Jake Gordon

Discuss The Advantages And Disadvantages Of A Housing System Where Home Ownership Is The Dominant Form Of Tenure

Home ownership, the dominant form of housing tenure in the Britain, competes against social housing - provided by local authority and housing associations - and private rented accommodation. Home ownership was famously encouraged by Margaret Thatcher (Prime Minister from 1979-1990) through right-to-buy policy and the notion of a 'property-owning democracy'. Whilst it brings many advantages, home ownership is not without its disadvantages. This essay seeks to analyse the advantages and disadvantages of a system where home ownership as the dominant form of tenure. First, the significance of home ownership will be explored, with arguments in favour and against home ownership following.

The Significance Of Home Ownership

Today, with approximately 70% of households in Britain being under owner occupation, it is easy to believe that home ownership is the obvious and rational form of housing tenure, and always has been. However, in 1914 home ownership in Britain stood at only 10%, rising to around 49% in 1971 and 69% in 2002Data for 1914 from Marsh & Mullins (1998: 11); data for 1971-2002 from National Statistics Online (20 April 2002) The 2002 General Household Survey: a summary of changes over time - housing tenure, online: http://www.statistics.gov.uk/CCI/nugget.asp?ID=821&Pos=2&ColRank=2&Rank=448. Murie (1998) explains:

"The nineteenth century man of property did not own his own home... Britain, at the turn of the century, was a nation of tenants and this applied to rural and urban areas and to the rich and the poor. Home ownership should not therefore be viewed as the natural tenure - mass home ownership is a product of post-war history." (Murie in Marsh & Mullins ed., 1998: 80)

Further, whilst home ownership may be the most popular form of housing tenure in Britain today, other nations see varying forms of housing tenure. 1991 statistics show Ireland and Spain with over 80% home ownership, the UK with 67%, the US at 59%, Germany on 40% and Switzerland with only 29% home ownershipSource: Steve Kanga's Web Page, data reproduced with permission from Michael Wolff (1992) Where We Stand, online: http://www.huppi.com/kangaroo/8Comparison.htm. The variance is clearly vast, and by exploring the differences between countries with high and low home ownership some advantages and disadvantages can partly be illustrated.

Homes are expensive, so most home owners take out a loan - a mortgage - to buy their home. Few people have huge sums of money readily available without borrowing. Usually, a mortgage isn't required only if the purchaser has another house to sell - for example, if they're trading down. For first-time-buyers, except for in exceptional circumstances, a mortgage is almost always required, and the percentage of the total house price of that mortgage is high. "In 1979, their [first-time-buyers] percentage advance had reached a long-term low of 74%; in 1982-85 it reached a high of 85%" (Ball, 1986: 38). Mortgage debt as a proportion of total house price has not only risen for first-time-buyers. "In 1980, only 46 per cent of purchase price on average was funded by a mortgage... By 1984, the proportion borrowed had risen to 59 per cent" (Ball, 1986: 38). The importance of this debt will be considered when assessing the advantaged and disadvantages of home ownership.

Whilst there are many interrelated factors which have helped the level of home ownership increase in the UK, the role of the building society is perhaps one of the most important. Before building societies, it was extremely hard for an individual to borrow enough money necessary to buy a home. In recent years, building societies have been on the demise, losing their mutuality and replaced with regular banks which serve the same purpose.

Government policy can also be seen to strongly influence the increase in property ownership. Thatcher's government of 1979-1990 is most notorious for pushing the notion of a 'property-owning democracy' and encouraged this through a generous right-to-buy policy aimed at those renting council accommodation. But whilst perhaps the most well known and pivotal, Thatcher's government is by no means the only to advocate home ownership. Blair's New Labour government commenced the 'Starter Home Initiative' in 2001 to "help key workers, primarily teachers, health workers and the police, to buy a home in areas where high house prices are undermining recruitment and retention"Office Of The Deputy Prime Minister, About The Starter Home Initiative, online: http://www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/odpm_house_023635.hcsp. Interestingly, in April 2004 this scheme was succeeded by the 'Key Worker Living' scheme to "help key workers in London, the South East and East of England to buy a home, upgrade to a family home or rent a home at an affordable price"Office Of The Deputy Prime Minister, New Key worker living scheme, online: http://www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/odpm_house_026955.hcsp (italics mine).

The Political Economy

Before one can understand many arguments concerning property ownership, it is first necessary to have a comprehensive understanding of the links with the political economy.

Perhaps the greatest advantage given for home ownership is in creating a 'property-owning democracy' in which individuals have a direct stake in the economy and their country - in fact, they literally own part of their country. However, I argue that this could in fact be a disadvantage rather than an advantage as it creates dependency and a fallacy of security and sustainability based upon unsustainable Cornucopian politics and economics. Maurie (in Marsh & Mullins, 1998) explains how home ownership "stabilises people politically" (1998: 83), therefore eradicating revolutionary Bolshevik views and encouraging a conservative short-term self-interested electorate which is perhaps blind to long-term economic and scientific realities.

To understand this argument, it is necessary to assess the sustainability of an economy on which home ownership is based. As has been explained earlier, in order to buy properties most people require a loan in the form of a mortgage. At some point, that loan will have to be paid back with interest as a reward to the lender. The size of a loan which can be secured is based upon credit history and salary - in general, it is possible to obtain a mortgage equal in value to approximately four times an individuals' yearly salary. So, for example, if a prospective buyer has a salary of £30,000 then they may be able to get a mortgage for up to around £120,000. Recently, however, it has been discovered that mortgage lenders often encourage buyers to lie about their earnings so as to secure a larger mortgageBBC News Online (11 Feb 2004) Self-cert mortgages could skew market, online: http://news.bbc.co.uk/1/hi/business/3478635.stm. But the great problem with mortgages arises when they cannot be paid back.

