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16/11/2016

Report: Decline in young people’s incomes sees a fall in home ownership

Words: Laura Edgar
Housing / Shutterstock_84968503

A decline in the incomes of first-time buyers and restriction on their access to a mortgage has contributed to the fall in home ownership, according to the Redfern Review.

The review, an independent report commissioned by shadow secretary of state for housing John Healey, has recommended that the current and future governments look long-term at home ownership issues and to adopt a principle-led strategy against which individual, short-term actions can be assessed.

Pete Redfern, leader of the review and chief executive at Taylor Wimpey, said 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 their ability to borrow.

“At root, this decline in home ownership matters to me because it matters to so many people in this country that we are determined to serve. And it matters too because the shrinking opportunity for young people on ordinary incomes to own a home is at the centre of the growing gulf between housing haves and housing have-nots. Housing is at the heart of widening wealth inequality in our country.

“Labour is determined to get to grips with the falling number of home owners and this review gives us, and politicians of all parties, the foundation to do that.”

John Healey, shadow secretary of state
for housing

“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.”

The reasons why

 

There has been a 6.2 per cent decrease in home ownership between 2002 and 2014, with home ownership in young people falling by 20 per cent, including the higher cost of and restrictions on mortgage lending for first-time buyers. This reduced home ownership levels by 3.8 per over that period.

Additionally, the review suggests that higher real house prices are estimated to have reduced the private home ownership rate by 2.6 per cent.

The decline in incomes of younger people, aged 28-40, relative to people aged 40-65, was also noted as a major contributing factor. Younger people’s average income fell from approximate parity to 10 per cent below after the financial crisis. Therefore, home ownership fell by 1.4 per cent.

Housing Commission recommended

 

The Redfern Review states that supply can be increased in a sustainable and long-term way “if we adopt a long-term, principle-driven approach”.

“We believe that without a shift to a long-term, cross-party plan that supports all key housing tenures, we will be asking the same questions in 10 years’ time that we ask today.”

To achieve this, the review panel has recommended establishing an independent Housing Commission, similar to the National Infrastructure Commission. The commission would “own this strategy and take a non-partisan approach to long-term housing decisions”.

The Housing Commission would make recommendations on:

•    The impact of policy changes on long term-supply quantum, quality and effectiveness to meet future demand.
•    The reason for key house price trends and the effectiveness of fiscal and monetary policy in maximising demand.

Additionally, the panel has recommended a review of the Help to Buy and Starter Home schemes, and that the current and future government focus on maintaining “a consistent, healthy environment for all tenures” because a fair housing market also needs a “healthy private rented sector and a supportive social housing sector”.

The Redfern Review can be found here (pdf).

Image credit | Shutterstock

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