The number of young people now owning a home has grown to the point where it matches the number renting. The “bank of mum and dad” and help-to-buy are beginning to redress the balance.
Go back to 1918 and less that one-quarter of households were privately owned.
But with increasing prosperity after WW2 there was a surge in house building which brought that balance closer to three-quarters. With rising incomes came access to mortgages and private renting declined; home ownership was transformed, particularly from 1980 to 2003 – helped by a large scale sell-off of social rented properties – and it peaked at 73 per cent of all English Households around 2003.
However, post 2003 home ownership and social housing have gone down again with just 64 per cent of residential housing in England now owner occupied, around 10 per cent is rented from housing associations and 7% from local authorities.
In the 80s and 90s private renting accounted for less than 10 per cent of households, but this proportion was transformed by the growth of buy-to-let from the mid 1990s onward, reaching almost 20% in 2013-14. This proportion of households in the private rented sector (PRS) has remained relatively unchanged ever since – for the sixth year in a row, according to the English Housing Survey’s (EHS), figures for 2018-19 released this month.
The ready availability of buy-to-let mortgages, the assured short-hold tenancy – giving landlords the confidence that they could to recover their property relatively easily if things went wrong – low interest rates, and increasing asset prices, have all conspired to boost buy-to-let and private landlording. It’s only recently that Government policy has started to reverse the trend with an increasing tax burden on landlords and more regulation of the PRS. The help-to-buy scheme is helping more and more first time buyers onto the housing ladder.
The “bank of mum and dad” and help-to-buy have started to redress the renting / ownership balance, or at least slow down the booming buy-to-let industry, with the number of young adults now owning a home reaching the same level as those renting for the first time in six or seven years. According to the EHS, ownership rates among 25 to 34-year-olds rose from 38 to 41 per cent last year, roughly equalling private renters – see the chart.
Daniel Tomlinson, policy analyst at the Resolution Foundation think tank says, “The 140,000 increase means that, for the first time since 2012, young adults are as likely to own as live in private rented accommodation”
However, the small shift from renting to ownership, which in any case is stated Conservative policy, is somewhat off-set by the rise in renting by the baby boomer generation, where renting in this cohort is definitely on the rise. Ten per cent of 55-64s now rent privately, which compares with 7 per cent a decade ago, and those renting social homes increased from 14 to 17 per cent.
But despite Generation Rent’s gravitating toward home ownership, the home ownership rate among young households is still one-third lower than it was in the early 2000s. There are millions of young adults who can’t afford to get onto the property ladder, and while house prices keep increasing faster than wages, that elusive deposit threshold keeps getting further out of reach for those without help from other sources.
The average deposit required of a first time buyer rose by 7 per cent last year reaching £46,187, according to the Halifax, while the equivalent in London is £109,885, up 2 per cent on 2018; but this did not stop 356,767 buying in 2019 compared to 193,940 in 2009.
The fact remains that millions of young adults, including double earners with professional careers, many who have grown up in privileged circumstances, often cannot afford to buy basic accommodation for themselves. When it comes to starting a family they reach desperation point, because their situation contrasts so starkly with their own childhood home.
With a reversal in generational fortunes, on a national scale, the government realises it has a problem on its hands and long-term it strains on the social fabric. Owner occupation helped millions of baby boomers, ordinary working people, get the means to accumulate wealth.
As Conservative policy proffers, help people build a tangible stake in their future, get a lower propensity to withdraw labour, and of course, they vote conservative. Home owners generally have more control over their lives and more money to leave to the next generation.
Housing tenure balance in England is a problem which the government will have to face up to, a problem which the Boris Johnson Government is about to grapple with. But of course, it is not alone: it is a problem facing every other western democracy.