Homeownership is just one housing option – David Alexander

David Alexander is the Chief Executive Officer of DJ Alexander Scotland

What contributed to my concern about this proposed legislation was the implication that a large number of tenants actually wanted to move into ownership because it was preferable to renting.

The dwelling foundation is, or should be, tripartite—like the tripods used by professional photographers or the theodolites used by chartered surveyors. Take away one of these prongs and the structure collapses.

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The three pillars of the housing stock are: owner-occupation, private letting and social housing. For some people, the middle of the three is often the best option, and they rent long-term, voluntarily, not because they can’t afford to service a mortgage.

Rather than being “priced out of the market,” some long-term renters will have relatively well-paying professional careers and may also have fortunes through direct holdings or within a pension. Maybe they even have their own property that they rent out – and to which they can one day retire. But at the moment they like to rent because, ironically, the higher the quality of the rental (in terms of location, space and amenities), the cheaper it gets proportionately cheaper. For example, a typical two-bedroom apartment has been cheaper to buy than rent in recent years, although this is already changing due to rising interest rates. However, move up the scale and properties that people would not normally buy become affordable for them to rent. An example of this can be found in Edinburgh’s New Town, where quality garden apartments have become popular with couples and families who appreciate the special location and lifestyle that comes with it, and for whom renting makes them affordable.

Other aspects of lifestyle play a role in many private rental decisions. Not only in terms of living comfort, but also, for example, depending on whether someone has or ever wants to have children; or if their work is of a temporary nature; or if they simply don’t want the expense of maintenance, repairs, and the ongoing interior renovations that are required to make a home or apartment marketable.

If the UK market was more continental I think many more people would be willing to take up the rental option. Overall, private hire companies (who own more than 80 per cent of UK stock) provide an excellent service, often in difficult circumstances, but with larger scale private hire, backed by institutional funds, so much more could be achieved.

Perhaps the greatest practical benefit would be a reduction in costs through economies of scale. But it’s not just about money; Such a scenario would change attitudes towards renting. In Germany, a well-paid manager can buy or rent his luxury home – it’s his choice, which depends on a number of factors in his life. The decisive factors are the quality and location of the house, not the financing. A decision to rent rather than buy is seen as normal, while in the UK renting rather than buying in these circumstances would be seen as bizarre.

A similar attitude would be desirable here. Largely for cultural reasons, owner occupancy will continue to be the preferred choice for the majority of the UK population, although it is often forgotten that a century ago most property was privately let. In addition to self-interest and social housing, we need a comprehensive private rental stock that expands the range from budget to luxury beyond what is currently available. A wider choice of rental properties would also curb home price inflation within the owner-occupied sector, which hurts first-time buyers the most.

That is why the government decision on housing cooperatives and construction financing for beneficiaries with its recommendation “buy well, rent badly” sends the wrong signals. Not everyone needs or wants to buy. If so, they are certainly entitled to the same choices already available to those who do.

David Alexander is the CEO of DJ Alexander

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