The news that house prices are finally in retreat would normally be met with a sigh of relief from those hoping to get their foot onto the property ladder. After two decades of soaring property prices, buffered only by the blip of the 2008 international banking crisis, the runaway train that is the UK housing market is showing signs of reversing. All things being equal, this should usher in an era of affordability for those currently locked out. However, high inflation in the wider economy and concomitant interest rate hikes mean that home ownership remains out of reach for most prospective, particularly, first time buyers.

For Muslims, especially those who abide by Islam’s proscription of interest-based instruments, the euphemistically named, politically created “cost of living crisis” is an even bigger hammer blow as their finances are stretched by higher rents and living expenses, hitting their ability to save and buy a home outright. The scale of the affordability crisis is unprecedented. The average house in the UK currently costs around nine-times average annual earnings. The last time house prices were this expensive relative to average earnings was in 1876, nearly 150 years ago. There are regional variations with London as one might expect being the most unaffordable (12 times earnings) and the figure decreasing as one moves north. In the 1990’s this ratio stood at just above three. The average house price is currently £260,000. In 1990 this figure stood at just under £58,000.

What is it that has brought us to this point? The main culprit is not economic but political. For the last 20 years, successive governments of all the main political hues, have maintained interest rates at levels never before seen in British history with the aim of manufacturing a false wealth consciousness among ordinary people in the form of housing equity in order to garner political support. The availability of cheap money has fuelled an asset bubble in housing as ordinary people have gorged on cheap credit, eyeing an easy way to become landlords for extra income, both for the here and now and as pension pots. And because of the additional demand this has stimulated in the sector property prices have spiralled out of reach for many.

Until the 1990’s the choice for Muslims in the private sector was between renting and buying, with the social housing sector also accessible to the less well off. Renting, as I will show later, has never been an attractive option for Muslims in Britain. This left conventional interest-based mortgages as the only available alternative. To address the problem, some Muslim scholars in the west opined that the shariah proscription on usury – one of the seven major sins in Islam – could be waived, providing certain conditions were met, for individuals who wanted to purchase a home on the basis of the jurisprudential principle of haajah or “general need”. A fatwa issued in 1999 by the European Council for Fatwa and Research is representative of this exemption.  “It should be restricted to the category of people who are in real need for a house. However, the fatwa does not cover taking up a mortgage to buy a house for commercial reasons or for purposes other than buying a personal house for those who do not have one,” it reads. This provided a welcome lifeline to Muslims who would otherwise find themselves trapped in the rental merry go round and effectively paying off other people’s mortgages. The permission was necessarily limited in scope. It didn’t cover commercial transactions leaving Muslims wishing to borrow money for investment purposes at the mercy of the traditional banking world.

Nature abhors a vacuum, so it wasn’t long before alternatives sprung up offering some hope to UK Muslims. The so-called halal mortgage sector burst onto the scene in the 1990s to much fanfare. These shariah-compliant home purchase plans promised to fill the void and render redundant the need to rely on spiritually unpalatable bank loans. Most of them were offered by Islamic or Middle Eastern banks but soon mainstream banking names such as HSBC and Lloyds spied an opportunity and entered the market. However, their appeal has been short-lived. Often much more expensive than their usurious counterparts they have also been criticised for failing to address the long-term indebtedness that borrowing creates and for heaping most, if not all, of the risks of the transactions, onto the purchaser. In other words, while they may be structured in a way that meets shariah requirements and thus be following the letter of the law, their effects are not entirely in keeping with its spirit or objectives. It is perhaps a sign of the decreasing popularity of “halal mortgages” with consumers that the biggest names like Al-Rayan as well as HSBC and Lloyds no longer offer these loans.

The next-gen products that have replaced them seek to address some of the shortcomings of their predecessors, particularly the problems of long-term indebtedness and unequal distribution of risk. They allow prospective home buyers to purchase on the open market in what are essentially variations on a shared ownership model. This involves the consumer buying a portion of the equity and renting the remainder with the option of scaling up the equity component over time, if they so wish. Generally speaking, these instruments seem a lot fairer for the home buyer, come with much less risk and offer more flexibility. A major attraction is that because they make profit from renting their part of the property to the customer, they require as little as a 5% downpayment making them much more accessible than the first-gen products. Heylo Housing, Strideup, Gatehouse and Wayhome all broadly operate along the same lines. Whether they are here to stay is difficult to say since most are still in their infancy and take-up is obviously limited by how much capital each company can raise from investors to purchase properties. Most were also conceived in an era of exceptionally low interest rates in which rents were relatively low. With rates now having almost tripled, rental prices have also shot up. And because these companies set their rents in line with market rates, this will necessarily impact affordability in a high rental price environment. Moreover, while they may solve the problem of usury, they are often still more expensive than interest-based mortgages and therefore fail to alleviate the wider shariah goal of exploitation of the vulnerable which the shariah prohibition of usury aims at.

