The long-awaited Redfern Review revealed little that wasn’t already known. Housebuilders have not locked a generation out of the housing market by not building enough houses fast enough; social mobility stalled somewhere in the ’80s and homeownership is simply a privilege many can’t afford, no matter how many houses there are.
INCREASED SUPPLY DOESN’T LOWER PRICES
The report echoed similar studies which found the impact of new supply on house prices is very small in the short term. Increasing home production to around 300,000 for one year would only reduce prices by c.0.6%, given recent rates of household formation. Supply constraints have not been the main driver for sharp price increases over the last 20 years.
“The government has introduced various policies to stem the issue and housebuilders have also responded, with housebuilding now at its strongest level for eight years,” said Ishaan Malhi, chief executive officer and founder of online mortgage broker Trussle. “But it will take a long time to tip the scales of supply and demand, making homes more affordable for young first-time buyers on moderate incomes.”
COST OF ACCESS IS THE BIGGEST BARRIER TO HOME OWNERSHIP
In fact, the biggest contribution to the fall in the home ownership rate after the financial crisis was higher costs of and restrictions on mortgage lending for first time buyers – namely tougher first time buyer credit constraints.
This is estimated to have cut 3.8 percentage points off the UK home ownership rate from 2002 to the end of 2014. During this time, higher real house prices are estimated to have reduced the private home ownership rate by 2.6 percentage points.
YOUNG PEOPLE ARE POORER
The third major driver of the fall was found to be the decline in incomes of younger people, aged 28-40, relative to people aged 40-65; i.e. the income of first time buyers relative to that of non-first time buyers.
This reduced the relative buying power of would-be first time buyers, pulling down the home ownership rate over the period by around 1.4 percentage points.
The Review also analyses the causes of the house price boom of 1996-2007, and the maintenance of prices at historically high levels in the period since the recession of 2008-2010. The main trends are macro-economic, with rising household incomes and employment and falling interest rates being the main drivers.
WHERE DO WE GO FROM HERE?
The report proposes the establishment of an independent Housing Commission, analogous to the Infrastructure Commission, which can own this strategy and take a non-partisan approach to long- term housing decisions.
“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,” said Pete Redfern, Chief Executive of Taylor Wimpey, who led the Review.
“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,” he added.
RENTERS NEED MORE SUPPORT
According to John Goodhall, chief executive officer and co-founder of peer-to-peer platform Landbay, the report calls for a shakeup in the UK’s saving and building culture. “Part of the solution will involve growing confidence in alternative investment options, which can help young people grow their deposits at a reasonable pace,” he said. “Another is to ensure we are building across all tenures, and investing in the future of the rental market. With homeownership still a pipedream for many, and a growing trend for flexible living, the buy to let sector is growing quickly to meet this demand, while also alleviating the rental pressure on aspiring homeowners.”
Richard Connolly, chief executive officer of Rentplus, said that a move towards Rent to Buy models could help generation rent settle into a permanent home. “A longer-term agreed approach to housing is crucial and we believe rent-to-buy should sit at the heart of it,” said Connolly. “Unless there is a sea-change in the way we deliver housing in this country we will only compound the housing crisis and the hopes and aspirations of people who want to fulfil the dream of homeownership will remain frustrated.”
John Healey MP, the Shadow Secretary of State for Housing, said, “At root, this decline in home ownership 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.”
The Redfern Review it is an independent report commissioned by Shadow Secretary of State for Housing, John Healey MP, supported by an advisory panel of Terrie Alafat CBE, Dame Kate Barker CBE, Andy Gray and Ian Mulheirn.
It is the most comprehensive review into home ownership and the wider housing market in over a decade and draws on bespoke polling, focus group evidence and expert analysis as well as new modelling from Oxford Economics. It also suggests areas for discussion and future policy development that could improve the housing position of young people in a sustainable way.