Do you like easy solutions for complex problems? Well, then this column is for you. Unless you’ve been living under a rock, you’ll know that Britain has a housing crisis and that younger generations are increasingly priced out of homeownership.
Older people, on the other hand, are more likely to own their own home and have benefited from decades of house price rises. Indeed, over the last 70 years, the average UK house price has risen by 365 per cent, even if you adjust for inflation.
The housing crisis is often seen as so complicated that it’s impossible to solve. So, you can forgive young people who often wonder why older people don’t just move out of their homes so that younger families can move into them? It’s a reasonable question.
According to recent research conducted by Zoopla, nine in 10 homeowners over 65 live alone or with only their partner. Between them, the property listings site says, they have 10 million spare bedrooms. The majority of these baby boomers have lived in their home for an average of 26 years and “worry that they would not be able to host Christmas if they downsized”.
Downsizing. It sounds so simple. So practical. And yet, it’s not happening. Instead, a new trend is emerging. Older people who have retired from work are renting rooms out in their homes because it earns them a bit of extra cash.
In theory, this sounds like a nice idea. Who doesn’t want a bit of help with their bills? A bit of company now and then? But when you consider that it is now thought that older people continuing to live in family-sized homes long after their families have grown up and flown the nest has led to a lack of supply of three-bedroom homes across Britain, it all sounds a bit less warm and fluffy, doesn’t it?
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Indeed, three-bedroom homes are the most in-demand property type amongst would-be buyers. And, as basic economics tells us, restricted supply pushes up demand – and, also, prices.
And yet, instead of moving into homes that suit their needs later in life, older people remain in their family homes. Part of the reason why they do this is that there is no incentive for them to sell up – quite the opposite. If an older person sells up and trades down for something smaller, they pay stamp duty on their new home – which, some experts argue, is causing them to stay put.
Conversely, renting out a room in a larger house is not only encouraged but incentivised by the government. Something known as “Rent a Room relief” was introduced in 1992. As things stand, a homeowner can earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in their home. If the homeowner is receiving a state pension, they do not even need to fill in a tax return if they rent out a room within the allowance.
One of the best things Chancellor Rachel Reeves could do for the housing market is to encourage older people to downsize. She could do this by changing the way stamp duty works – not just for them, but for younger buyers, too. Reeves is rumoured to be considering this alongside changes to council tax, which would mean homeowners pay a property tax related to the value and size of their home instead.
Such changes would be incredibly contentious. Newspaper front pages are already calling it a “mansion tax”. Perhaps it is. But, if older people are rattling around in massive homes while young adults are crammed into flats and houses that don’t allow them to have children, is it such a bad thing?
Reeves could rebrand her idea by calling it an “empty room tax”, but even then, as David Cameron learned when his government introduced a similar spare “bedroom tax” for benefits claimants in 2013, it probably won’t go down well.
Still, younger voters are going to start wondering why lower-income households have been penalised for having spare bedrooms, when wealthier older homeowners are incentivised not only to stay in them, but encouraged to make money from doing so. They’re also going to wonder why the Government didn’t do anything about it.
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