The pressures caused by these economic headwinds are already playing out, according to research published last year by the Muslim Census. This found that 70% of Muslims with a so-called Islamic mortgage reported an increase in monthly payments over the past 12 months versus only 51% of Muslims with a standard mortgage. It also found that since August 2021, Muslims with a shariah-compliant mortgage were again disproportionately impacted with 65% reporting being late with their payments as opposed to 33% of Muslims with a conventional mortgage. “More dramatically, the former group reported always being late at a rate five times greater than those with a standard mortgage – 15% as opposed to 3%,” it revealed.

Left to the “free market”, a misnomer if ever there was one because the private sector has benefitted enormously from government subsidies and other friendly policies (leaving aside the fact that the whole global economy is politically managed), the housing market has become the preserve of a wealthy minority. The Mayor of London, Sadiq Khan, tweeted in May that the average terrace in London now costs £850,000 and the average monthly private rent is £2500. The housing system in the UK is broken and the private sector, “halal finance” solutions included, to whom our politicians are beholden, is incapable of fixing it.

With the private sector increasingly unaffordable, halal or otherwise, this leaves Muslims dependent on the social housing sector for their accommodation needs. But this is also not without barriers. Since 1980, when then Conservative PM Margaret Thatcher introduced the “right to buy” scheme allowing council house tenants to buy their own homes at huge discounts to the market value, the number of council homes available has shrunk considerably. Some 2.5 million have been sold under right to buy leaving 2.2 million with another approximately two million that have been transferred into the possession of housing associations. Right to buy, effectively a Tory policy of winning Labour voters by selling them the dream of middle-class status, has been single-handedly responsible for the huge social housing deficit we see today, resulting in huge shortages in all parts of the country, multi-year waiting lists and hordes of desperate people left to rely on the open market and at the mercy of private, often rogue, landlords.

A safe secure affordable home is the basis for socio-economic wellbeing, good mental and emotional health and a happy personal and family life. The stability it provides is foundational for success in all other areas of our existence. A spacious house is part of the Muslim’s happiness, says a hadith of the Prophet (peace and blessings be upon him). Overcrowding, squalor, unaffordability, racist areas, economically deprived and crime infested neighbourhoods are destructive and disruptive for the individual and society. Yet Muslims in the UK are more likely to face these conditions. According to Heath and Li  Muslim households are significantly more likely to be in conditions of poverty than those of other religious groups. Muslims are more likely than other groups to live in social housing, to live in private rented accommodation, and are less likely to own their own homes. Writing in 2021, Raleigh and Holmes found that rates of household overcrowding in Britain are highest in Bangladeshi, Pakistani, Black African, and Arab households.

In May this year, a special investigation by the Independent revealed that over 80% of Black and Asian renters have been forced to live in conditions of disrepair over the past 12 months, compared with less than three in five white people. “Even starker is the difference in treatment by property owners. While 18 per cent of white renters said they had experienced illegal acts by landlords in the past year, for non-white tenants the figure is 33 per cent. They were also more likely to be threatened with eviction in the past three years, whether they had complained about issues in their home or not,” the probe revealed.

What these statistics show is that by dint of its socio-economic profile, the UK Muslim population is more predisposed to being eligible for social housing than other ethnic and religious groups. However, this author’s personal experience in his home city of Preston shows that in reality, the community’s specific needs are wilfully ignored, leaving it unable to access this very realistic option. There are two main types of social housing tenure, renting and shared ownership. Renters can generally expect to pay well below the market rate with the added benefit of long-term security.

Shared ownership involves buying a portion of the equity in the property and paying a discounted rent on the part that remains in the possession of the landlord, with the right over time of scaling up or staircasing and buying more of the equity, in some cases up to 100%. This is an attractive option for people who want to save to buy their own home as the relatively lower rental payments allow them to save more of their income to purchase equity, and they also get the security that comes from renting from a social landlord. The purchase of the equity portion is typically paid with personal savings, family loans or a mortgage, but because the equity is typically small, any mortgage is obviously more affordable and involves paying less interest.  Both these options are targeted at people at the lower end of the socio-economic scale. In theory at least, they offer a genuine but little explored alternative for Muslims wishing to eschew interest-based loans and private renting.

Preston is a small city of 148,000 people in the north-west of England. Most of its ethnic minority contingent owe their presence in the city to the post-Second World War migration from the Indian subcontinent with a smaller component hailing from the Caribbean. They formed the backbone of the workforce running the cotton mills that were a major employer in the region until decline set in during the 1970’s. Broadly speaking, their descendants inhabit a ring around the city centre, a geographical circle which is expanding as the population increases. Some 19% of the city’s population live in socially rented housing. However, there is plenty of evidence to show that the Asian population (I am forced to use this designation as only “ethnic” categories are employed by the social housing providers, however it is broadly representative of Muslims as most of Preston’s Muslims are of south Asian heritage and the overwhelming majority of South Asians are Muslims) is getting a raw deal.

