By Kevin Gulliver, Director, Human City Institute
Research by the Resolution Foundation confirms the continuing decline of home ownership in England, which is now back to levels last seen in 1986. From its 2003 peak of 71%, home ownership has waned as the country’s main tenure of choice to 64% of households.
The two drivers of this decline are an inability of house-building to keep pace with demand over the long-term, and stagnant wages in recent years. Their impact is revealed in the unaffordability of home ownership to most young people and newly forming households without recourse to the bank of Mum and Dad.
Inadequate housing supply can be tracked back forty years when annual house-building dipped below 200,000 for the first time since the 1920s, with the exception of the years spanning World War Two.
David Cameron has the dubious distinction of achieving the lowest average annual house-building since Stanley Baldwin in 1924 of 124,000 homes. This is just two fifths of the 290,000 homes averaged annually by prime ministers from Churchill to Callaghan between 1952 and 1979. Even Margaret Thatcher achieved an average 191,000 yearly in the 1980s.
During the Churchill – Callaghan era between 5.9 to 7.5 homes were built annually per 1,000 head of population. But the last four prime ministers – Major, Blair, Brown and Cameron – all failed to achieve less than half of this with Cameron providing just 2.2 homes per 1,000 people since 2010.
This under-supply of housing has resulted in growing affordability problems. The ratio of the median earnings to median house price in England has increased from 3.6 to 7.6 over the last twenty years, and today is back to levels not seen since the 2007 crash.
While there is significant variation in affordability across the country, most areas are less affordable than they were even a few years ago, setting the bar much higher for young people, often saddled with student debt, to move into home ownership as their parents did.
Plans announced by George Osborne just last November, have, today, the feel of belonging to another era. The former chancellor’s target of providing at least 200,000 homes each year until 2020 are now surely unachievable, if they ever were, given the multiplicity of problems besetting the housing market.
Uncertainty in the wake of Brexit, the construction sector in the doldrums, the increased financial risks for housing associations, doubts about housing and employment markets to support starter homes and shared ownership development as well as rising private sector rents, the availability of private finance for housing investment and potential drying-up of land supply, are all set to exacerbate long-term problems in our housing system.
An expensive, insecure and varied quality private rented sector is all that is left for today’s young people, with Generation Rent set to endure long into the future. Intergenerational inequality in wealth, accrued by Baby Boomers through home ownership but beyond the reach of most Millennials, will be just one unfortunate consequence.
Dwindling social housing, with the Right to Buy set to reduce further the number of social homes available, is no longer a viable tenure of choice for those young people who are not homeless or in priority housing need; and often not even then.
The reality is that such a deep housing crisis, many years in the making, will require a range of actions. Above all, much more housing needs to be provided over all, but that also sits close to higher quality jobs and better transport links to underscore economic sustainability.
This housing supply should include much more public house-building as part of a major infrastructure programme – after all, over the last 100 years, 200,000 new homes has only ever been achieved annually when social house-building has formed a significant proportion of the total building programme.
Post-Brexit is an ideal opportunity to boost social housing supply to support our construction sector at a difficult time and to contribute to projected stagnant economic growth.
Alongside, the private rented sector needs to be made more secure and legislation to keep rents down should be drafted – both probably through a new Rent Act.
Finally, there must be significant greater investment in education, training, and apprenticeships accompanied by support for business start-ups and introduction of a real Living Wage to create higher quality employment and wages so that the affordability gulf in the home ownership sector can be bridged.