Redfern review into the decline of HomeownershipMake Text Bigger
Published today, the Redfern Review is supposed to be an independent report, led by Pete Redfern, Chief Executive of Taylor Wimpey, commissioned by Labour Shadow Secretary of State for Housing, John Healey MP.
The review into home ownership reveals that the financial squeeze on young people is at the heart of the decline in the number of home owners and calls for a long term, cross-party approach to housing issues.
The Review indicates the primary causes of the decline in home ownership
The Review’s analysis shows that the primary causes of the 6.2 percentage point fall in home ownership between 2002 and 2014 are as follows:
- The biggest contribution to the fall in the home ownership rate after the financial crisis came from the higher cost 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.
- The biggest contributor to the fall in the home ownership rate before the financial crisis was the rapid increase in house prices. Between 2002 and 2014, higher real house prices are estimated to have reduced the private home ownership rate by 2.6 percentage points.
- The third major driver of the fall has been the decline in the 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 younger age group’s average income fell from approximate parity with the over-40s to some 10% below in the wake of the financial crisis. 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.
In common with other studies, we find that the impact of new supply on house prices in the short term is very small. For example, even increasing home production to around 300,000 for one year would reduce prices by only c.0.6%, given recent rates of household formation. New household formation and supply have been broadly in balance over the last 20 years and therefore the significant increases in house prices over that period have not been driven primarily by supply constraints.
We strongly encourage the current and future Governments to look long term at home ownership issues and to adopt a principle-led strategy against which individual, short term actions can be assessed.
In the Reports Conclusions it includes:
- Far more could and should be done to provide a healthy and stable renting environment, providing a better opportunity for young people to save and a better set of conditions for longer term renters
- Rental conditions for tenants should be improved whilst avoiding unnecessarily increasing landlords’ costs
Please read the full review HERE so that you can gauge an accurate weighting of the reports assumptions and conclusions for yourself
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