The Home Builders Federation (HBF) are again calling for a government equity loan scheme to support first-time buyers and revive both the housing market and the housebuilding sector
The report on UK home ownership, titled Broken Ladder: The Affordability Gap, highlights the dropping rate of households that own their home.
It shows that in 2003, 71% of households owned their own home, but in 2024 this has dropped significantly to 64.8%.
This leaves 1.5m “missing” homeowners
The report states that if the same rate of ownership in 2003 had been maintained to today, there would be another 1.5m households that own their home.
Furthermore, it highlights the effect this has had on potential homeowners and prices, with every age group under 65 being affected. 35-44 year olds are hit the hardest, with around 800,000 “missing” households, while ages 25-34, 45-54, and 55-64 all missing around 500,000 each.
Additionally, the report shows that while on the surface there is high demand for housing, the conversion into effective demand from buyers who are both willing and financially able to buy a home is becoming more difficult. This is due to the requirements for a deposit rising, stricter lending criteria, higher interest rates, and the rise of house prices being quicker than wage growth.
Most mortgages are issued at loan-to-value rations equal-to or below 90%, meaning generally a deposit of 10% is needed. This means that for a median-earning first-time buyer, if they save half of their remaining disposable income (a feat in itself), it would take an average of more than seven years to acquire a large enough deposit.
After that, the issues do not end. The average first-time buyer home costs £240,000, but due to lending rules and requirements, generally first-time buyers can borrow around £148,000, based on standard income multiples. Even with a 10% deposit, this leaves an affordability gap of nearly £70,000. In London, this can increase to £275,000, depending on the age group.
Neil Jefferson, chief executive of the Home Builders Federation, said: “The gap between what people can afford and the cost of buying a home has become a major barrier to home ownership. For millions of younger households, saving a deposit and bridging that affordability gap is no longer realistic.
“Without Government intervention, home ownership will continue to fall and become the preserve of a smaller, older and wealthier group. Help to Buy demonstrated that well-designed equity loan schemes can support buyers, boost supply and deliver strong returns for taxpayers.
“A new, targeted first-time buyer equity loan scheme, part-funded by developers, would restore access to affordable mortgage finance, support new housing delivery, create jobs and growth and give a new generation a fair chance to get onto the housing ladder.”
“The chancellor must act boldly and decisively if housing delivery is to stand any chance of reversing the decline”
Writing for PBC Today in November, the director of external affairs at the Home Builders Federation, Emma Ramell, discussed the need for first-time buyer support, and why it would have been prudent to bring up in the Autumn Budget last year.
Emma wrote: “One of the most significant challenges facing home builders is the worsening viability crisis, which is already stifling development and deterring investment in future sites across vast parts of the country.
“It is little surprise that viability has reached a breaking point. In recent years, home builders have been confronted with a growing array of new policy costs, taxes, and regulations. According to recent research by Zoopla, building new homes is now financially unviable across almost half (48%) of the country.
“While many of these individual policies, from Biodiversity Net Gain (BNG) and the Residential Property Developer Tax (RPDT) to the forthcoming Future Homes Standard, are well-intentioned, their cumulative impact and rapid introduction have placed intolerable pressure on the industry.”
She continued: “For aspiring homeowners, the barriers keep mounting. Stretched affordability ratios, limited access to mortgage finance, and punishing transaction costs have combined to make home ownership an increasingly distant dream, particularly for those without family wealth to fall back on.
“The latest data from the Office for National Statistics, published in September, paints a bleak picture. In London, the average property is now unaffordable even to households in the top 10% of earners. Across the South East, South West and East of England, only those in the highest income decile can afford the average home.
“Unsurprisingly, without a realistic market for new homes, investment in new sites and labour is being limited. To overcome these challenges, the Government could provide assistance for first-time buyers at the Budget in the form of a new equity loan scheme part-funded by home builders.”
