The government must act now and address Britain’s housing shortages or else they risk creating a ‘lost generation’ of people who are unable to acquire ownership of a home, according to one of the country’s leading housing charities.
Shelter, identified that on current market trajectory, the average worker in England would need to earn twice as much as they do now in order to be able to afford the costs of a home, which will mean that over 4 million people will be forced to cast their aspirations of being a homeowner aside in the future.
They have now called for the government to instigate new policy that improves the house building levels in the country, in a bid to create property that is attainable and in reach of the average workers finances.
Last week, the government identified that house building levels were soaring at their fastest rate in almost ten years.
However, the real affects of this statistic have been downplayed due to the fact that construction levels have been particularly poor in the past seven years, meaning that any rise in building levels would be relatively sharp compared to the period of stagnation that has characterised the industry since the beginning of the recession.
Serious social implications’
Shelter have conducted their study of the correlation between average incomes and property prices since 1997, and have found that for the first time, that the average worker would need almost £30,000 more in order to be able to cope with the rising cost of property.
Shelter have criticised the government for failing to instigate the construction of lower range property in the UK, arguing that their prioritisation of expensive property for foreign investors has meant that the country is now reaching ‘crisis point’ with its housing shortages.
“The reality is that successive governments have failed to build the affordable homes that this country needs, and as a result our housing shortage has reached crisis point,” said Campbell Robb, Shelter chief executive.
Data from the Office for National Statistics has suggested that the primary affect that rising property prices has had on society is that more and more people are living with their parents to an older age, with over 3 million people aged between 20 and 34 estimated to still be living with their parents in 2013.
Sean Oldfield, chief executive officer at Castle Trust, said: “The failure of the young to break into the housing market has some very serious social implications.”
This included some young people borrowing from family members.
“Older generations know this and want to help – many have the resources to do so.”
Help to Buy
The government have sought to downplay Shelter’s criticisms, arguing that the governments Help to Buy scheme, released last year, has done much to offer young workers a financially viable and affordable alternative to housing than living with their parents.
Housing Minister Kris Hopkins said: “Anyone who works hard and wants to own their own home should have the help they need to get on the property ladder. That’s why we’ve introduced Help to Buy, which offers a valuable alternative to the Bank of Mum and Dad and is so far helping 28,000 people buy with a fraction of the deposit they’d normally require.
“Shelter fails to recognise that our efforts to cut the record deficit we inherited have helped keep interest rates at a record low and home ownership at its most affordable since 2007.”
The impact of the first stage of the government’s flagship Help to Buy scheme has been widely debated, with advocates pointing to the fact that over 13,000 people utilised it to acquire property last year, with more expected in the near future.
The Equity Loan scheme was introduced last April in order to bolster the house building industry in the UK, and enables prospective homeowners to receive 20% free interest on their mortgages in order to be financially capable of paying for a new-build property.
However, despite the relative success of the scheme, it has been argued that a far greater level of property needs to be constructed in order for the country to fully address its housing problems, with even ‘best case’ scenario’s in the next five years being branded inadequate for purpose by leading property developer Savills.
Susan Emmett, Savills residential research director, said: “We have made some robust assumptions about increase in output from both the private and public sector. It is worrying that even a best-case scenario is still not good enough to meet our housing need.”
Ms Emmett added that whilst construction levels are expected to rise by 55% in the next half decade, that nevertheless more will be done to address the country’s endemic housing problems, and that this estimation was merely a ‘best case scenario’ anyway.
Savills estimated that private property developers would contribute the highest percentage of newly built property in the next 5 years, with housing associations the next on the list of major contributors. However, they identified their belief that councils would continue to contribute very little towards the construction of new property, with just 1360 homes expected created from the finance of these factions last year.
Private developers will provide the bulk of the properties, with Savills forecasting they could build 91,000 homes this year, rising to 123,000 in 2018. The numbers of homes created by housing associations and local authorities are predicted to grow to 34,000 and 10,000 respectively. In 2013, councils built only 1,360 homes – although even that was an increase from a low point of just 60 in 2000.Source; MoneyExpert