A tale of two cities

Housing affordability is often depicted as primarily a London problem but is this really the case? New analysis from the Resolution Foundation suggests that while the capital may be at the epicentre, the housing storm now rages far and wide.

London itself is a tale of two cities. Home ownership rates in Inner London have always been well below the national average. Even at the 2004 peak, barely two in five people owned their home – a figure that has subsequently fallen to 36 per cent. The more striking shift has been the rapid increase in private renting over the period, up from 19 per cent in 1996 to 31 per cent today. Three quarters of this rise, however, is explained by the contraction of the social rented sector rather than a fall in owner occupation in Inner London.

Outer London is a different story. Here, the capital looked much like the rest of the country in 1996 when home ownership stood at 70 per cent. That has plummeted to 58 per cent today (compared to the UK average of 64 per cent). As a result, the ranks in the private rented sector in this part of the capital have been swollen not by those who would previously have been housed in social rented properties, but by households locked out of home ownership by rising prices and sluggish earnings.

Policy makers would do well to heed the different dynamics in Inner and Outer London, especially as other regions such as Greater Manchester, South and West Yorkshire and the West Midlands metropolitan area have all seen stark rises in private renting in recent years. If our aim is to ensure that all can enjoy a stable, affordable home we need to understand who lives in the PRS, which often provides neither.

Private renters similar to those in Outer London on the margins of home ownership could benefit from ramped up versions of help-to-buy products for example. In contrast, households like many of those living in the PRS in Inner London may never be able to afford to buy a home even with help from these government schemes.

Yet the aspiration to buy is driven largely by a desire for security, posing the question of how families a long distance from ownership can ever achieve this end. Reforming the private rented sector to improve the stability it offers households should be on the cards. But policy makers may also want to take a long, hard look at the decline in the social rented sector and ask whether this is sensible when home ownership is becoming increasingly out of reach.

This blog was originally published on Inside Housing