The Housing Boom Replaced Social Democracy. Now We Have Neither

In 2003, when I started my degree at a London university, I was fortunate enough to enjoy affordable, fully-catered student accommodation. For less than £100 a week, I could live in zone one, allowing me to walk to campus and enjoy two cooked meals a day. Life as an adult seemed easy enough. 

Yet over the following decade and a half, as I moved more than 15 times, rent increases stalked my thoughts like an apex predator. Most people find moving more stressful than a divorce, so it’s unsurprising that my own misadventures gave me an anxiety disorder. 

By my own calculations, I spent £75,000 on rent between 2004 and 2018 – an especially outlandish figure given the state of some of the properties. Several should have been condemned. One had a gas leak and a bathroom with no functioning toilet. Another building had no central heating. On particularly cold mornings, I would enjoy my espresso in the kitchen – using the oven, door ajar, like a fireplace. When friends came to visit, they were mildly stunned it wasn’t a squat.

In most of these places, I paid north of £600 a month for a room – more than my dad’s mortgage for his detached house in Bournemouth. At the time I couldn’t understand it – more baffling still, it didn’t seem to register for anyone in politics or the media. 

Around the same time as I began my descent through Britain’s rental market, Gareth Tudor-Williams – a retired academic – purchased a five-bed house for £850,000 in Wimbledon. He did so with an interest-only mortgage – where you only pay back the interest on the amount borrowed. At the end of the mortgage term, you owe the full amount on the loan. 

Interest-only mortgages have several advantages, particularly when house prices are going up, because the mortgage holder can cash in any increase in value. The disadvantages are that prices can go down too – and the borrower is at the mercy of interest rate rises. When rates are low it’s a far better bet than renting, provided you can find a deposit. 

At one time Tudor-Williams was reportedly handing over as little as £770 a month (detached houses in Wimbledon are generally now more than £3m). In 2010, that was only slightly more than I paid to rent a single room off Queen’s Road, Peckham. It’s not hard to see who had the better deal.

For much of the last 15 years, anyone able to accumulate a deposit got an absurdly good deal, compared to renters. But the basis of that disconnect has now evaporated, with the Bank of England increasing the base rate of interest from 0.5% to 5% in little more than a year. As a result, owner-occupiers are starting to suffer too. That includes Tudor-Williams, whose monthly payments have reportedly risen to £2,700. As he told the Times last week: “It’s utterly unsustainable for us[…] We’re considering whether to sell up and count our losses.”

“Count our losses” is a strange way to put it when – because of the housing boom over recent decades – Tudor-Williams is likely sitting on several million pounds if he chooses to sell. While recent rate rises were described in the Times as tantamount to a personal tragedy, he has benefitted from record-low rates for 15 years and ‘earned’ a life-changing amount of money.  

It says something significant about the psychology of certain homeowners that such a situation is registered as a ‘loss’. But unmet expectations breed their own kinds of resentment. And given the presumption had been that prices would always soar, and credit remain cheap, one can understand the disappointment.

But there’s more to it than just pampered individuals who have lost any sense of perspective, because the former status quo – of rising house prices and cheap credit – also filled the void left by social democracy. Over the last two decades multiple generations, both psychologically and economically, adjusted to this new settlement: Yes, people will have to pay for a university degree, and the quality of things like public transport and healthcare may not be on par with elsewhere in northern Europe. In real terms, your wages will not stretch as far as before, and you’ll certainly feel sorry for your kids. But in the place of all that you can own a property whose price rises with the regularity of a metronome. The world outside might be less generous than before, but that remodelled kitchen sure looks good. After all, regarding the case of Mr Tudor-Williams, it wasn’t previously outlandish for a retired academic to live in a detached house in zone three. So should it really come as a surprise that he, despite being a potential millionaire, feels rather put out? What one sees in his story isn’t a tale of greed, or overindulgence, but instead a desire for the old ways to continue – only by different means.

If On The Buses captured the solidaristic culture of the 1960s, and Arthur Daley and Delboy the individualist turn of the Thatcher years (as a cultural type both still feel familiar today), then the political snapshot of Britain in the early 21st century was Location, Location, Location. But whereas those earlier shows were a source of entertainment, the latter transcended this. Britain’s obsession with property, and specifically maximising returns, was a moment when free enterprise fused with self-help. Like all creeds, it had certain truths – the last of which are now unravelling. 

Around two million homeowners have come off fixed-rate deals since the Bank of England started raising rates in December 2021. By the end of 2024, that figure will have risen to 4.4 million. Every week around 35,000 households are having to find a new mortgage deal – with many having to pay hundreds, and sometimes thousands, more than before. For some, maybe even most, this will be a more radicalising experience than any manifesto or protest. Of real political importance is that those most exposed to rate rises live disproportionately in England’s south-east – the traditional heartland of the Conservative party.

Emblematic of this was a recent appearance on Newsnight of one Charlotte Towne. Towne described how a recent mortgage deal meant she would have to stump up £1.3m in order to pay for a home presently valued at £600,000. While that seems unfair – and of course, her property’s value will almost certainly increase over time – it’s important to recall that millions of people pay hundreds of thousands of pounds for no asset at all: it’s called renting. This isn’t a gotcha aimed at Towne, far from it. Rather her rising anger underscores how housing could radicalise even the property-owning middle class with ferocious speed. 

After watching Towne’s interview one can even start to sympathise with the idea of the government helping struggling mortgage holders, as some are now suggesting. This might initially sound strange, after all, I’ve just made the argument that owner-occupiers are a comparatively privileged section of the population. But when you grasp that the property boom replaced a generous welfare state for the middle class, it is at least understandable. This extends to the now illiquid ‘Bank of Mum and Dad’ – whose generous deposits permitted their children access to the property ladder. For 15 years that allowed the middle class to reproduce itself. With the end of cheap credit that is likely now over too. 

If the house price boom and cheap credit replaced social democracy, and they aren’t coming back, then it should be clear what a coalition of renters and owner-occupiers should work towards. More house building, better terms for renters, a gradual levelling up of wages with property prices (with the latter stagnating) and no more interest rate rises. Who knows, maybe Mr Tudor-Williams can start a direct debit to the London Renters Union with his newfound fortune.