Data shows housing tenure trends continuing
Published: 5 March 2015 | Author: Bernard Clarke
- The rate of home-ownership has been falling since 2005 reaching 63% in 2013-14 from 71%.
- Home-ownership as a tenure is likely to decline further in the future with the age profile shifting to older people.
- However, the Right to Buy scheme has been fundamental in driving the rate of home-ownership from 1980 to 2005.
The release of the English Housing Survey report for 2013-14 has attracted widespread market commentary, though many of the trends highlighted have been in place for a number of years.
Taking a big step back, owner-occupiers accounted for about 57% of all households in 1980, while private renters were 12% and social renters were 31% of all households. Fast forward 25 years to 2005 and there has been a large increase in the proportion of owner-occupiers, to its highest ever recorded level at just under 71%. The proportion of those privately renting has largely stayed the same as it was in 1980, at roughly 12%. This means a fall in the social rented sector to account for the increase in the proportion of owner-occupiers. In 2005, the social rented sector accounted for just under 18% of all households, down from 31%.
Chart 1: Trends in tenure, 1980 to 2013-14
The Right to Buy scheme has been fundamental in driving these changes. The scheme, which allows eligible council tenants to buy their home at a discount, helped make more than 1.7 million households home-owners from 1980 to 2005. To give this figure some context, there were 17 million households in 1980 and 20.9 million in 2005, meaning Right to Buy helped push owner-occupier rates up by around 10 percentage points over this time period.
As the Right to Buy scheme wound down in the mid to late 2000s, it has been accompanied with a decline in the rate of home-ownership, which fell to 63% in 2013-14.
After the early 1990s recession, there was a fall in the proportion of younger households getting on the housing ladder. This coincides with the renaissance of the private rented sector and the growth of buy-to-let activity.
This fall in the proportion of home-ownership in the younger age brackets is partly down to lifestyle changes, such as opting to attend university or preferring to enter the rented sector for more flexibility. But other factors such as falling availability of social housing and the issue of affordability have left young people with little choice but to enter the private rented sector. This is most clearly seen in the youngest age bracket, the under 25s. Back in 1993, roughly a third of under 25s were home-owners. In 2013-14, survey data shows about 9% of those in the same age group were home-owners.
While the median age of a first-time buyer has not changed much, there has been a clear delay in the age at which people become home-owners. It is now the case that many first-time buyers will purchase a property in their late 20s, as opposed to early 20s. As well as purchasing later, the number of first-time buyers has fallen too. First-time buyer numbers close to 500,000 per year would reflect the normal levels seen between 1993 and 2003, compared to the latest annual figure of 311,500 in 2014.
The impact of these delays feeds into changing tenure patterns. In the early 90s, the group with the highest proportion of home-ownership was the 45-54 year olds. Twenty years on, in 2013-14, peak home-ownership sits with those aged 65 and over, with the majority owning their house outright. It will not come as a surprise that those who were in the 45-54 year old age group 20 years ago are the same people who are in the 65 and over group now. Increased life expectancy is also helping this shift, with people on average living six years longer now than they did in 1990, according to the World Bank.
Chart 2: Proportion of home-owners by age group
While many young people favour home-ownership, they are realistic enough to realise that in the short term, their options are between the private rented sector and staying at home. More recently though, there has been a large increase in 20-34 year olds living with their parents, with the increase becoming sharper since the economic downturn. This highlights that affordability in the private rented sector may also be an issue for young people as more of them live at home.
As these trends are not likely to change in the foreseeable future, we shall expect to see overall home-ownership rates decline further and become even more concentrated amongst older people. This gives some credence to those which project home-ownership is set to become a minority within the next 20 years, in the absence of significant shifts in housing policy.
The deep-seated nature of these changes means that to turn things around we will need a corresponding length of time in which policy-makers will need concerted joined-up measures to promote housing supply and improve access to home-ownership. The CML manifesto outlines a housing strategy that first accepts the current state of the housing market and aims to bring about a house building programme to keep up with the growth in the number of households and make best use of the existing housing stock.