Home ownership struggle reaches Coronation Street

Published on Housing, Wealth and Debt

Handwringing about the housing crisis has become a national pastime. Not surprising perhaps, with home ownership becoming an increasingly unrealistic dream for many younger families. This was once a London-centric issue, but there is growing evidence to suggest the crisis is spreading across the rest of the country – with Manchester and other big northern cities leading the way.

Yet, while the fall from peak ownership in the early-2000s has been sharp, the last English Housing Survey offered some hope that overall home ownership rates may have started to level out. No such luck. As the chart shows, the modest apparent uptick in 2014 looks increasingly to be no more than a blip. More timely data from the Labour Force Survey suggests that the downward drift has continued into 2016. As a result, English home ownership now sits at just 63.8 per cent – taking us back to levels last seen in 1986.

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Back then, the average first time buyer paid just under £30,000 for their new home. By 2015, the figure topped £150,000. With prices – and deposits – continuing to rise even as incomes have stuttered in recent years, it’s not hard to see why increasing numbers have become locked out of home ownership.

The scariest figures of course relate to central London. The average first time buyer paid just shy of £330,000 in 2015, helping to explain why just a third of households are owned. But the capital has always looked different, even at its peak home ownership only just topped 40 per cent. If it’s the decline of the property owning dream that we’re focused on, then we need to look outside of inner London.

Indeed, the area with the sharpest drop in ownership over recent years is Greater Manchester. As the next chart shows, ownership there has plummeted 14 percentage points from its peak in the early 2000s. Fewer than six in ten households living in the region own their own home today – a similar level to the London suburbs. Double digit falls in home ownership have also been experienced in South and West Yorkshire, driven by Sheffield and Leeds, and the West Midlands Metropolitan Area.

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One consequence of this trend is the growth in private renting. Across England the proportion of private renters nearly doubled between 2003 and 2015 – in Greater Manchester the proportion has come closer to tripling.

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It would be wrong to assume that home ownership is the be all and end all. The obsession with getting on the housing ladder is a particularly British one, with many counterparts on the continent taking a different approach (although the decline in ownership in this country means that only Germany now has lower ownership levels than Britain across Western Europe).

But for those who don’t yet own, the desire to buy remains as clear as it’s ever been. Data from the English Housing Survey’s First Time Buyers report shatters any notion that renting is a first choice destination. Fewer than one in ten private renters think they’ll never buy a home because they like it where they are and just 3 per cent actively prefer the flexibility of renting. Worryingly, of those that never expect to buy, two-thirds (65 per cent) say it is because they can’t see themselves ever being able to afford it.

This matters not just because of the frustration it brings for those unable to buy, but because of its impact on living standard too. As we showed a month ago, housing costs have accounted for an increasing share of household income over recent decades. That’s driven by rising costs within tenures, but also by the shift towards private renting – which on average accounts for 30 per cent of income, compared with the 23 per cent figure associated with mortgages.

Longer-term, this new housing reality also means that younger generations face more uncertain retirements, with less wealth to fall back on and potentially spiralling Housing Benefit bills.

In her inaugural speech Theresa May hinted at these issues. The hope is that unlike her predecessors her administration will make real progress in tackling the housing deficit. In the same speech she also made it very clear that she’d like to spread economic growth more evenly across the country. This research suggests that at present it is the housing crisis that is spreading.