The concentration of property ownership – how far will we let it go?
Daniel Bentley, 12 January 2015
The expansion of home ownership has surely been one of the defining social trends of the past century. Back in 1914, only 10 per cent of people owned their own home, the rest (apart from a tiny number in municipal housing) rented from a private landlord. Fast-forward to the end of the 20th century and owner-occupiers accounted for about 70 per cent of all households, a remarkable advance which seemed to suggest that the property-owning democracy was (more or less) upon us. This was the result of decades of policy (both Tory and Labour) designed to expand owner-occupation to the masses, with the investment and tax environment favouring first-time buyers, in a variety of ways, over the landlord class. As Winston Churchill’s post-war government put it in its 1953 housing White Paper: “One object of future housing policy will be to continue to promote, by all possible means, the building of new houses for owner-occupation. Of all forms of saving, this is one of the best. Of all forms of ownership this is one of the most satisfying to the individual and the most beneficial to the nation.”
There are many arguments one can make for owner-occupation as a force for good, but in the current political climate, amid increasing concern about wealth inequality, it is worth considering the French economist Thomas Piketty’s remarks on the subject. His recent magnum opus – which has provoked acres of analysis of the subject, not all of it in agreement – describes how before the First World War virtually all of the nation’s wealth was owned by a mere 10 per cent of its people. The next 40 per cent owned just five per cent, virtually nothing – there was no middle class, effectively. What has happened since the Edwardian era is that that middle 40 per cent has got hold of roughly 35 per cent of national wealth (as the top 10 per cent’s share has fallen to about 60 per cent). Piketty is clear that a central factor in this spread of wealth has been the advance of owner-occupation: “Within this vast group, where individual wealth ranges from barely 100,000 euros to more than 400,000, a key role is often played by ownership of a primary residence and the way it is acquired and paid for… Make no mistake: the growth of a true ‘patrimonial middle class’ was the principal structural transformation of the distribution of wealth in the developed countries in the twentieth century.” (Capital in the Twenty-First Century, p.260)
He is also clear, of course, that wealth is becoming more concentrated again and that “there is no guarantee that the distribution of inherited capital will not ultimately become as inegalitarian in the twenty-first century as it was in the nineteenth.” (p.422) This is where we should return to home ownership in England and Wales which, having reached a high-water mark of 69 per cent in the 2001 census, is now in decline. It was 64 per cent in the 2011 census and is falling all the time, mostly giving way to the re-expansion of the private rented sector. Landlords have more than doubled the number of Britain’s homes they own in the past couple of decades. They have piled in largely because there is so much money to make on soaring house prices. A study by Savills, the estate agency, has now shone some light on how this is playing out. Landlords have made a profit of £177 billion in the past five years, the total value of the stock they hold increasing by 57 per cent. This is beside rental income. The total value of owner-occupied housing has risen a mere five per cent in the same time. Lucian Cook, Savills’ director of residential research, says “the benefit of recent house price growth has become increasingly concentrated in the hands of private investors… it is difficult to see how this will change, particularly given increased mortgage regulation”. In fact, owner-occupation is predicted to become a minority tenure once again within two decades, as the private rented sector continues its advance.
It is important to avoid alarmism. We are still in a much better place than in 1914; you might argue the two periods are incomparable. But it is important to note the trajectory we are on, which is no longer towards the expansion of owner-occupation and the wealth advantages that brings to a larger proportion of society, but towards the increasing concentration of property ownership in the hands of a relatively small minority. The question is, how concentrated are we going to allow it to become?
Daniel Bentley is the author of ‘The Future of Private Renting: Shaping a fairer market for tenants and taxpayers‘ and the co-author of ‘Finding Shelter: Overseas investment in the UK housing market‘