Twenty-three years ago, Ashiana Housing Association, which operated in north-west England in the 1990s and 2000’s, carried out quite an extensive survey of Asian housing needs in Preston. The study looked at the attitudes of the town’s (Preston only received city status in 2002) BME community towards shared ownership, and the potential demand for such schemes. One presumes the need for it arose from at least the realisation that authorities weren’t adequately catering for this segment of the community. Between February 1999 and January 2000 trained interviewers, able to communicate in Gujrati, Urdu and Punjabi interviewed 135 households. The survey’s most startling finding was that overcrowding was common in Asian households, with over 30% of the households interviewed containing six or more occupants. It also found there was a lack of awareness about shared ownership among the Asian community and this may have a bearing on the true extent of demand for this form of housing provision. The survey concluded that there was a demand for larger three, four and five bedroom houses in specific areas.

Ashiana no longer exists, having been swallowed up by a mainstream housing association. One can only speculate as to why the survey focussed on shared ownership as opposed to renting, but this author’s educated guess is that it is because Asians in general are more averse to renting than the general population. This is borne out by national statistics showing that despite being rooted to the bottom of the socio-economic scale, in relative terms the Asian community has the highest rate of home ownership of any ethnic group. Whatever the reason for this preference, it would make the Muslims among them who typically suffer from low income, overcrowding, larger families and have an aversion to usury, prime candidates for shared ownership. Yet, in Preston, this community has barely figured in the decision-making of the major housing providers. Their situation reflects the experience of Muslim communities elsewhere. In May this year, the Observer reported that dozens of Somali families in the London borough of Tower Hamlets were taking legal action against their council after accusing it of corruption and racism. “The families, all of whom are Somali, claim they have been systemically removed from housing waiting lists by Tower Hamlets council due to their race, and some have been placed in severely unfit and unsafe homes that doctors say posed a major risk to their health… Most of the families taking legal action have been on the housing waiting list for several years, with some waiting more than a decade – far longer than the periods the council claimed are normal” said the report.

As of August 2021, there were only 230 social housing dwellings in Preston that had four or more bedrooms. Only 16 of these had five or more bedrooms. They make up less than two percent of the total social housing stock in the city. The last major shared ownership development in the city went up 20 years ago. Since then, the vast majority of new developments have consisted of mainly 2-bed and 3-bed rental properties. It is little surprise then that the tenancy roll of the largest social housing provider in Preston, Community Gateway Association, (responsible for approximately half of the city’s total social housing stock), contains relatively few Asians, just three percent by the organisation’s own admission, even though they make up 20.2% of the city’s total population.

Why the situation has been left to deteriorate to this degree is anyone’s guess but it does lend itself to accusations of structural racism. Certainly, a scan of the make-up of the governing boards of the half a dozen main housing associations in Preston reveals that there are hardly any Asian or Muslim representatives. They are also oblivious to Muslim needs which is why together with concerned local councillors and activists I formed an engagement group to apply some pressure for change. We organised a jointly developed survey of Muslim housing needs in the city in 2022 which returned broadly the same findings as the Ashiana survey in 2000. Among the main findings were that only 5.4% of respondents were in social housing but 20% were on the social housing register, suggesting once again that not enough of the right type and tenure of homes are being built for Asian residents. Another problem that is perhaps not particular to Preston is that most of the new build social housing is unappealing to Asians as it is going up in the outskirts of the city far from existing communities and amenities such as places of worship, madrasas and shops.

This is not to suggest that social housing is a panacea for the Muslim community’s housing difficulties. There is a chronic shortage of social/affordable housing in the UK (caused in the main by right to buy) and until that is addressed the problem of undersupply will continue to constrain choice. Nationally, about 1.2 million households are on waiting lists for social housing, the highest number since 2016.  In Preston, approximately 1050 social/affordable housing dwellings were built between 2010-2020, an average of approximately 100 units per annum. Some of these comprised the social housing component of private developments (where councils normally require developers to allocate 20-30% of the build to social housing) which are typically much more expensive than council/housing association homes. Moreover, most social housing in the city is in the form of rental properties which is not the tenure of choice for Asians.

