Generation rent – tackling the generational inequalities of the housing market

Guy Horne, chief executive and co-founder of HSPG

The past few years have been turbulent across all sectors but, in particular, the housing market has faced significant turmoil as the pandemic has triggered exponential rises in house prices. For example, the average asking price of houses rose by nearly £40,000 in the two years since the pandemic began, in comparison to just £9000 between 2018 and 2020.

This shifting market has created clear winners and losers, leaving many priced out of owning a home. However, the effects of the UK’s chronic shortage of Affordable Housing have not been felt equally. With nearly half of the UK’s homeowner wealth in the hands of the over 65s, the generational gap in the housing market is more distinct than ever before.

Generation rent

For many millennials, the prospect of owning their own home is a distant dream, with young people half as likely to own their home at the age of 30 than baby boomers. As rents have risen to record heights of more than £1,000 a month, the disadvantages of being unable to access the property ladder are becoming increasingly pressing. Equally, with current statics suggesting there are 25 million surplus bedrooms in England alone, this disparity in ownership seems surprising. However, with older individuals increasingly putting off downsizing, the reasoning for these unused rooms is clear.

Despite this surplus of space, younger generations are facing a shortage of Affordable Housing which is even leaving them at risk of homelessness. Currently, there are 274,000 people experiencing homelessness in England, of which 126,000 are children. With research suggesting we need 145,000 Affordable Homes to be built in England each year by 2031 to truly tackle this issue, the need for increased provision of Affordable Housing to address the generational housing gap is clear.

Yet, with the delivery of Affordable Housing falling by 12% over 2021, the government can’t be left to face this alone. Partnerships, such as HSPG’s collaborations with local authorities can help drive improved provision of this housing, while supporting local authorities in meeting their obligations to provide housing under the Homelessness Reduction Act 2017. This Affordable Housing can offer the younger generation a helping hand in getting on to the property ladder.

Putting health first

This widening gap in generational housing equality has a significant effect on the lives of those left unable to achieve home ownership. At HSPG, we know that a house is more than just ‘bricks and mortar’, it is vital for improved wellbeing and can offer people better opportunities in their lives.

For example, the charity Mind recognises poor housing as a key contributor to worsening mental health. According to the English Housing Survey, renters are more likely to be dissatisfied with their homes, meaning that generation rent could be left facing broader health problems.

In fact, good quality housing is even more crucial for the younger generation as it has a lasting impact on their lives. For example, children who have experienced homelessness are three to four times more likely to experience mental health issues, even after they have been rehomed. Clearly, addressing the housing market’s generational inequality with increased provision of good quality Affordable Housing is matter of protecting the health of younger generations.

Time for action

The generational inequalities in the housing market have been vastly exacerbated by the UK’s chronic shortage of Affordable Housing. In 2017 the government set a target of building 300,000 news homes each year, but this has consistently been missed. With the delivery of Affordable Housing continuing to fall by 12% over 2021, it is time for action rather than targets.

Equally, with the average price of a home rising by a further 12.6% in February, the need for affordable homes has never been more pressing. At the same time, rising inflation and expectations that energy bills could rise by more than 40% this Spring is leaving many people facing significant financial challenges. These financial pressures and the shortage of Affordable Housing mean that homeownership is becoming an increasingly distant dream for many of the younger generation.

As we continue to grapple with the current ongoing economic difficulties, we must seek to tackle the generational inequalities in our housing market. With home ownership offering many more benefits than just four walls to call your own, the impact of generation rent’s inability to reach the property ladder is extensive. Improving the provision of Affordable Housing will be the key to truly addressing our widening generational housing gap.

Comments 3

  1. So now as well as demonising landlords attention is now turning to the over sixty fives to blame for the greedy way they are holding onto the houses they spent most of their working lives paying for. Yes, it probably was easier for them to get on the property ladder back in the day, but so what?
    Things are different now. All this demonising of innocent parties is a smoke screen to cover up the fact that housing supply has not kept up with population growth due to lack of government action, property developers’ are allowed to drip feed the market to keep prices high and land bank rather than build, councils sell off social housing and don’t replace it. Government policy tends to favour a low wage economy such that many jobs these days are rubbish, low paid, gig economy, zero hours with no job security and no career progression, so that wages stay low for a lifetime and have to be topped up with tax credits, housing benefit and the like to allow people to exist, while never allowing them to afford a place of their own unless they rent and that is getting harder as landlords have to be picky and have to pass the expense of every landlord bashing piece of legislation onto tenants as they have no choice.
    There might 25 million spare rooms but once again so what? Should everybody with a spare room be forced to put a homeless person in it? Most older people are well established and like familiar surroundings and prefer to stay in the same area. Classic retirement bungalows sell at a premium and are hard to find in many locations so there is no real financial incentive to move with all the attendant cost and hassle. In many cases it is cheaper to stay put, install a stair lift, slab over the garden, put in raised beds, keep a spare room for guests and close the others off rather than actually downsize.

  2. northernlandlord states it as it is. If you cut through all the political rubbish most of the problems come down to supply and demand. To few houses and too many people seeking them set the prices. Rental property is becoming more difficult due to landlord bashing driving landlords out of the market (a government policy it would appear) I get a little tired of the slanted whinges. They refer to the baby boomers who had it easy – yeah sure 15.25% mortgage interest was easy; they will be moaning at 8%. So these people expect older generations to be moved out of their home so others can move in. I as a babyboomer has no possibility of renting as the Rent Act 1977 stopped renting as it was not viable for landlords so they left the market. A few years on and the lefties are back on the rent control hobby horse having not learnt from history. Had I been up north I would not have had any chance of social mobility as you could not eaily rent in the more prosperous part of the country at the time to get a better paid job.

  3. Quite right Will 2. I get fed up of the rhetoric that the so called baby boomers (you and I) had it easy when they were buying houses in the seventies. The prices might look like peanuts now but don’t forget seventies wages were also peanuts.
    These days we have the 28/36 affordability rule for income spent on mortgage. This says that to be affordable your mortgage payment should not be more than 28% of your monthly pre-tax income and 36% of your total debt. So let’s compare 1977 (when I bought my first house) to now.
    In 1977 Mr Average earned £3,640 and Ms Average earned £2272 (not much hint of equality then). A gross combined income of £417/month (£5012 pa). Average house cost was £11600. Credit was tight and interest rates high at the time and you had to have a pretty stiff interview with the Building Society to get a mortgage. So, 10% down and a mortgage of £133 month (25 years at 15%). Percentage of gross income spent on mortgage 31.9%.
    Average house price now £274,000 Mr and Ms Average combined salary £49,200. Gross income £4100 month. !0% down, mortgage of £246,600 or £1,169 month (25 years at 3%). Percentage of gross income spent on mortgage 28.5%. Of course using averages is a bit risky but suffice to say actual affordability has not changed much then till now. If affordability does not actually govern the market it must be a major factor. Ultimately if people can’t afford to buy, nothing will be sold and prices will adjust. As wages rise the affordability of mortgages increases. Our 2022 Mr and Ms Average who buy now could potentially have a paid for million pound plus house in 25 years. People will probably moan at them as well, saying it was easy for them too, but I expect look closely and the affordability ratios might still be similar. Remember also that back in the seventies many people could not afford the “peanut” prices, just the same as everybody cannot afford house prices now.

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