Homeownership is falling in major cities

Posted 3 August 2016 by Helen Christie

Analysis suggests that many major English cities, particularly Manchester, have seen the sharpest falls in homeownership since a peak in the early 2000s...

The Resolution Foundation has said that homes were becoming increasingly unaffordable for struggling potential buyers.

The proportion of homeowners dropped from 72% in April 2003 to 58% this year in Greater Manchester, it said. West Yorkshire, the metropolitan area of the West Midlands and outer London have also recorded double-digit falls.

Explaining the falling rates of home ownership, Matthew Whittaker, chief economist from the Resolution Foundation, told the BBC's Today programme: "What we particularly have seen since 2002-2003 is that incomes simply haven't kept pace with house prices, so it's not just that house prices have gone up.

"We had access to lots of relatively easy credit and the position we're in now is that credit has been turned off. We have this sense now that house prices have become detached from people's earnings, and we no longer have the route through 100% mortgages and the like for getting on to the housing ladder."

The average first-time buyer paid just under £30,000 for their new home in the 1980s compared with more than £150,000 now, the think tank said.

The Resolution Foundation used data from the Office for National Statistics' Labour Force Survey (LFS).

The report follows recent data from the government's English Housing Survey showing the total number of buyers has fallen by a third in 10 years, and those who do buy their first home increasingly reliant on the bank of mum and dad for help. 

The Resolution Foundation's analysis of the LFS found that home ownership in England peaked in 2003 at 71% of the population and had now dropped to just below 64%. The analysis also showed that the struggle to own a home was no longer just a "London-centric issue."

"London has a well-known and fully blown housing crisis, but the struggle to buy a home is just as big a problem in cities across the north of England," says Stephen Clarke, the foundation's policy analyst.

"The chances of owning a home have fallen fastest in Greater Manchester over the last decade, though the Leeds and Sheffield city areas have also experienced sharp drops."

The housing industry have responded to this report:

Nick Sanderson, CEO of Audley Retirement Villages says: “There is a fundamental flaw in the UK housing market; there is simply not enough aspirational and high quality housing for older generations, so it’s no wonder that we are seeing such stagnation. Reports show two in five UK homes are under-occupied, of which half are occupied by those aged 50 to 69. Baby boomers are finding themselves stuck in this type of unsuitable housing, which in turn creates blockage and is central to why we are seeing levels of home ownership fall so dramatically across the whole UK.

“Brexit may have sent shockwaves through the property industry, but it’s vital that we quell the panic and look at the facts – we have a housing shortage that needs urgent political attention at all levels. Theresa May's new government must now recognise the increasingly important role the retirement living sector plays in the fluidity of the housing market, so we do not allow supply to dwindle further, which would create a potential housing black hole in the future.”

Tony Brooks, joint managing director at Moda Living, says: “One of the key things missing from today’s debate is even the tiniest acceptance that saddling young people with debt and pushing people into ownership at all costs may not be the most appropriate thing to do.

“It’s fantastic that the government’s various schemes have helped around 300,000 people get on the housing ladder, but what we fundamentally lack is a supply of quality rented accommodation suitable for people who can afford to pay market rents. Everyone accepts the need for more affordable housing – and policies like the extension of right to buy do nothing to help this. But in a society where Netflix, Spotify, Zip Car and Uber have created an “asset-light” economy, we shouldn’t disparage people simply because they do not own a house.

“Today’s research highlights an important issue but to ensure city centre economies can thrive, we have to have a functioning rental market offering flexibility and a level of convenience that fits with the way people now live.

“Insisting that everyone own, with all the hassle and debt that comes saddled with it, is frankly irresponsible. What we should have is a balance of tenures, ensuring those most at need have costs subsidised and that those who want to pay to live centrally can do so without taking risks in what is currently a highly inconsistent private rented sector.”

Renting v ownership

One area that was highlighted in the report was the metropolitan area of the West Midlands. The report said that homeownership had fallen from 70% in April 2005 to 59% now.

Mark, who lives in Dudley, says: "We've been renting for six years. We have paid almost £60,000 in rent. As much as I would love to buy my own house, it grieves me to rent, but we just can't get on the ladder due to the deposit. Instead of doing the Help to Buy scheme, the government should bring back 100% mortgages, and maybe help us with the deposit. If the government was to pay the deposit, we could go out tomorrow and buy a house."

The think tank also confirmed that the fall in ownership corresponded with a rise in renting from private landlords.

The proportion of private tenants rose from 11% in 2003 to 19% last year, it said. In Greater Manchester, the move was more pronounced, rising from 6% to 20% over the same period.

While accepting that home ownership was rather a national obsession, it pointed out that those in the private rented sector spent more of their income on housing than their owners, and there was more insecurity in short-term tenancies.

In her first speech as prime minister, Theresa May referred to the "injustice" in the fact that "if you're young, you'll find it harder than ever before to own your own home".

The Loftings (Redrow Homes)
11 May 2017
The WhatHouse? team takes its weekly look at some of the top events, offers and launches for buyers of new homes in the UK right now...Read more
Today's New Homes
Bilberry Chase (Barratt Homes)
16 February 2017
Some short stories and articles from the new homes market across the UK, including special events and new build launches across the spectrum of p...Read more
Today's New Homes
St Margaret's View (Barratt Homes)
7 October 2016
Our final look at new homes which - if you start the buying process in earnest - can be yours to move into in time for the Christmas holiday seas...Read more
Today's New Homes

Click here to see your activities