Home ownership in England and Wales falls to lowest level for 25 years
Home ownership in England has fallen to its lowest level in 25 years with figures for 2012/2013 showing that the number of owner occupiers has dropped to 65.2% compared with 71% a decade before.
Also, the number of private tenants overtook the number in social housing for the first time, according to official figures from the English Housing Survey.
It suggests that ownership levels have been driven down by rising prices and tougher mortgage criteria, and charities have called on the government to increase the number of affordable homes being built.
‘Throughout the 1980s and 1990s, the proportion of private sector households stayed steady at around 10%. However, the sector has undergone sharp growth since then and has nearly doubled in size,’ the survey said.
‘This was driven by a number of factors; in the late 1990s rent controls were removed, and assured short hold tenancies became the standard, giving greater flexibility in the length of tenancies. Lenders also introduced the buy to let mortgage at around the same time,’ it explained.
Average weekly rents in the private rented sector continued to be well above those in the social sector, the survey showed, at £164 a week compared with £83. A third of working households in social accommodation received housing benefits to help them meet the cost of their rent, up from 24% in 2010/2011. That compares with 12% of households in private rented property.
It is also suggested that reduced mortgage availability due to the credit crunch forced some would be buyers into the rental sector. The survey showed the number of owner occupiers has been falling since 2006, when it reached a peak of just under 14.8 million. Since then it has dropped by almost 500,000, falling by 51,000 in 2012/2013 alone.
The research also looked at occupation levels of both rented and owner occupied properties, and found that under occupation levels were significantly higher amongst those who owned their own home. Half of owner occupiers were under occupying, defined as having at least two bedrooms more than they needed, compared with 16% of private renters and 10% of social renters.
The survey was carried out before the launch of Help to Buy, and growing confidence amongst lenders and homebuyers which saw purchases increase steadily throughout 2013.
Meanwhile, a new analysis from real estate firm Knight Frank, also charts the rise of the private rented sector. It says that in the UK as a whole the private rented sector has more than doubled in size in the last 14 years, and it is set to keep expanding.
‘It has sometimes been said that the growth of the private rented sector has been purely down to the clampdown in mortgage lending after the financial crisis. There is no doubt that this event, which orced would be home buyers into the rental sector, has had a significant impact in the market,’ the report says.
‘However, the growth in the private rented sector preceded the financial crisis, indicating that other factors were at play, a mix of the scrapping of rent controls, the proliferation of buy to let mortgages and rising house prices in relation to earnings. It is also worth noting that in the wake of the 2007 financial crisis, those with high levels of equity or cash were much less affected by the credit crunch, and as such, were in a position to invest in rental properties, underlining the role that equity has played in the expansion of the sector,’ it explains.
It also points out that on the demand side, population growth has outstripped the delivery of new homes for decades, creating a structural undersupply of accommodation across the country.
Added to this, increased labour mobility has meant a rise in demand for rental accommodation among workers looking specifically for flexibility of tenure especially in urban centres. Almost 50% of all households in the private rented sector are classified as ‘high income’, and a third of these have children.
‘This underlines that increasing numbers of families are also moving into the private rented sector and it is being seen as more of an alternative to home ownership,’ it adds.
The analysis also suggests that housing affordability remains a key factor in the growth of the private rented sector. ‘House prices rose more quickly than earnings in the years leading up to the financial crisis, helping to push house price to income ratios to new highs and putting the hopes of home ownership beyond many.