"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."
The Redfern review calls for a long-term, cross-party approach to housing issues after finding that declines in home ownership have been steepest amongst young people – over 20% in 12 years.
Its analysis indicates that the biggest contribution to falling home ownership rates 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.
Interestingly, the Review doesn't blame a sharp increase in house prices or a lack of supply, instead identifying the relative financial strength (earning and borrowing power) of young people compared to older generations.
This, the Review says, has 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 research shows that even with a significant increase in supply home ownership rates will not necessarily increase, as the "impact of new supply on house prices in the short term is very small".
The data shows that 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.
The Review explains that "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".
Instead, the Review recommends that Help to Buy should be refocused so that it is targeted more exclusively at first time buyers and at lower price points on a regional basis – extending its term beyond 2021 for this restricted group.
It adds that Starter Homes should be retained but on exception sites only and with the first time buyer discount retained in perpetuity, and that the ‘one for one’ replacement policy for Right to Buy should be extended so that all council homes sold through the scheme are replaced.
Additionally, it believes more support should be given to programmes that promote savings among young people - the maximum scale of lifetime ISAs should be increased and consideration should be given to increasing the level of Government contribution.
Overall, it proposes the establishment of an independent Housing Commission "which can own this strategy and take a non-partisan approach to long-term housing decisions".
Pete Redfern, Chief Executive of Taylor Wimpey, who led the Review, said: “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.
“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.”
