industry news 7
Redfern Review calls for new approach to decline in ownership
in the number of home owners. The report calls for a long-term, cross-party approach to housing issues. Led by Pete Redfern, chief executive of Taylor
T
Wimpey, the Redfern Review is an independent report commissioned by Shadow Secretary of State for Housing, John Healey MP, supported by an advisory panel of Terrie Alafat CBE, Dame Kate Barker CBE, Andy Gray and Ian Mulheirn. Among the findings was a 6.2 per cent fall in
homeownership between 2012 and 2014, the fact that home ownership is the tenure of choice for 80 per cent of the UK, and that declines in home ownership have been steepest among young people. It is the most comprehensive review into home
ownership and the wider housing market in over a decade and draws on bespoke polling, focus group evidence and expert analysis, as well as new modelling from Oxford Economics. It also suggests areas for discussion and future policy development that “could improve the housing position of young people in a sustainable way.” The report found that, since its peak in the
early 2000s, the rate of home ownership has fallen significantly in England and the UK, falling from 70.9 per cent in England in 2003, to 63.6 per cent in 2014/15. The declines have been the steepest among young people. The Redfern Review has been supported and challenged by a strong inde- pendent advisory panel and with extensive external modelling commissioned from Oxford
Key policy options
• 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 extended beyond 2021 for this restricted group • Starter Homes should be retained but on exception sites only and with the first time buyer discount retained in perpetuity • More support should be given to programmes that promote savings among young people. Te maximum scale of lifetime ISAs should be increased and consideration should be given to increasing the level of Government contribution • Te ‘one for one’ replacement policy for Right to Buy should be extended so that all council homes sold through the scheme are replaced, rather than just some of them • Rental conditions for tenants should be improved while avoiding unnecessarily increasing landlord’s costs
fe
he Redfern Review has been published, revealing that the financial squeeze on young people is at the heart of the decline
Economics to identify the root causes of the fall in home ownership since 2003. The conclusions were divided into those that directly impact home ownership and those that have a more general impact on the housing market. According to the Review, the main drivers of
the reduction in home ownership over the last 12 years are macroeconomic and closely connected with the relative financial strength, in terms of the earning and borrowing power of young people compared to older generations (the key group who will contribute to and benefit from increases in home ownership rates.) It warns that policy changes can be made that
help mitigate some of these impacts, but adds “if the trends continue, the long term impacts will not be limited purely to housing.” Even with a significant increase in supply, “home ownership rates will not necessarily increase (but supply increases would be in the interests of the younger age group of potential buyers)”. “To genuinely increase the home ownership rates,” the report suggests, “we need to challenge relative wage rates, mortgage lending standards or provide specific subsidies for certain ‘qualifying’ groups.” It also warned that targeting a specific home ownership level “is not only difficult, but may also be damaging”, and asserted that “we must continue to focus on the housing situations of individuals in the potential home owning group.” The Redfern Review called for a long term strategy for the housing market. This included
suggesting a long term increase in supply, sustained over 20+ years, which will ‘be needed to reduce overall housing market pressure.’ It also suggested ‘longer-term thinking and cross-party co-operation’, a set of readily deployable “counter-cyclical tools”, a Housing Commission (to be set up in parallel with the Infrastructure Commission) and “improved resourcing for planning departments.” Pete Redfern commented on his review: “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 hous- ing strategy, independent of short term party politics if we are to improve the position in a sustainable way for future generations.” John Healey MP also commented, saying that
the review “sets out the causes of the recent decline in home ownership with unprecedented analytical rigour and detail, drawing on extensive new modelling by Oxford Economics, as well as bespoke national polling, focus groups and wide-ranging input from housing professionals and experts.”
Primary causes of the decline in home ownership, according to the Review
Te Redfer ern Revievie w of ho m wnershi p
into the declline e own
• Te biggest contribution to the fall in the home ownership rate aſter 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. Tis is estimated to have cut 3.8 per cent off the UK home ownership rate from 2002 to the end of 2014 • Te biggest contributor to the fall in the home ownership rate before the financial crisis was the rapid increase in house prices. Between 2002 and 2014, higher real house prices are estimated to have reduced the private home ownership rate by 2.6 per cent • Te third major driver of the fall has been the decline in the incomes of younger peo- ple, aged 28-40, relative to people aged 40-65, i.e. the income of first time buyers relative to that of non-first time buyers. Tis younger age group’s average income fell from approximate parity with the over-40s to some 10 per cent below in the wake of the financial crisis. Tis reduced the relative buying power of would-be first time buyers, pulling down the home ownership rate over the period by around 1.4 per cent
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