Home ownership in England will slump to just 63.8% over the next decade – the lowest level since the mid 1980s – as an entire generation are effectively locked out of the housing market, according to a new study.
Huge deposits, combined with high house prices and strict lending criteria, have sent home ownership into decline in recent years and the downward trend will continue for the foreseeable future, the National Housing Federation’s independently-commissioned forecasts predict.
The Federation, which represents England’s housing associations, warned the housing market will be plunged into an unprecedented crisis as it forecast steep rises in the private rental sector, huge social housing waiting lists, and a house price boom – all fuelled by a chronic under-supply of homes.
* In England, the proportion of people living in owner-occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021;
* In London, the majority of people living in the capital will rent by 2021 with the number of owner occupiers falling from 51.6% in 2010 to 44% by 2021;
* The North East will be the only English region to see any increase in owner occupier numbers over the next decade, rising marginally from 66.2% to 67.4%;
* The average house price in England will meanwhile rise by 21.3% over the next five years from £214,647 in 2011, to £260,304 in 2016, according to Oxford Economics, who were commissioned to produce the forecasts.
For the hundreds of thousands of people locked out of the housing market, the options open to them will be limited and increasingly expensive.
Average rents in the private sector are forecast to increase sharply by 19.8% over the next five years fuelled by high demand and a shortage of properties. Oxford Economics predicted that would mean rents would increase on average in England from £486 a month in 2011 to £582 a month in 2016, meaning tenants would be paying £1152 more a year in total.
Around 4.5 million people are currently stuck on social housing waiting lists – but only those in the most desperate of circumstances have a realistic chance of being allocated a home.
At the heart of the problem remains a chronic under-supply of new homes. In 2010/11 just 105,000 homes were built in England – the lowest level since the 1920s. Plans for more than 220,000 new homes have been abandoned by local authorities since the Government announced the abolition of regional house building targets last year.
The Government’s latest projections suggest new households will form at a rate of 232,000 a year to 2033. Housing associations produced nearly half of all homes built in England last year and are on course to deliver 50,000 affordable homes a year – despite seeing government grants slashed by 63%.
More government investment in affordable housing would stimulate a wider, faster economic recovery and help fix our broken housing markets, according to the Federation.
It is calling for suitable surplus public land to be made available for the building of affordable homes, for local authorities to regularly assess housing need and for ministers to make a renewed commitment to building the homes the country needs.
For housing associations to secure their financial futures, it is also vital that ministers scrap plans to remove tenants’ rights to have their housing benefit paid direct to their landlord, which could seriously hinder associations’ ability to borrow from the banks.
Federation chief executive David Orr said: “With home ownership in decline, rents rising rapidly and social housing waiting lists at a record high, it’s time to face up to the fact that we have a totally dysfunctional housing market.
“Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy. And for the millions locked out of the property market the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels.
“At the heart of this crisis is a chronic shortage of new homes. Despite the overwhelming need to increase supply, house building has slumped to a 90-year low, plunging the country even deeper into the mire.
“Ministers need to make unused public land available to housing associations, local authorities must assess the level of housing need in their area, and housing has to be finally treated as a top political priority.”
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