Why the private rental sector is dominated by young tenants

Posted on Wednesday, February 24, 2016

The home ownership ladder is disappearing for most young working households on modest incomes who are obliged to rent for the indefinite future, claims an independent think tank.

For this group home ownership is projected to be approaching just one in ten by 2025, according to new analysis from the independent Resolution Foundation body.

While the biggest decline in young families owning homes is for those on modest incomes, it has also fallen for young households that are benefit dependent or on higher  incomes.

As a result home ownership is increasingly becoming the preserve of older and wealthier households.

The analysis finds that those aged 65 or above now account for around one-third (32%) of all homeowners, up from less than one-quarter (23%) in 1998.

In contrast, those aged 16 to 34 account for just 10% of homeowners, down from 19% in 1998 – a 49% reduction.

The analysis shows that young (under-35) modest income working households have recorded especially sharp declines, with homeownership plummeting from 57 % in 1998 to just 25%. And an contrast, levels of private renting have more than doubled, from 22% to 53%.

The position is starker still in London. The proportion of younger modest income working households owning their own home more than halved over the last decade, falling to just 13%.

If home ownership were to continue to decline at the same rate in the capital for this group, it would all but end by 2025, dropping below one in twenty.

Nationally, homeownership has been falling slowly since the start of the century – following a steady increase from the 1950s onwards – and stands at around 63% today.

“With the average modest income household having to spend 22 years to raise the money needed for a typical first time buyer deposit – up from just three years in the mid-1990s – it’s no surprise that owning is increasingly a pipe dream for many” says Matt Whittaker, chief economist at the Resolution Foundation.

“Schemes such as Help to Buy can only ever help a minority – often providing a leg-up to those who would eventually climb onto the housing ladder anyway. More than half of those benefiting from Help to Buy to date have household incomes in excess of £40,000. It is hard to imagine any way out of the home ownership crisis facing those on low to middle incomes that doesn’t involve significantly boosting house building” he says.

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