Nearly two million more young people locked out of homeownership since 2001

A new think tank report estimates that 1.8million more 25-34 year-olds have been ‘locked out’ of the housing market since 2001, due to high property prices, stricter lending criteria and tougher circumstances in which to save the necessary deposit.

The independent Social Market Foundation’s (SMF) ‘Locked Out: How property crowdfunding could help the next generation of homeowners’ says that if the rate of homeownership among young people in England had stayed the same since the beginning of the century, 1.8million more of them would now have their own property.

As well as arguing the case for crowdfunding to help more people onto the housing ladder and providing much-needed investment in housebuilding, the report suggests that by 2026, the UK will have a deficiency of 1.3million homes based on unmet demand and inadequate supply growth. It goes on to say that the continued shortfall of new homes will drive property prices up even further.

The report says property crowdfunding allows would-be investors to a share of a property through online platforms and is encouraged by the way such schemes have bloomed in the USA, where the $1bn mark has been surpassed in its real estate crowdfunding market.

The author of the report, SMF economist Katie Evans said: “Getting onto the housing ladder is becoming harder and harder for young people. Our failure to build enough homes means this problem threatens to stretch into the future. Property crowdfunding could be the means to tackle both demand and supply, by helping more young people to become homeowners, whilst directing additional investment to small and medium-sized house builders.”

The report says property crowdfunding could address the housing affordability crisis in the following ways:

• By making saving for a deposit easier. Investing in a crowdfunded property means the return will keep pace with house price growth. £100 invested in property at the start of 1996 would have been worth over £600 by the start of 2015 – the same sum in cash would have grown to only £226 in an instant access savings account.
• By lowering the barriers to entry and allowing a more people to share in property price growth.
• By providing equity funds to small and medium-sized housebuilders and consequently boosting the supply of new homes.

Among the report’s recommendations to the government are:

• Including crowdfunding in the new Innovative Finance ISA, encouraging consumers to consider the potential of property crowdfunding.
• Allowing savers to use property crowdfunding when saving in a Help to Buy ISA
• Introducing a new 'Help to Build' savings product to incentivise investments in new housing supply.
• Considering the role property crowdfunding could have within broader Shared Ownership policy.