Only half of families own their own home – how do the other half live?

Published on Housing

While the received wisdom is that home ownership has fallen to 64 per cent over the last decade, is that a fair reflection of the real world? Do around two in three of us really own our home?

Conventional rates of home ownership may offer a misleading picture as they only tell us the proportion of properties which are owned by an occupier. While that may have some macro-economic significance, surely it makes more sense for those of us interested in living standards to think instead about the proportion of people who do (or don’t) own their homes?

Imagine, for example, a person who buys a house but who then takes in three lodgers. On the standard measure, this simply counts as an owner-occupied household – and the three residents that rent drop out of the picture. Or consider an adult returning to the parental home. That individual also disappears from the statistics. And five unrelated people who share a house? They would be counted as one rented household rather than the five separate renters that most would intuitively regard them to be.

All these real-life situations have largely been missed out of the tenure story to date. So what happens if we switch our attention from households to families (by which we mean here a single adult or a couple, along with any dependent children)? A different picture of how we are housed emerges.

To begin with, as Figure 1 makes clear, we may have over-estimated home ownership levels to date. We used to think that home ownership peaked at 71 per cent in 2004 and has since fallen back to 64 per cent. But if we look at this from a family perspective, the peak was far smaller – around 58 per cent – while home ownership stopped rising earlier, in 2002. As a result, our analysis shows that barely half of all families own their own homes today.

Figure 1: Home ownership in the UK

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Source: RF analysis of ONS, Labour Force Survey

Rather than ownership being clearly the majority tenure, with two thirds owning, the country is far more evenly divided.. The other half deserve more of our attention – so where do they live? Figure 2 begins to build up a comprehensive picture. To start, we can see that the proportion of families who either own their home or live in the social rented sector has declined over the last 25 years, and into the breach has stepped the private rented sector (PRS). But just as the household measure over-estimates home-ownership, so too it has under-estimated the scale of private renting: there are around 6.3 million families living in the PRS today compared to 4.9 million households. And when we look at trends over time we see that more than double the share of families lives in the PRS today than did in 1992.

Figure 2: Proportion of all families by tenure, UK – selected tenures only

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Source: RF analysis of ONS, Labour Force Survey

The family measure also provides new nuance to the story of tenure change over time. Popular accounts often ascribe the expansion of the PRS to a growing group of millennials forced by high housing costs to share a rented home. There is clearly some truth to this: the proportion of families headed by a 21-30 year old who cohabit has increased by 14 percentage points in the last 25 years. Our Intergenerational Commission is exploring how this might affect the lifetime living standards of young and future generations. In London, with its younger population, chronic housing shortage and sky high housing costs, the share of renter-sharers has more than trebled since 1992.

But this is not the whole story – especially if we look beyond the capital. Of at least equal significance has been the rise in the proportion of families living in the PRS who are not sharing with others. In 1992, just 1 in 20 families headed by a 35 to 44 year old rented in this way. Today that figure stands at 1 in 5. Moreover, this is not a pricey-South-of-England phenomenon: it is in the poorer parts of the country such as Northern Ireland, the North East and Yorkshire and Humberside that we see the biggest increases in the proportion of families renting a home alone. Living in the PRS isn’t just a millennial problem then – it is taking hold across people’s life stages and merits wider examination.

Looking at tenure through the family lens also allows us to complete the picture (as we do in Figure 3) by bringing in the 5.8 million families who neither own their property, rent privately nor live in the social rented sector but who instead who reside in someone else’s home. These families are missed out entirely when we use the household measure – what else can we discover about them?

Figure 3: Proportion of families by tenure, UK

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Source: RF analysis of ONS, Labour Force Survey

Note: ‘Living another’s home’ refers here to anyone who isn’t a single adult without children living with their own parents – e.g. single parents living with their own parents, elderly family members or lodgers.

First, it is worth noting that more than 8 out of 10 of this group are adult children living in the parental home. So are these the offspring we hear regular reports about, returning to the nest in a way more reminiscent of southern Europe than the chillier north? In fact, as the chart shows, this way of living is no more prevalent in the UK today than it was 25 years ago. However, this group did grow during the last recession – and was likely elevated in the early 1990s for similar economic reasons.

Yet in some parts of the country living with parents has declined quite starkly. In Northern Ireland in 1992, 22 per cent of families were adult children living in the parental home (even excluding those with their own partners or children). Today that has fallen to 17 per cent while the size of the PRS has tripled. So are family bonds looser in the region than they were in the past? Similarly, nationally, we can see that the proportion of pensioners living in someone else’s home (i.e. their children’s) has been in steady decline over this period – again shaped by cultural norms as much as demographics and economics.

Using our family measure of housing tenure provides us with a richer understanding of the nation’s living arrangements across time, region and age group – much of which is ignored by the standard housing measure. But it also raises a number of interesting questions about the way we live today. Has tenure change over the last 25 years been mainly about price pressures, for example? Or have shifting norms and the changing composition of our population played a role too?

Watch this space in 2017 for the answers to those questions and more…