The Dilemma of the Single Option
A key thread in the argument for a Complementary Housing Strategy has to do with risk and the instability of the current market. We need to look again at the UK’s emerging new households and to consider what is uniquely different about the situation that they are facing.
The most obvious change is in their attitude to risk. It used to be considered very risky to take a loan of more that 2.5 times of annual income, but TV adverts now offer loans at 5 times annual income and backroom boys offer as much as 10 times income. Why do people take such risks?
The answer must be that they consider the goal to be worth it.
Consider their situation. They no longer have the option of a low cost rented alternative. It costs just as much to rent as it does for the first year of a mortgage. The future success of each emerging new household depends on the defining risk of taking a mortgage loan in an unstable house price market.
This is the dilemma of the single option. Young people choose to risk and buy because the alternative is a poverty trap. High rent supported by Housing Benefit with the withdrawal of benefit at the rate of 69p in the £ for all extra earnings.
If households cannot afford to buy, then they cannot afford to rent and they are forced into dependency on the subsidy of housing benefit. This is not a choice; it is the consequence of financial structures, which underpin current housing policy.
The dilemma of the single option segregates the population. Property owning households can expect rising wealth and decreasing costs, while the property-less poor face a financial poverty trap with marginalized opportunities for improved employment and restricted choice of housing placement.