New homes shortage not a major effect on homeownership levels, says Redfern Review 

The Redfern Review, an independent report led by Taylor Wimpey’s chief executive Pete Redfern and commissioned by shadow secretary of state for housing John Healey MP, is launched today and gives a fascinating and detailed assessment of homeownership across the country, concluding that the shortfall of new homes is only a minor factor.

The report, supported by an advisory panel of Terrie Alafat CBE, Dame Kate Barker CBE, Andy Gray and Ian Mulheirn, used polling, focus group evidence and expert analysis to look at the numerous factors relating to the decline in homeownership in Britain in recent years and suggest measures that could be taken to address these problems – the first major look at the topic in a decade.

John Healey MP says: “At root, this decline in homeownership matters to me because it matters to so many people in this country that we are determined to serve. And it matters too because the shrinking opportunity for young people on ordinary incomes to own a home is at the centre of the growing gulf between housing haves and housing have-nots. Housing is at the heart of widening wealth inequality in our country.

“Labour is determined to get to grips with the falling number of homeowners and this Review gives us, and politicians of all parties, the foundation to do that.”

With a fall of 6.2% in homeownership in England over the past 12 years, from 70.9% to 63.3% – and a 20% drop in young people buying their own homes over that period – the report identifies three primary causes for this decline:

• The higher cost of mortgage lending for first-time buyers and increasing restrictions on what is lent to whom. This factor is estimated to have reduced the homeownership rate from 2002 to the end of 2014 by 3.8%
• The rapid increase in house prices, particularly before the financial crisis of 2007/8. This is estimated to have reduced the private homeownership rate by 2.6%.
• The decline in the incomes of younger people (aged 28-40) relative to people aged 40-65, which is calculated at having fallen from relative parity before the financial crisis to a shortfall of around 10% by 2014. This is estimated to have reduced the homeownership rate by around 1.4%.

Pete Redfern says: “The detailed analytical work of the Review reveals the challenges that young people face in buying their first home and highlights the impact on them of long-term falls in relative incomes and ability to borrow.  We must focus on supporting today’s younger generation and creating a genuine long-term housing strategy independent of short-term party politics if we are to improve the position in a sustainable way for future generations.”

The report says that even if housebuilding in the UK were increased to around 300,000 for one year – somewhere close to twice the current level of construction – prices would only fall by circa 0.6%, with studies having generally established that property price booms over the past 20 years have not been led by a shortage of supply.

The Review goes on to recommend the setting up of an independent Housing Commission to take a non-partisan approach to long-term housing decisions, based on how policy changes might affect long-term supply and demand as well as the roots of house price trends and how policies might impact on stability.

The Review also says “We recommend a review of Help to Buy and Starter Homes to ensure that they deliver the best long-term result to the people that need it most, and maximise their impact on home ownership, whilst minimising their inflationary effects”, suggesting that the potential inflationary effect of Help to Buy might be mitigated by restricting it to first-time buyers only and reducing the price point on which it is based, potentially with regional variation. It also recommends this more targeted scheme should be extended beyond the current 2020 deadline.

Among the other conclusions of the Review are that improving the relative earnings of young people to older people will be the primary factor in significantly raising homeownership levels in that age range, and to look at ways that mortgage lending criteria might be made more flexible, or lending subsidised, for some younger potential homebuyers.

The review does recommend setting a target level for homeownership, and urges caution against making short-term policies to dramatically increase housing supply, preferring a longer-term approach to bring consistency to building policy.

It also recommends extending the ‘one-for-one’ replacement policy for Right to Buy council homes, increasing support to programmes encouraging saving among young people (eg through Help to Buy ISAs), improving rental property conditions without unnecessary costs to landlords and improved resourcing for planning departments

Read the Redfern Review in full here: www.redfernreview.org