Financial pressure on young people has led to a decline in the number of homeowners, according to a major new housing report.
The Redfern Review, the most comprehensive review of home ownership in a decade, was commissioned by John Healey MP, the Shadow Secretary of State for Housing, and led by Pete Redfern, chief executive of Taylor Wimpey.
While 80% of Brits would prefer to own their own home, the number of young people who are homeowners has dropped by 20% in 12 years, the report reveals.
Since its peak in the early 2000s, the rate of homeownership has dropped dramatically nationwide. In England, for example, it has fallen from 70.9% in 2003 to 63.6% in 2014/15.
The main factors behind the decline in homeownership have been a drop in income of potential first-time buyers and tougher restrictions on mortgages.
People in the younger age group of 28-40 saw their average income drop from approximate parity with the 40-65 age group to around 10% lower after the 2008 financial crisis.
The report recommends a review of Help to Buy to ensure that it can be accessed by those who need it most. It found that the uptake of the Help to Buy Equity Loan was greater in the North of England where, on average, properties are cheaper. Only 1.8% of Help to Buy Equity Loans are taken up in London, which may mean that the scheme is helping buyers in more affordable parts of the country, as opposed to those in pricier areas such as London and the South East.
The review recommended that Help to Buy needs to be more carefully targeted – for example, to first-time buyers only and to lower income groups.
It adds that more needs to be done to promote a healthy and stable renting environment with better conditions for longer-term tenants.
One of the review’s main proposals – which combined bespoke polling, focus group evidence, expert analysis and new modelling carried out by Oxford Economics – is the establishment of an independent Housing Commission that can take a non-partisan approach to long-term housing strategy.
Commenting on the research, Pete Redfern says: “The detailed analytical work of the review reveals the challenges that young people face in buying their first home and highlights the impact on them of long-term falls in relative incomes and ability to borrow.
“We must focus on supporting today’s younger generation and creating a genuine long-term housing strategy independent of short-term party politics if we are to improve the position in a sustainable way for future generations.”
Andrew McPhillips, chief economist at Yorkshire Building Society, says: “We’re pleased to see that this report echoes our views on the difficulties facing younger people who want to buy a home.
“As it makes clear, addressing the supply of housing is a key factor over the long term. In the short term, there are other measures, which could help first-time buyers, including making stamp duty a seller’s tax rather than a buyer’s tax to help reduce upfront costs.
“Our previous research found that this would save first-time buyers in the UK (excluding Scotland) an average of £3,971, with Londoners saving the most at an average of £13,171. Additionally, those moving up the ladder would save £4,154 on average, and £9,762 in London.”
Stephen Smith, director, Legal & General Housing Partnerships, adds: “The report’s recommendation of a Housing Commission is certainly a sensible one. For too long housing policy has been dictated by short-term, electioneering on behalf of the ruling party. The establishment of an independent body would put government in the best position to strategise a long-term approach to housing policy across all tenures.
“Not enough homes built”
“Ultimately, it is housing supply that continues to remain the defining issue of the crisis. There has simply not been nearly enough homes built over the last decade to meet the rising demand from our growing population. It is this that is ultimately pushing up house prices, making the prospect of homeownership a false summit for many buyers.
“With the Autumn Statement approaching, the government must use this opportunity to enact a truly radical housing policy that addresses this problem of supply, for both those looking to own a home and those opting to rent. When it comes to the Chancellor’s announcement next Wednesday, will the government have the courage to deal buyers a good hand, and make a real effort to resolve the crisis?”.