Nor is it to suggest that the housing problems faced by Muslims are all externally caused. In places like Preston, where Asian areas once meant cheaper housing (caused by white flight), the establishment of settled communities with amenities now means they go for a premium and often buck the local/national price trend. This has been exacerbated by Muslim carpetbaggers who have shamelessly capitalised on the demand to buy multiple properties, taking advantage of cheap interest rates. They have put these homes up for rent, effectively leaving the economically most vulnerable to pay off their mortgages. This demand from landlords has meant that house prices in Muslim neighbourhoods, near to mosques and madrasas, are now often higher than in the leafier, well to do suburban areas. The upshot has been to price the less well-off members of the community out of the local home ownership market.

Changes at the national level in social housing policy may present an opportunity for Muslims to get on the housing ladder more easily. On 17 October 2019 the Government announced a new Right to Shared Ownership (RTSO) which reduces the minimum equity stake required from buyers from 25% to 10%, with the right to buy further shares over time. Taking the example of a £150,000 home, buyers will only need to put up £15,000 as opposed to a more prohibitive £37,500. This will bring shared ownership homes within the reach of more low-income households, in many cases obviating the need to resort to loans. The RTSO will apply to homes delivered by the Affordable Housing Programme (AHP) 2021-26 which originally promised to deliver 180,000 new homes over the period, 50% on discounted rent but 50% in the form of affordable housing with the majority of the latter being shared ownership. However, as with most other promises made by the current government (more police, more hospitals…) we will have to wait to see how many new units are genuinely added to the country’s affordable housing stock. The government has already reduced its target from 180,000 to 157,000 in the face of spiralling inflation and building costs, forcing the House of Commons public accounts committee to warn last December that it “does not seem to have a grasp” of the risks ahead.

Muslims in Britain have expended a disproportionate amount of effort and resources into developing private models of “halal finance” to facilitate home buying. Some of our brightest young minds have migrated to the sector from other professions and indeed mainstream finance. Under their leadership, Islamic finance is developing apace but because it demands profits for its investors and operates in a broken market it can only provide a very small part of the answer to our housing needs. More fundamentally, because Islamic finance operates as a sub-system within a larger western economic system predicated on interest-based credit it fails to address the endemic inequalities that the latter causes. Carving out “halal” safe spaces in a haram environment should only offer a temporary solution but the explosion of Islamic finance in the last four decades risks making “halal mortgages” a more permanent feature.

It is clear to this author that if we are to safeguard future generations from the dangers of housing insecurity, squalor and usury we must start to focus more of our energies on accessing and developing the not-for-profit sector. In the first instance this means pressuring local providers into meeting Muslim needs. From our own experience in Preston, housing equality can only be achieved by organising, lobbying and campaigning.

But above and beyond that we also need to establish a not-for-profit sector to make home ownership more affordable and not exploitative. There do not currently appear to be any 0% financing options for homes offered by any institutions that claim to be ‘Islamic’.  However, as Jibril Latif pointed out in 2015 (Just Money and Interest: Moving Beyond Islamic Banking by Reframing Discourses) 0% financing has existed in other spheres of exchange for decades. Citing Burton (2008) he gives the example of JAK Members Bank (JAK Medlemsbank), an authentic interest-free institution in Sweden that gives interest-free home loans to its 38,000 plus members, while operating under the following principles:

• Charging interest is inimical to a stable economy
• Interest causes unemployment, inflation, and environmental destruction
• Interest moves money from the poor to the rich
• Interest favours projects which yield high profits in the short term (short-term thinking)

Latif states: “Admittedly, JAK is not highly profitable; it only survives on co-op like yearly dues as it facilitates interest free financing for its members from its pool of savings. But that is exactly the point, that without ideological commitments to charging interest, credit facilitation facilities can be distribution centers for society’s access to their own credit, rather than monopolies on wealth or highly profitable businesses. In recognizing the intrinsic difference here, JAK does not utilize the axiom of ‘interest-free’ (or riba free) to charge more than the price of the item being financed, whether it is a car or a home. Since it is possible, then, the question looms, why are Muslims unable to move beyond ‘Islamic’ banks and establish more of these types of ethical exchange facilities?”

Muslims in the UK donate hundreds of millions of pounds every year to charitable causes with most of it going abroad. The demands of the global ummah are pressing and manifold but there is a growing realisation that the balance needs to be tipped back a little from the foreign to the domestic. Our focus on the endless overseas causes demanding our support has distracted us from establishing truly Islamic alternatives that serve our own communities.  Along with an unhealthy obsession with profit it has become a stumbling block to helping the poor and vulnerable. It is high time that we start the task of making truly shariah-compliant and affordable housing a reality. The money is there, the expertise is there, as is the need. The question is, do we have the will?

Faisal Bodi is one of the editors of The Long View, and IHRC’s press officer. He has worked as a journalist in both the print and broadcast media specialising in Muslim affairs. During a journalistic career spanning some 15 years Faisal wrote extensively for the Guardian and also worked for the BBC and Aljazeera.