Tenants get far less Government subsidy than homeowners

Homeowners get a much bigger slice of Government help than renters, whether they are social or private tenants, according to a report published by the Chartered Institute of Housing.

Contrary to widespread beliefs, an analysis of Whitehall spending, taxation and regulation of the housing market has shown that homeowners are the most subsidised, followed by social housing tenants and then private landlords and renters.

The study made a broad comparison of Government intervention in the housing market, taking account of public spending on grants, loans and guarantees, as well as on tax reliefs, welfare benefits and regulatory mechanisms.

The research was carried out by housing finance experts Steve Wilcox, former Professor of Housing Policy at the University of York’s Centre for Housing Policy and Peter Williams, departmental fellow in land economy at the University of Cambridge and funded by UK Finance.

It shows that the Government is directing about £8 billion annually into private housing over the five years to 2020/21, with over half going specifically to support home ownership and the remainder being more broadly aimed at the private market.

In contrast, direct funding for new social housing is less than £2 billion annually, although most of this is grant spending whereas much of the private market support is via loans or guarantees.

Tax reliefs deliver a much bigger benefit to homeowners than they do for private landlords. Net tax relief for owners was some £29 billion in 2016/17 (£10 billion paid in tax; £39 billion received in tax reliefs). In contrast private landlords paid net tax of at least £8 billion.

Private market subsidies

On the other hand, the benefit system aids tenants much more than homeowners, with about £15 billion annually going to social housing tenants and £8.5 billion to private renters.

Although regulation in different forms constrains both the homeowner market and private renting, the latter has a strong advantage in having access to interest-only mortgages whereas new home buyers have to navigate various restrictions on mortgage availability.

Overall, the report ‘Dreams and reality? Government finance, taxation and the private housing market’ concludes that home ownership is the most ‘subsidised’ tenure, followed by social housing and then the private rented sector.

CIH chief executive Terrie Alafat said: “This report demonstrates just how much Government support is going to the private market, and to home-owners in particular. It takes a comprehensive look at the way the Government supports our housing system and we would urge ministers to do the same.

“Currently just 21 per cent of Government investment is going to affordable housing. Rebalancing this budget to support people on lower incomes who can’t afford to buy could make a big difference. It is vital that the Government supports councils and housing associations to build more homes for social rent.”

The research, funded by trade body UK Finance which represents about 250 banks and financial firms, builds on work the Chartered Institute of Housing has previously done to show how almost four-fifths of Government grants, loans and guarantees now go to support the private sector. Combining this with analysis of the net effect of the tax and benefits system shows the marked advantage homeowners have in terms of state support.

By Patrick Mooney, editor