The Conservative party has good reason to think that its vote is only as safe as house prices. Its 2019 victory could be ascribed to two homeowning demographics – outright owners and mortgage holders – which saw millions more back the Tories ahead of Labour. Not only did the party return to levels of support in these two groups in England and Wales not seen since 1992, but it extended its lead among homeowners over Labour in every region apart from London and the north-west. Only with renters was Labour comfortably ahead.
Despite the Conservatives’ poor economic record, house prices explain why large parts of the population felt as if they were getting richer – and voted Tory. While real wages sank and productivity flatlined, property owners saw their house prices going up while their repayments were low. This feelgood factor looks like disappearing as soaring borrowing costs make payments unaffordable. The Financial Conduct Authority warned this week that more than 750,000 households are at risk of defaulting on their home loans. With interest rates going up, mortgages will become more expensive and buyers will be able to borrow less – and property prices should fall. Some think that house prices could drop so fast that, in real terms, they end up where they were a decade ago. Were that to happen, the Conservative dream of a property-owning democracy would become a Tory nightmare.
For some, a housing downturn would be a good idea. Lower house prices should mean lower rents. Older people understand that by hoarding housing wealth, their children’s ability to buy a home is increasingly dependent on them. The downturn may also turn into a crash as highly indebted landlords face unsustainable losses, triggering a wave of property fire sales. An economic crisis presents opportunities. The UK private rental sector is too big and needs regulating. A slump might be a chance for ministers to provide safeguards for tenants, and to rethink how to provide secure, affordable housing. Living in social housing is a pipe dream for most people. Last year, the Big Issue found that the longest wait for a social home could now be more than 50 years.
Britain’s extractive model of housing is out of step with many of our European neighbours. In a forthcoming book, Shattered Nation, Oxford University’s Prof Danny Dorling points out that had house prices only risen in line with inflation over the past 70 years, the average home in 2022 would have cost £63,300, or just over twice the median full-time UK salary of about £31,000. Prof Dorling says money is siphoned from the less well off to the already wealthy when the former pay excessive rents, when they buy an overpriced house, and even when they keep up with their large mortgage payments. Lawmakers perhaps don’t see the problem as so many of them are landlords. Rishi Sunak’s family owns four luxury properties.
The current electoral configuration that pits homeowners against renters profits the Conservatives. In this crisis, however, the Tories might find it hard to insulate mortgage holders and not tenants. But without market intervention, the political dividing line may shift to being between outright owners versus a coalition of borrowers and renters – with the latter two groups favouring much-needed redistributive policies from Labour. Falling home ownership rates and property prices might then mean the question of how the Conservatives lose the next election is answered in two ways: gradually, then suddenly.
