Skip to content

House of Lords call for more to be done for housing for younger people

Increased housing costs, both renting and buying a property, are one of the major pressures that the younger generation in Britain is facing, according to a new report which calls on the Government to act to improve housing opportunities.

The report from the House of Lords Committee on Intergenerational Fairness and Provision suggests reform to stamp duty and warns that the Government’s proposed reforms to the private rented sector do not create a regulatory framework that will provide private tenants the security they need.

It points out that this particularly affects young people who are unable to buy and becomes a greater problem as they age. Change is needed so that renters who want a long term secure tenancy can find one.

The report also says that the Government should ensure that local plans have specific policies to address the needs of younger and older people. If the new National Planning Policy Framework’s requirement that local authorities consider these issues does not achieve this, then the Government must take more direct action.

The report says that those born between 1981 and 2000 appear to be spending over one and a half times more, as a proportion of their income, on housing at the age of 25 than the generation born immediately after the Second World War spent at that age.

For previous generations, housing costs as a proportion of income have declined as individuals enter their 30s, but it is unclear whether this latest generation will experience a similar decline.

The reports that that this increase in housing costs as a proportion of income does not appear to be caused by younger generations choosing to spend more to prioritise living space. The amount of floor space per person for those under 45 has fallen over the last 20 years whilst the amount for those over 45 has risen.

Nor is it the case that younger generations are paying more to live closer to work. For the cohorts for which there are data, each cohort has had longer commutes than the generation before them had at their age.

The relationship between generations and the proportion they spend on housing changes slightly if households are differentiated by tenure. In the private rented sector younger generations have a larger income gap with private renters born 1981 to 2000 paying 35% of their income at 25 whilst private renters born just after the Second World War were paying just over 15% of their income at 25.

Mortgage holders in younger generations were paying similar amounts to mortgage holders born just after the Second World War at 25 and the report points out that this is mainly due to lower interest rates and this could change if interest rates rise.

Older generations who owned at a young age had a more difficult experience than younger generations who own today. Owners from older generations faced higher interest rates and for some the experience of negative equity. However, there are fewer home owners in younger generations than those that came before.

John Phillips, group operations director at Just Mortgages and Spicerhaart, welcomed the report and said that stamp duty is stifling the market and is long overdue a huge overhaul and while he supports it abolition, significant cuts would be a good start.

‘Stamp duty tax makes up such a huge proportion of the cost of moving that many of those who want to upsize are choosing to extend instead, creating a plethora of houses all the same size and nothing in between. While at the other end of the scale, older people are staying put rather than paying to downsize and are being criticised for taking up all the family homes,’ he explained.

‘There is an argument that of course stamp duty brings in valuable income for public spending, about £8 billion a year, which sounds like a lot. But what about the costs associated with people not moving because of stamp duty costs? For example, older people living in homes unsuitable for their needs which adds extra pressure to health and social services,’ he pointed out.

‘I supported the cut in stamp duty for first time buyers as it was a start, but said at the time, if you only help first time buyers, property prices will be forced up as sellers try and add the money saved onto asking prices, to help them cover their own stamp duty costs and this is what we have seen, to some extent,’ he added.

Becky O’Connor, personal finance specialist at Royal London, said that the imbalance of housing wealth and costs between the older and younger generations is an urgent social issue.

‘Greater housing costs among the young, whether that’s rent or mortgages, have serious implications, such as living in cramped accommodation far away from work and putting off having children,’ she pointed out, adding that those renting face the worst of all worlds as they are paying more, for less.

‘But care should be taken not to blame older people for this. The report makes it clear that older people are helping their children and grandchildren where they can. Many have their own housing cost issues to face. The causes are structural and therefore require policy reform, not simply more help from the Bank of Mum and Dad, to resolve intergenerational unfairness,’ she said.

Topics

Related