place? If we want larger properties freed up, there are plenty of people of all ages who live in those. But of course, as soon as you start thinking this way, you realise that what you are in fact doing is potentially giving a tax break or other form of financial support to rich people, especially the ones that have benefited the most from inflation in housing. For how do we distinguish the struggling from those who are not? There may be ways to penalise rich people who live in large houses to try to stop them from doing so, if that is what is intended. Giving them tax breaks seems an odd way to go about it, and probably why this widely trailed idea has not appeared in the published White Paper.
- What might be the unintended consequences of stimulating the sale of older people’s “under-occupied” properties with a view to their downsizing to smaller properties – i.e. exactly the properties that the younger folk might want too. First, how many properties in the chain will enter the rentier economy – being bought as buy-to-let, compounding the wealth of those who already have wealth, and continuing to deny home ownership to those with less? Second, you might create excessive demand for exactly those houses that you think need to come onto the market – the efficient two- and three-bedroom properties, creating a bubble for those with prices soaring out of reach of the very families you were intending to help.
Undoubtedly there are problems with the housing market, liquidity, an increasing rentier economy, a shortage of social housing and huge inequalities in housing. We should focus on the consequences of housing policies for creating inequalities in society, rather than the generational divide.
Sources:
Ageing Issues 
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Very interesting article and also interesting discussion on Money Box Live (available as a podcast).
I’m 68, my youngest children are 32 and one of those is basically homeless/nomadic, i.e. my house is his only permanent home at the moment – partly because he is self employed and his income is so variable that he probably couldn’t get a mortgage; partly because he is travelling a lot at present and doesn’t want to pay British rent. His problems re. housing are a) that rents are too high, especially in London landlords do seem rather to be profiteering at the expense of renters (often but not always young); b) that although he paid £650 a month rent for one room in a shared flat, for nearly 2 years, this counts for nothing in terms of proving him to be a reliable payer c) that property prices in the UK are too high.
At one time, even in London, young folk could buy a two bedroom flat (OK overstretching themselves a bit), let one room out to ease that situation hence providing a home for someone else, and eventually as income rose or they entered a long term relationship, they could move into buying somewhere with their partner or moving their partner in.
Although I’m a landlord myself (to supplement a measly pension), I do believe that the rental system needs reform, though not the unfair way Osborne has done it. Why not just go back to rent controls? As long as these are fairly applied and it’s accepted that rents do gradually need to go up, this could put off the profiteer landlords while benefiting those renting. At present there is the ludicrous situation that housing benefit is limited i.e. there is a maximum housing benefit payable for a home of a certain size (and which mustn’t be ‘under occupied’), but there is no limit on rents for homes of that size. I think the coalition government was hoping that by limiting housing benefit, it would indirectly limit the rents paid: this may at the margins – or in some areas – be so, but rents are ultimately determined by supply and demand, and there are plenty of people in London and the South at least, who are NOT on housing benefit, such that landlords can put rents up by more than inflation, and indeed do so, with tenants in reasonable jobs managing to pay them, even at the cost of sharing with more people than they might prefer.
I think what is needed is to encourage, even compel, building of more truly affordable homes ( and I don’t mean ones costing £400K!), and sorting out the mortgage system in a way which means that people who’ve got good track records of paying rent, can somehow get that to count as some kind of plus for them in the credit scoring system. How ludicrous is it to decree that someone like my son ‘can’t afford’ to pay £650 a month for a mortgage, when he’s already been paying that for rent?
Your point debunking the ‘downsizing incentives’ idea, was very well made and one I hadn’t thought of before. Of course, it would be unfair to give an incentive to someone who already has a larger, valuable home, to cash in on that. Weird that it’s even being thought of.
Practical help in managing a house move would be more valuable. In the course of volunteering at Citizens Advice, I often come across people who really need a kind of ‘nanny’ or ‘secretary’ to help them through various ordeals and problems, be it dealing with debt, or downsizing a home. Many people of all ages lack family support and have nobody to help them negotiate various transitions of life. We at the CAB can’t do that because we are office-bound, and our remit is limited as well as our time. The offer of practical help might really encourage people to make a downsizing move, if that’s relevant to them.
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