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Falling out of love and down the housing ladder?

Since World War II, homeownership has developed into the major tenure in almost all European countries. This democratization of homeownership has turned owned homes from luxury items available to a lucky few into inherent and attainable life goals for many. In the general perception, owning is often associated with better homes with larger gardens, in better neighbourhoods with better schools. To rent, in contrast, is considered pouring money down the drain. Therefore, especially as people marry and children are planned, homeownership becomes the preferred choice of tenure. This choice has been strongly subsidized by governments and has become the norm in countries such as Australia, Britain, Belgium, and the United States. Once people have better jobs or more children, they move to ever bigger and better homes. This has been described as people moving up the housing ladder.

However, the underlying idea of a stable, married family – which has been the standard convention for most of the twentieth century – is outdated. Many (though declining numbers of) marriages end in separation today. Besides the emotional turmoil that the marital separation causes, this event has profound effects on the chances to remain in homeownership for both ex-partners. Generally, at least one, if not both partners, will leave the previously shared dwelling. As separation often involves a loss of financial resources, people may have a hard time re-entering homeownership. After falling out of love and separating, a fall down the housing ladder may follow, as we show in a study recently published in European Sociological Review.

Figure 1: Average ownership rate before and after separation in Britain. Source: Lersch/Vidal 2014
Figure 1: Average ownership rate before and after separation in Britain. Source: Lersch/Vidal 2014

How drastic this fall will be depends very much on the housing market environment (see Figures 1 and 2). In the past in Britain, easy access to housing finance and high supply facilitated (re-)entry into homeownership for ex-partners even under house price inflation in the 1990s and early 2000s. In tight housing markets ex-partners will face more difficulties, and once access to mortgages becomes restricted, as happened in Britain after the recent crash in the housing market, problems may arise. So in the past British ex-partners could return to homeownership at some point in their lives because access to mortgages was easy – and they needed to return because alternatives in the private and social rental sector were and are unattractive. This may no longer work in future. Ex-partners may increasingly face similar problems that new market entrants currently encounter, for which the term generation rent has already been coined.

To better understand what may happen to British ex-partners, we can consider the example of Germany. The German housing market is in many ways different from the British, not the least because private rental accommodation is an attractive alternative to homeownership. Access to mortgages is also more restricted than in Britain, even after the recent tightening of regulations in Britain. High down payments are the rule in Germany. In this market environment, homeownership is a once-in-a-lifetime opportunity for many, while a considerable share of people will never enter homeownership. After separation, very few Germans will be able to return to homeownership (see Figure 2). Ex-partners will be less likely to be in homeownership through their lives post-separation. This scenario may foreshadow the British situation in the near future.

Figure 2: Average ownership rate before and after separation in Germany. Source: Lersch/Vidal 2014
Figure 2: Average ownership rate before and after separation in Germany. Source: Lersch/Vidal 2014

Being excluded from homeownership in the German context is not as consequential as it may turn out to be in Britain, however. First, more Germans will accept to rent after separation compared to the British, because attractive, and most of all, secure accommodation is available for – internationally seen – reasonable costs. Second, the German public pension system is relatively generous for those who continuously worked throughout their lives. To build up private wealth as a cushion for old age is not as necessary as in Britain. In Britain, where individuals are expected to privately invest in financial products and property to build an individual safety net – an idea called asset-based welfare – people that experience a separation may lose this safety net. This may result in stark disparities between the separated and those remaining married in old life.

Homeownership may offer many advantages for families. At the same time, homeownership is a long-term investment that does not necessarily fit well with the dynamics of modern partnership and family life. Everybody needs suitable and secure accommodation. Such diverse accommodation may sometimes be better provided in the private and social rental sector, which must not result in less security or quality compared to homeownership as can be seen in Germany. To make this work people need decent options to build up a safety net for rainy days outside of the housing market. However, people should also have reasonable tenure choice, which is not currently the case for many ex-partners in Germany.

Headline image credit: Keys. CC0 via Pixabay.

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