When Ronan and his wife lived as property guardians in Walthamstow, east London, owning a place of their own seemed out of their reach. But in 2018, an opportunity presented itself: a development offering compact one-bedroom flats at a discounted price to people living in the local community.
The couple had no plans to start a family and the flat seemed suited to their lifestyle and budget. Then plans changed, as they often do, and they gave birth to a baby boy four years after moving in. Overnight, the bedroom doubled as a nursery and the open-plan living space functioned as a kitchen, dining room, living room and playroom. For lack of space, the pram was parked outside in the communal corridor. Soon, complaints landed in their inbox from the building management company stating that it posed a fire risk.
It was time to move on, take the equity they had built up and use it to put a deposit down on a bigger place in their neighbourhood. This, it turned out, was easier in theory than practice. They could sell their property for about £300,000, based on their last valuation in 2020, but the lowest asking price for a fixer-upper two-bed terrace house was £500,000. This time around there would be no stamp duty relief, no help-to-buy Isas or equity loans.
Even if they scrabbled a deposit together, they were unsure whether they could manage such a large mortgage, given the rise in interest rates: “Our mortgage is already a stretch for us.” Five years ago, the average five-year fix was 2.4%; in 2024, it is 4.4%. Add nursery fees (often the price of another mortgage) and increasing utility bills, and it’s not hard to see why families are unable to bear the financial cost of moving.
London is a particularly hot housing market, but this is a story I heard again and again from “second steppers” up and down the country. I chatted with families from Sheffield to Somerset and no one was asking for much – no en suites or home offices, just an extra bedroom. A home not dissimilar to the one they grew up in. For Georgina and her family in Yorkshire, “[it] feels unfair. What have I done that previous generations haven’t? My parents bought their first house for [practically] nothing … something ridiculous like a month’s worth of my dad’s wages.”
How did we get here? Rising interest rates are a relatively recent shock for buyers, but the cause of rising prices can be traced further back. When Margaret Thatcher promised to turn Britain into a “property-owning democracy”, she said: “The privilege of a family home should not be restricted to a few.” More than 40 years later, many young families would struggle to find suitable homes, in part due to the changes she ushered in.
The Thatcher government took a number of steps to loosen the restrictions on credit markets. Instead of relying on savings and building societies (which funded loans using deposits from savers), people began to take out mortgages from banks (which generated new money to fund the loans). As more money flooded into the housing market over the decades since these changes, prices have gone up and successive governments have done little to hold back the tide.
Anyone lucky enough to buy and hold on to property over this period, including large numbers of baby boomers, have seen their asset wealth grow enormously. Some members of this cohort went on to leverage their newfound wealth by taking out loans against their homes to invest further in property and become buy-to-let landlords. This demand further pushes up housing prices.
What type of property is most in demand for buy-to-let landlords? Precisely the modest terrace house Ronan’s family would like to move into, explaining in part why they face such a large price difference between their current and desired home. So here we are: renters living in terrace houses with housemates dreaming of their first flat, and families stuck in flats dreaming of a two-bed terrace house.
Renters, first-time buyers and second steppers are not on the bottom rungs of a “property ladder”, they’re the bottom layers of a property pyramid as these groups transfer wealth to those at the top. In Property: The Myth that Built the World, the Observer’s architecture critic, Rowan Moore, writes: “Property [has become] a Ponzi scheme, reliant on ever-increasing prices and on continuous input of funds from newcomers at the bottom of an expanding pyramid.” At some point, wages and property prices cleave so far apart that people are unable to fund their deposits or mortgage payments.
For some, there is the Bank of Mum and Dad, now the UK’s sixth-biggest lender – if that resource has not already been used up for the purchase of a first home. Others are having to turn to alternative solutions. In Frome, Somerset, Emma and her partner are planning on leaving their starter home and moving back in with her mum when they have their first child. “My mother can see that things are really hard for millennials compared with when she was 30 with me and my brother … If society doesn’t work, if the housing market doesn’t work, then you have to find your own solution.” But this isn’t an option for everyone.
As the rot of the housing crisis rises upwards, maybe the government will start to act on a problem that those at the very bottom have been aware of for all too long.
Kirsty Major is a deputy Opinion editor for the Guardian
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