A ‘lost generation’ of young people are giving up on the dream of home ownership as prices soar, interest rates rise and the cost of living crisis hits their spending power, according to a new report published today.
The national housing emergency needs to be tackled urgently with a huge boost in house building, with a particular focus on providing thousands of affordable homes to help first-time buyers get a foot on the property ladder, it claims.
Leading global professional services firm RPS Group has prepared the Housing Emergency – The Lost Generation report on behalf of the Land Promoters and Developers Federation (LPDF).
In the past three months alone house prices have, on average, jumped £19,000 in value – the highest since records began, according to the report.
Paul Brocklehurst, LPDF chairman, said: “Hidden within the optimism of the housing market are messages of concern for the younger generation.
“Concerns that whilst the housing market is buoyant, securing that first home remains out of reach for many. It is perhaps unsurprising that whilst nine in 10 young adults still aspire to home ownership, only 30% believe that home ownership is achievable.
“The average house price in the UK shot up to £283,000 in May 2022 (up 11.9% on 2021) and it is understandable why the dream of homeownership for the young feels like it is slipping away.
“Homeownership as a percentage among 25 – 34-year-olds has fallen from 59% in 2003 to 47% in 2021, whilst for those over 65 the percentage has increased from 71% to 80%.
“This is compounded by the changing distribution of wealth in the country with those under 40 seeing only a 9% growth over the last eight years whilst those over 65 have seen their asset base increase by 32% over the same period.
“This generational unfairness contributes to the growing despondency amongst our young adults that they will be unable to afford their own home.”
Strong growth in house prices has not been mirrored in growth in earnings over the past 10 years. When coupled with rising inflation, it is perhaps easy to see why it would be difficult for young people, particularly at a time when house prices are 9.7 times the average earnings, to think owning their own home is achievable.
Brocklehurst added: “Whilst an issue of some complexity, what is clear is that shortfalls in housing delivery have led to an imbalance in the supply and demand of housing.
“This has been observed not just in the stock of private housing, but in affordable housing too. Not only is it estimated that only 35% of the total affordable housing needed is being delivered but supply lost is not being replaced.
“As a country we need to do more now to address these imbalances by building more homes of all types and tenures, including affordable homes, and in locations where they are desperately needed, such as those areas where the ratio of affordability is significantly higher than the national average.”
The LPDF report suggests a range of solutions to help tackle the problems, including:
- Boost housing supply across a range of sites in the right locations to allow choice and enable growth, in particular in SME housebuilders.
- Introduce national targets for senior living products to increase the supply of this type of housing, enabling greater movement in the property ladder.
- Substantially boost the level of affordable housing of all types and tenures delivered without the need for public subsidy.
- A commitment to replace the affordable housing lost through Right to Buy on a like for like basis.
- Provide further support for first-time buyers to address financial barriers, including amending the First Homes Initiative to enable greater delivery of this ‘affordable’ product.
The lack of suitable housing has been compounded by other factors, including the significant increase in second homes, up 50% between 2010 and 2020. The consequence of this is that we see that one in six born between 1946 and 1964 own extra property whilst young people struggle to envisage owning any property in their lifetime.
The LPDF, is working with the Government, local authorities and communities to enhance the planning process, and help deliver the new homes the UK needs.