An individual with a mortgage is clearly extremely reliant upon their salary, upon having a well paid job. In a country where home ownership is the dominant form of housing tenure, a high level of employment is crucial. However, I argue that full employment is unsustainable due to a saturation of industries and markets, and also because of technological unemployment - that is, technology is replacing jobs previously performed by humans without a corresponding increase in the supply of new jobs elsewhere. Whilst the UK may currently be experiencing a low level of unemployment, I view this as a short-term feature of the technological unemployment occurring. For example, many of the current new jobs are temporary jobs in which some individuals are working on fairly simple tasks whilst others are employed as programmers or in research and development to find a way to automate those jobs or find alternatives to themSee my dissertation online at http://www.nojobs.co.uk/ for an in depth explanation of the unsustainability of full employment and cheap energy.

Mortgages are lent with a rate of interest which is usually either fixed over a term or variable based upon a function of the Bank of England base rate. In general, the lower the Bank of England base rate, the cheaper the repayments on a mortgage. Individuals taking out a mortgage are therefore extremely reliant upon the Bank of England base rate.

Home owners with mortgages to pay back are extremely dependent upon their jobs, and those jobs are at risk from numerous fronts. It therefore makes sense for home owners to advocate and vote for political parties which offer policies for full employment and economic prosperity, regardless of the long-term unsustainability of such policies.

General Advantages & Disadvantages Of Home Ownership

One argument for home ownership is that it increases the amount of care people have for their property. The logic of this argument is simple: people will take more care of their home if they own it as they think it will increase the value of their home, and they enjoy owning a nicer home. However, there is also a strong counter argument to be voiced. Ball (1986) writes that "[s]uccessive house condition surveys show a rapid escalation of dilapidation in Britain's housing stock. Some of the greatest increases are in the owner-occupied stock." (1986: 44). So what reason can there be for this? It is important to understand the just because someone owns a home, does not mean that they have disposable income to hand. Ball also writes that "[r]ecent house condition surveys have shown alarming increases in the extent of disrepair in owner-occupied dwellings... because owners cannot afford to repair them." (1986: 3). Rather than viewing a home as an asset, it is more sensible to view its mortgage payments as a liability, presuming a mortgage must be paid. Every month, no income is generated from the house, but the mortgage must be paid. There is a net outgoing. Whilst the home may be increasing in market value, that is largely irrelevant if the home is not sold. The home only becomes an asset when, and if, it is sold.

Obviously renting a home is also a liability because of the cost of rent. However, with rented accommodation the landlord is legally responsible to keep the home above a certain standard. Further, the income generated by the landlord can be used for improvements to the home, whilst an individual living in a home with a large mortgage may find it difficult to put money aside for improvements.

Another argument in favour of home ownership is that homeowners are better off. Rather than paying rent each month and gaining no long-term tangible asset for it, the homeowner owns the home when the mortgage is paid off. The renter is left with nothing, the homeowner is left with a home. Again though, a crucial counter-argument can be given. Ball finds that "[a]verage statistics showing that homeowners are better off than non-owners may hide pockets of strained economic circumstances within the tenure" (1986: 43). The argument here is similar: homeowners with mortgages are under extreme stress to pay off that mortgage, particularly if interest rates are high. Unless the homeowner sells their home, it is not a financial asset.

The Joseph Rowntree Foundation links together poverty and home-ownership. They find that "half of all people living in poverty in Britain today are home-owners"Joseph Rowntree Foundation (Jan 2003) Home-ownership and poverty in Britain, online: http://www.jrf.org.uk/knowledge/findings/housing/113.asp. They conclude that "the social distribution of poverty and the way in which tenure is sometimes used as a measure of relative disadvantage or advantage should be reconsidered"ibid.


There are undoubtedly many advantages of home ownership, but it is all too common for people to make presumptions about the benefits which are false. Owning a home without a mortgage frees an individual from having to pay monthly rent or mortgage payments. However with a mortgage, the importance of home ownership comes in the main from an expectation of increases in house prices. The model is unsustainable and flawed. It has worked in the past, but it will not necessarily work in the future. A major crisis is approaching when house prices crash and home owners find themselves in negative equity. The longer that crisis is put off, the greater the fall.

[2,650 words, written May 2004]

Bibliography & References

Alcock, P (1997, 2nd ed.) Understanding Poverty, Basingstoke: Palgrave
Ball, Michael (1986) Home ownership: a suitable case for reform, London: Shelter
Burrows, Roger (2003) Poverty and home ownership in contemporary Britain, Bristol: Polity Press
Cahill, Kevin (2001) Who Owns Britain, Edinburgh: Camongate
Hogarth, Terence (1996) Mortgages, families and jobs: an exploration of the growth in home ownership in the 1980s, Coventry: Institute for Employment Research
Karn, Valerie (1985) Home ownership in the inner city: salvation or despari?, Aldershot: Gower
Malpass, P & Murie, A (1982) Housing Policy & Practice, London: Macmillan
Marsh, A & Mullins, D ed. (1998) Housing & Public Policy, Buckingham: OUP
Merrett, Stepehn (1982) Owner-occupation in Britain, London: Routledge
Pawley, Martin (1978) Home ownership, London: Architectural Press
Saunders, Peter (1990) A nation of home owners, London: Unwin Hyman

Web resources:
Numerous individuals and discussions on the following usenet discussion groups: free.uk.housing.misc, uk.community.social-housing, uk.politics.misc, soc.culture.british
by Jake Gordon, some rights reserved