Reminder of the challenges for affordable home ownership

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Opinion piece by Chief Executive Mark Graham

Recently the Institute of Fiscal Studies issued a report that showed that at the age of 27, those born in the late 1980s had a homeownership rate of 25%, compared with 63% for those born in the early 1970s. This the IFS says is fully explained by household prices relative to family income – in 2015–16 almost 90% of 25- to 34-year-olds faced average regional house prices of at least four times their income, compared with less than half twenty years earlier. These figures are a stark reminder of the challenges we face to provide everyone with an affordable home.

These are UK figures and there are large regional variations. Here we have some of the most affordable house prices, but as our experience in Co-Ownership shows young people are still struggling to afford their own home. A typical applicant to Co-Ownership is coming from the private rented sector paying high rents and finding it difficult to save for a deposit. Indeed today the deposit is probably the single biggest obstacle to home ownership explaining why for first-time buyers the average age is now over 30.

Affordability is generally discussed in terms of a ratio of income to housing costs, but like deposits, there is more to it. People that apply to us tell us they also want a secure home where they can live as long as they want, in a location that meets their work and family needs and a high-quality property they can decorate and improve. In other words they want somewhere they can call home.

Home ownership is not the only type of housing that provides a secure, affordable and high-quality home. Sufficient low cost, high quality, rented properties with secure life-time tenancies are also needed and a high quality private rented sector with more secure tenancies as seen in other counties can also meet people’s needs.

When we discuss how to solve the problems of affordability the focus tends to be on supply and that by building more housing, affordability will improve. But more supply will not in itself reduce prices or improve affordability. Before the housing crash we were building nearly twice the number of houses we are now with an average house price nearly twice what it currently is. Economists would say that limited land supply, easy credit and people using housing as an investment will keep prices high.

Everyone in our society should have access to an affordable home. To achieve this we need to deal with the systemic issues. On the demand side Co-Ownership and other government schemes help people on lower incomes get into home ownership, but we also need to recognise we have a generation of young people that are worse off than parents; often struggling with debt and in insecure employment. On the supply side we need to recognise that the private sector will never build enough low cost homes. This is not a criticism of private developers who are a critical part of the solution but simply a recognition that commercially they can only develop a rate and a price that the market can absorb. Public sector intervention is therefore critical, most obviously in the development of more low cost houses. With sufficient funding and support housing associations are well placed to deliver more. Better access to public sector land will also make a difference.

In Co-Ownership we are ready to play our part. Our goal is to help more people into home ownership and we are ready and willing to work with our partners in finding more innovative solutions to housing affordability.

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