This year has seen a succession of data released which raise questions over how efficiently the UK is making use of its existing housing stock.
For example, census data shows that the number of spare bedrooms in people’s homes in England and Wales has grown by almost two million over the last decade, with 26 million ‘unused’ bedrooms now within the housing market.
The findings also revealed that the number of households enjoying at least two spare bedrooms has increased by 825,000 between 2011 and 2021.
However, it’s not just specific bedrooms that are empty ‒ there are thousands of entire properties that lie unused too. A study by Leeds Building Society earlier this month found that there are now more than 676,000 empty homes in the country, with that number having increased by 3.6 per cent over the last 12 months.
Brokers told Mortgage Solutions that fixating on empty bedrooms may not be the answer to the housing issues, though, calling for greater levels of housebuilding and tax incentives to get more out of our existing housing stock.
Lack of government interference a selling point
Richard Campo, founder of Rose Capital Partners, said that the distinction between an empty home and an empty room was an important one.
“I suspect many people have the rooms empty for family to stay, children at university, or simply because they have earned the right to a nice home.”
Campo added that one of the attractions of the UK to investors is the fact that the government cannot simply reclaim land and property as they see fit, providing investors with confidence.
“If we start interfering with that I suspect it will have adverse long-term effects on values. If I felt my vacant property could be reclaimed by the government at any time they see fit, I would be more likely to sell it and invest elsewhere. While that may sound good in the short term, if property is deemed a less desirable asset class, prices could fall in the long term.”
We need more homes
The only real solution lies in building more affordable homes, according to Campo, who suggested that doing so would stifle prices over the long term, making it less desirable for owners to hold onto vacant properties.
He added: “Unlike simply reclaiming empty property, this would take a long time to have an impact and people can adjust their investment needs as required without upsetting the current validity of the title of the property.”
Jonathan Burridge, founding adviser of We Are Money, also argued that the solution lay in building more homes overall, rather than “jealously eyeing someone else’s home and deciding it is more than they need.”
He continued: “We need to embrace modern construction methods to reduce the cost of building new homes, we need to make planning faster and easier to allow the development or redevelopment of land and we need to build more than just small apartments.”
James Forrester, managing director of Barrows and Forrester, agreed that having worked hard to buy your home, it’s not for the government ‒ or anyone else ‒ to tell us we should move elsewhere.
He argued that focusing on older homeowners provides a “convenient smokescreen” to cover the government’s consistent failure to build more homes.
He said: “There’s certainly no harm in incentivising an ageing population to downsize but the reality is there’s no real incentive there to offer.
“They are already sitting on a considerable sum of equity within their home, so financial incentives won’t tempt them in the same manner as homebuyers struggling with the high cost of homeownership.”
Look again at Rent a Room
Brokers also suggested that the government should take a fresh look at its Rent a Room scheme.
Under the current rules, homeowners can earn up to £7,500 tax free by letting out a room in their property, though there were calls to increase this.
Graham Cox, director at SelfEmployedMortgageHub.com, argued that hiking the allowance “would increase rental supply, bring down rents, help with the cost of living and reduce homelessness. And there’s an awful lot of people living on their own who might like a bit of company”.
This was supported by Riz Malik, director of R3 Mortgages, who said that the scheme could be particularly pertinent for older homeowners, who may prefer “co-living arrangements to living alone”.
He added: “This could free up more property for those in need of more space.”
Obsessing over the wrong features
But is the housing market focusing on the wrong features of a property?
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, suggests that in the UK we have an “odd obsession” with the number of bedrooms a property has, rather than its actual size, which can distort discussions around supply.
He added: “Most other countries quote property as so many square metres, which makes more sense, otherwise, I could knock a few walls down when my kids move out and go from a four-bedroom to a two-bed. Is that then suddenly OK, even though the floor space is exactly the same?”
Tax tweaks
Older homeowners are commonly blamed for the empty homes situation, with the suggestion that they remain in properties larger than they need once their children have moved out.
There have been calls for stamp duty to be removed for older movers, in a bid to encourage them to downsize. The Institute of Fiscal Studies, for example, argued that removing it would help “empty nesters fly their coop”.
Campo noted that one reason some older people hold onto larger homes than they need is because they want to pass it on as an inheritance to their loved ones.
He continued: “The only possible incentive would be to remove inheritance tax if sold while you are alive, or capital gains tax if it’s a second property, past a certain age. Even then, these figures are a drop in the ocean of what is actually required, as for years, we are not building enough of the right type of homes to fulfil demand. The issue is bigger than this so pushing the elderly out their homes does not serve a meaningful purpose in my opinion.”
Don’t underestimate emotion
Taylor-Barr noted that emotion plays a role here too, pointing out that people “buy a house, but sell a home”.
“It’s very easy to talk about moving house when it’s not your home, but a very different prospect to say to someone who calls it home to ‘just move’,” he continued.
“That’s where they raised their children, or where they had that great party before Dad passed away, or where they have the whole family over every Christmas. It’s not easy to just give that up.”
This was echoed by Nick Lovell, equity release director at Concept Financial Services, who noted that he finds clients are often less interested in downsizing because of their emotional attachment to a property.
Incentivising investment
Lovell also argued there was a need for the government to do something to incentivise investment into old housing stock, offering people a reason to want to rejuvenate those unused homes and bring them back into the market.
He continued: “An opportunity for first-timers to secure property at an attractive price maybe? However, the challenge lies in persuading lenders to offer borrowing for these types of refurbishment projects.”
