Landlords not to Blame for UK Housing Crisis

Landlords not to Blame for UK Housing Crisis
Christopher Watkin brings you a historical look at why the housing crisis has very little to do with landlords - despite what the media may say!

The housing crisis continues to dominate media coverage in the property market, and some commentators are pointing the finger at landlords for skewing the sector for those who desperately want to buy their own house.

Is the housing crisis really down to the landlords? Not really, and we need to go all the way back to the start of the 20th century to find out why.


At the end of the First World War, 77% of British people rented their home. Most of this was in the private sector - council housing was still in its infancy. As we recovered from the war and the Great Depression homeownership slowly increased. All was well.


The Second World War came along. The Luftwaffe, the German Airforce, decimated families and cities in the Blitz during 1940-41. Among the victims were, of course, houses, so when our returning soldiers came home in 1945, we made a concerted effort to supply clean and new accommodation. The Local Housing Authorities, as we know them today, were born.


Britain recovered and we built large council estates. The economy was booming, and people decided they wanted to own their own homes instead of renting. Mortgages were easier to come by and homeownership become a viable option again.


By 1977, 62pc of 30-34yr-olds were owner occupiers with a mortgage. Just 9pc were in private rented accommodation, and the remainder of the UK population were still in the council houses or living with friends and family.


This is when things started to go wrong, and it all came about from an unintentional mistake by new Prime Minister Margaret Thatcher. Her new Right-to-Buy campaign planned on getting three quarters of Brits to own their home privately, so she put the council estate housing on the market, and their tenants could buy them at big discounts.

200,000 homes were sold to tenants in 1982. That number rose to 1m council houses in private ownership by 1987, when 68.2pc of 30-34yr olds had a mortgage, and 4.6pc were privately renting.

Social renting fell from 31pc, a record high, to just 20pc in ten years.

The issue was that the money raised on all these property purchases was spent on reducing debt, not replacement housing. The supply/demand crisis began and three decades later it is a driving force behind most of the property market.


Right to rent declined as house prices inflated in the wealth of the 90s, so homeownership stayed steady (68.3pc compared with 68.2pc in 1987). Meanwhile, the landlords who had invested in the 80s started reaping some benefits - private renting almost tripled from 4.6pc in 1987 to 12.1pc.

The supply started to become an issue, but nobody was really noticing it at the time. Because the Right-to-Buy properties were being sold so cheap, it meant more and more properties had to be sold to match the income that would have been generated from the original property before Right to Buy.

For example, two houses worth £200,000 are sold for £100,000 each. The government generated income at 50pc of market value and effectively sold just one house.

Imagine this cycle a million times over, and add to the equation that most of that income wasn't even spent on replacing the houses that were sold, and you can see the horrible situation the property market was beginning to dig itself into.

2000s onwards

And here we are in the modern housing market. Successive governments have failed to tackle supply and renting has become a lifestyle for more and more people. In 2007, homeownership in the 30-34yr old demographic dropped to 65.8pc and renting rose to 18.7pc.

In the latest figures, for 2014, homeownership had dropped to 47.2pc and renting had risen to 33.4pc.

The thirty-somethings may blame landlords for owning 'their' houses, but the fact is that the properties they would ordinarily be buying are the council houses that were sold off for huge discounts during Thatcher's ill-fated Right-to-Buy scheme - and not replaced.

The selling of council housing in the 80s artificially grew homeownership but, as these people have become older, the following generations have not had the same opportunity to buy those council houses, purely because the older generation are still living in them. Thus, in the 90s, Noughties and 2010s we have seen increasingly mature adults being funnelled into a growing private rented sector.

Unless local councils start building council houses by the acre (and hundreds more acres), private renting is in the UK is destined to grow, and grow, and grow.