Young adults are less likely to own their own homes than ever before, according to research by the Institute of Fiscal Studies.
The decline in homeownership is most significant amongst those aged between 25-34-years-old, as house prices have soared by an average of 152% over the last two decades.
Just 27% of 25-34-year-olds on middle incomes are homeowners, compared with a substantial 65% in 1995/96 – a decrease of almost 40%.
At the same time, the latest English Housing Survey has highlighted that the private rental sector has grown significantly. Notably, the proportion of 35-44-year-olds living in private rental housing has increased considerably, from 11% in 2006/07 to 29% in 2016/17.
Young Adults Less Likely to Own a Home than Ever Before
Alejandro Artacho, the CEO and Co-Founder of rental platform Spotahome, comments on the findings: “It is getting increasingly difficult for young adults to get onto the property ladder, and this is driving the growth of the rental market. Renting is now becoming the go-to accommodation option for many people.
“Another challenge that renters face is the continued increase in the average rental asking price. The average rent is currently £1,280 per month – a significant chunk of the average salary. This makes it difficult for the average person to save and get a foot on the property ladder. As a result, we are seeing growing numbers of people looking for cheaper alternatives, with a particular desire for shared accommodation.”
David Smith, the Policy Director of the Residential Landlords Association (RLA), believes that plummeting rates of homeownership among young adults demonstrate the folly of choking off investment in private rental homes: “This huge increase in the number of young people unable to buy their own home means that more are renting and for longer periods. This shows the folly of Government policy imposing higher taxes to deter investment in new homes to rent.
“The scale of the housing crisis demands a complete re-think from Government, with policies needed to support investment in homes to rent to meet the increasing demand.”
The CEO of HomeRenter, an online lettings platform, Will Handley, continues: “The private rented sector needs to be modernised to accommodate for the growing number of young adults renting. The rental market needs to make sure it doesn’t price out people too. We recently found less than half (45%) of tenants are happy renting, with unreasonable letting admin fees being a top gripe (42%). 70% of tenants said they would prefer to rent direct from a landlord, suggesting a desire to cut out the middle-man estate agent.
“The reality is, young adults are used to a digital world and traditional estate agents have failed to tap into this. Proptech is filling the void, enabling landlords and tenants to connect directly online and cut out estate agency fees, reducing costs for all parties. In addition, the rental market should be more geared up towards helping people work towards owning their own property, by enabling rent payment history count towards credit scores.”
Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, offers his thoughts: “In the last two decades, there’s been a seismic shift in homeownership in the UK. For young adults on average incomes, the new landscape looks a little bleak. These squeezed millennials have seen the average house price rise seven times faster than their income. An astonishing statistic, which shows just why homeownership has collapsed among this age group.
“The recent changes to Stamp Duty rules should offer some hope for those striving to get on the ladder. But the Government needs to go much further if we’re to have any chance of balancing the scales again for young adults. It’s no secret that we need more investment in housebuilding to increase the supply of affordable homes. But we also need more forward-thinking, innovative policies to address the challenges of affordability and space in the UK’s cities. The Government has pumped a lot of money into demand side policies, but we must see firmer action on the supply side, if we’re to house the next generation.”