Sign up to our Editors Choice newsletter now! Click here

Homeowners to become a minority, report warns

Accessibility Menu

Menu Search

24dash - The UK's most up-to-date social housing and public sector news website

Homeowners to become a minority, report warns

24DASH.COM Logo

Published by Max Salsbury for 24dash.com in Housing and also in Finance

For sale sign For sale sign

Half of the UK's population could be living in rented accommodation in a generation unless urgent action is taken, a new report has claimed.

Owner-occupiers currently make up 65% of the country's householders, down from a peak of 71% a decade ago. And on current trends this proportion could fall to 49% by 2041, dragging homeownership back to the levels of 1970, the report warns.

'Nation Rent' says that the explosion in the buy-to-let market and the growth in demand for housing because of a rising population have already created 'generation rent' as more people are forced to turn to private landlords for a place to live.

But without fundamental change, 'generation rent' will become 'nation rent' as the dream of a property-owning democracy is shattered, the report claims.

Produced by housing experts Natalie Elphicke and Calum Mercer of Million Homes, Million Lives, 'Nation Rent' warns of "permanent structural change" in the UK housing market.

But the authors believe that current trends fly in the face of what people want. The report draws on evidence showing that the desire to own a property is "as strong as ever". More than three quarters of people in private rented housing and nearly half of those in social rented housing want to buy their own home, with only 3% of people choosing long-term renting as their first choice.

The report call for a "revolution" in the financing of housebuilding and homeownership, urging sweeping changes designed to encourage the big insurance companies and finance houses to invest in "long-term property portfolios that actively promote and enable people to buy the homes that they live in".

'Nation Rent' calculates that such portfolios would generate a return of at least 5% in real terms over periods of 40-50 years (the so-called golden rule for investment) and that, depending on the mix of tenures, returns could be as high as 15% in the medium term.

Co-author Natalie Elphicke said: “We are at a turning point in how we finance and build new homes through pension funds and others large investors who intend to rent the homes out for the very long term. Yet it needs to be possible for people to buy their homes as their circumstances allow in order to meet the home-owning aspirations of the British people. It would be wrong to allow the current trends to continue.

"We need a creative and imaginative new approach to bring big new players into housing finance and unlock their wealth in a way that will be good for people seeking a home of their own and for investors looking for good long-term returns.

“By setting out a whole of market solution, the Million Homes approach will also ensure a steady supply of privately rented and social housing so that people will be able to match their housing needs at different stages in their lives to their circumstances."

Calum Mercer added: “The technical work we have undertaken at Million Homes, Million Lives shows that institutional investors who intend to rent out homes for the long term can make just as good a return if they enable renters to buy as and when they are able to do so.

“By setting up these large property funds so that they are designed to build a better blend of owner-occupied, private rented and social housing, a range of quality rented homes and opportunities to buy can be provided to suit different needs and aspirations over time.

“The solution lies in overhauling housing markets so that they attract far more investment from big financial institutions and create mixed portfolios of housing spread across owner occupation, private renting and social housing.

“Detailed analysis of projected returns shows that over 40-50 years, such portfolios would produce strong and stable returns to investors while meeting popular demands for home ownership plus other quality forms of housing tenure, including affordable and social housing”.

Comments

Login and comment using one of your accounts...