The latest annual analysis of the housing market covering every local authority area across Great Britain shows house-price to household-income ratios for working households has reached record levels.The geography of affordable and unaffordable housing by Steve Wilcox specifically looks at the difficulties facing younger working households (aged 20-39) in buying homes within their local area in 2005.
Published by the Joseph Rowntree Foundation, building on earlier studies produced annually since 2002, the report analyses the long-term trends in housing market affordability. Using these analyses, the author highlights implications for regional and national housing policy to help address some of the challenges facing younger households unable to buy their first home. The report shows that while lower interest rates softened the impact of higher house prices, mortgage cost to income ratios reached 1990 peak levels.
House price to household income ratios for younger working households exceeded five to one in 78 areas – over twice as many as in 2004. In 51 areas, over two in five younger working households can afford a social sector rent without housing benefit but cannot afford to buy in the cheapest tenth of the housing market. The author describes working households who cannot afford full ownership as falling within the ‘intermediate housing market’ and presents a full analysis of what they currently face and what might help them get a foot on the first rung of the home ownership ladder.
While house price to income ratios are highest in London, access to home ownership is most problematic in the South West. The South East as a whole is almost as unaffordable as London and the South West, and there are unaffordable ‘hot spots’ in all regions. Overall, Scotland is the most affordable part of Great Britain. But even within the more affordable regions there are local areas where affordability is far more acute; some of the least affordable areas in the country are in the northern regions of England.
The report explores housing market products, policies and strategies that may help working households access home ownership in some form. For example, using various forms of shared ownership where a family cannot afford to buy outright, or moving to an adjacent area to increase affordability.
Professor Steve Wilcox of the University of York said, “The case has already been made for the supply of market and affordable housing needing to keep pace with levels of household formation to avoid more acute problems of affordability. But with both house price and mortgage cost to income ratios at peak levels, additional assistance, in one form or another, is required for working households priced out of the market.”
Policy options that facilitate mobility, instead of trying to provide solutions in local areas where families currently reside or are homeless, should be explored, suggests the author. He cites an example where a Greater London Council scheme provided seaside or rural retirement homes for London residents. As well as meeting the aspirations of the households concerned, the scheme was a very cost-effective way of releasing family-sized rented accommodation in London.
“Regional and national housing market policy needs to review more critically the ‘where’ as well as the ‘how’ of policy interventions. Moving to a cheaper area where a household can buy outright, rather than remaining in a more expensive area where the household can afford only shared ownership, may well be a better long-term strategy in terms of housing market choices over a lifetime,” he concluded.