Home ownership and renting comparing the
costs and benefits
What are the main advantages from owning rather than renting a home?
The prospect of earning a capital gain from rising property prices.
The security from owning an asset from which further borrowing can be secured e.g. in
the form of a housing equity loan.
A desire to build up wealth and pass it onto succeeding generations within the family.
The utility and satisfaction (private benefit) from modernising / improving a property
and then living in the property over a number of years.
Renting a house or flat does not involve the same financial commitment and, although
living in a rented property provides a flow of services for tenants over time, there is no
opportunity for making a capital gain, merely regular entries of payments into the rent
However, renting a house or flat may give people more flexibility and freedom to
move when family, work or other factors demand it.
Many people do not become homeowners. There are two main reasons for this:
Personal Preferences: Many young people opt to rent because they dont want to
commit themselves to a mortgage when career and family plans are unsure.
Housing Affordability: Many households cannot afford to take on a mortgage. The
problem of affordability is most acute in regions and localities where house price inflation
has been strongest for example London and the South East.
Thousands of people own more than one home. Rising wealth and a desire to avoid
lengthy and time-consuming commuting to work are two of the factors likely to boost
demand in the years ahead. People are prepared to use some of their wealth to buy
second homes in urban areas closer to central business districts. Another feature of
the housing market is the preference for buying overseas holiday homes it is estimated
that more than 750,000 overseas homes are now owned by UK households.
The Private Costs of Running a Home
Mortgage interest payments account for around a third of the annual costs of owning
and running a household and
the Local Authority Council Tax made up 15% of the total cost. For the average family,
housing expenses take up 17% of income.
There are differences of over £3,000 per year in housing expenditure across the United
Kingdom. London housing costs are the highest (£7,691 per year) 77% above annual
housing costs in the North East which is the cheapest region at £4,358 per year. Relative
to household income, the South West has the highest housing costs, 19% of gross
disposable income; whereas costs are lowest in the East Midlands at 16% of gross