Blog: The Problem of the Rent and the Problem of the Mortgage

The Resolution Foundation estimates some £12bn in additional mortgage debt has resulted from interest rate rises, with around two-thirds of that still waiting to be passed on to mortgage holders, as their fixed rate deals end, in May 2023. Last Autumn, the Joseph Rowntree Foundation estimated 120,000 households (400,000 people) will be pulled into poverty by mortgage interest rate rises, alongside 750,000 households with a mortgage already in poverty. Finding that average of an extra £2,300 a year for the mortgage will mean more people experiencing net negative incomes, i.e. never having enough to meet basic living costs including housing, fuel and food. 

The problem of the rent, as Beveridge put it, was the most intractable challenge when (re)creating the British welfare state in 1942. The problem of the rent (and mortgage) then, as now, was that housing spending cannot vary, unlike food or energy costs. If renting privately or buying, the UK’s welfare systems and generally low wages mean that poorer households often cannot ‘trade down’ - they are often already occupying the only housing they can afford – while social housing waits are very long indeed. 

After housing cost poverty means the rent or mortgage is too high to afford enough food, enough energy or to live a reasonable quality of life. Links between increasingly unaffordable and often poor quality housing and risks to public health, including child health, are self-evident. Eviction risks also increase, which can filter through to rising levels of homelessness. 

Social housing was the policy solution until 1980 and it largely worked. The images of failed, grey towers of Modernist folly, ridden with social problems are real enough, but they were also the exception, most social housing was originally just that: houses with gardens. Social housing has deteriorated, because Thatcherism sold off the best stock at big discounts, development funding was privatised, and housing management budgets shrank. 

Nothing infuriates the hard right quite like social housing. Core narratives in Thatcherism and Neoreaction centre on not giving people decent homes they have not ‘worked for’, ‘housing market distortion’ and ‘dreams’ of home ownership being ‘undermined’. In reality, nineteenth century housing markets created slums. Philanthropists and then the State developed social housing because ‘free’ housing markets had not worked. Massive social housing development, alongside extensive government grants for home improvement, saw steady and radical improvements in the housing conditions for poorer people during most of the twentieth century. 

UK housing is often a commodity. To get away with privately letting, often not great, housing for a median rent of £800 a month in England (£1,475 in London) housing supply must be inelastic, i.e. it must not increase relative to demand. Owner occupied housing is the primary source of personal wealth in the UK. In England, average house prices were £177,754 in March 2010 and £304,000 in March 2023, again resulting from inelastic housing supply. Overheated housing markets in London have created a bonanza for foreign investment, pushing prices further upward. Increase affordable housing supply drastically, let alone start building social housing again, and those property markets will collapse. Landlords and owner occupiers do not want to see their properties depreciate just like their car does, because newer, better, housing options are always appearing. Regarding housing as a human right, rather than a commodity, has proven impossible for mainstream UK politicians. Every failed policy initiative has pushed unsuccessfully at the margins of owner occupancy. The problem of the rent and mortgage is the problem of decades of undersupply of decent, affordable, secure homes.