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Why we have more in common with Spain than we think – L&G

by: Steve Goodall
  • 02/07/2015
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Why we have more in common with Spain than we think – L&G
While much of Europe has a successful and prosperous larger rental sector, the Conservative government has recently extended the controversial Right to Buy programme, furthering access to home-ownership.

With Right to Buy back in the mix, the Conservatives are keen to sell their vision of a hard-working, home-owning population.

The government suggests it will encourage stability, aspiration and reward for those who can get onto the property ladder. But with the latest iteration to include social housing tenants, the extent of Right to Buy is considerably more controversial.

Taking a step further back, where does the evidence supporting the benefits of higher levels of home ownership itself come from?

If we take a look at Europe, the countries with higher levels of home ownership than the UK are some of the weaker economies. They include: Spain, Greece, Italy and former communist regimes, where housing has been given away or sold very cheaply to the people.

Putting aside the unavoidable challenge that we still need to build a huge number of new homes to keep pace with the population, what are the lessons to be learned from European neighbours with higher levels of home ownership and less social housing stock?

Similarities in Spain

Around 82.2% of homes in Spain are owner-occupied with 15% privately rented and just 2.8% socially rented. Prior to the banking crisis, Spain had a similar approach to the new government in several respects: home ownership was promoted through tax exemptions, state-subsidised loans and financial assistance to first-time buyers.

But the subsequent dramatic property market crash has seen Spanish house prices halved since their 2007 peak with tens of thousands of evictions and many empty homes. This demise in value is unlikely to reverse with a construction boom and a consumer renaissance fuelled by printed ECB money. Analysts are bracing themselves for another hard landing in due course.

Since the crash, Spain has begun a U-turn in its housing policy. The focus has shifted from home-ownership to the development of the rental sector. Austerity measures have resulted in the withdrawal of many homeowner subsidies and tax reliefs. A new law has recently been introduced to encourage people to rent out empty homes, offering benefits and tax breaks to landlords, reducing standard tenancies from five to three years and removing the former right for a tenant to buy the property – except where it was written into the tenancy contract.

Other western European countries have successfully embraced a larger rental sector. Perhaps the time has come to invest in holistic housing strategies that give more people the chance to enjoy ‘a place of their own,’ rather than ‘a place that they own.’

Steve Goodall is managing director of Legal & General Surveying Services

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