Private renters should have the right to buy the homes they live in after three years in order to help address declining home ownership levels according to a report by think tank Civitas.
The report states that for the last 36 years, home ownership has been in the decline as private rental activity increased. It also states that with young people at risk of regular hikes in rent every six months as tenancies expire, many are simply unable to save a deposit.
The report states: “Between 1918 and 1980, owner-occupation grew largely at the expense of private rental. But for the last 20 years, private rental has been growing at the expense of owner occupation.”
The report plays down the shortage of housing as the dominant feature of the market, arguing that if supply were to increase, the impact on house prices would be small.
The report continues: “The main causes of our problem have been on the demand side. The failure to control the explosion of credit from the late 1990s onwards grossly inflated house prices, and the historically low cost of credit since 2008 has kept them inflated and prevented the price correction which is necessary to restore the link with earnings (as occurred in the three previous house price booms).
“The growth of buy-to-let has further fuelled demand, and this has been reinforced by an influx of foreign money into the luxury London market, the strong growth in immigrant numbers, and an increase in the number of parents’ drawing down their own housing equity to help their children buy.”
The report, written by Peter Saunders then makes what it terms “some modest proposals”.
It states: “Since 2013, the RTB qualifying period for council tenants has been three years (the Blair government had raised it to five). A similar residency qualification also applies to the newly introduced voluntary RTB for housing association tenants. Assuming this same rule were extended to the private rented sector as well, tenants would not be eligible to buy their home from their landlord until they had been in occupation for at least three years.
“To stop landlords terminating the lease before three years have elapsed (in an attempt to prevent tenants from applying to buy their homes), security of tenure would have to be guaranteed for at least that long. The Shelter proposal for five-year leases would meet this requirement best.
“After three years of a five-year tenancy had elapsed, tenants of private landlords would be offered the option to purchase their home at any time in the next two years (i.e. during the remaining period of their tenancy). This would give them five years in total to save for a deposit, during which period their rental outgoings would not rise above the rate of inflation. At the end of five years, the tenancy would lapse, and if they had not exercised their RTB by then, their eligibility to do so would lapse with it (this would give landlords as well as tenants some predictability). “
