A new report has emerged claiming under-occupancy and a lack of affordability caused by a growing and ageing population is more to blame for the housing crisis than a lack of new homes.
The analysis by the Cass Business School for think tank the Centre for the Study of Financial Innovation (CSFI) claims that there are too many second and empty homes, and that housing stock is high enough to meet current demand, on paper at least.
Using a new concept known as the Dwelling Index, the research assesses growing numbers of older people living alone or in couples, as well as the number of unoccupied homes across the UK. It suggests that these upward trends are set to continue over the next two decades.
It also points out that this is having a significant impact on the UK’s ability to satisfy current needs, and that this is likely to continue. Between 2020 and 2030, the number of households is set to rise by around two million to 30.7 million, but 35% of the increase will be made up of older households, with almost two thirds being occupied by just one person.
Meanwhile, further household growth of around 1.6 million is forecast for the decade between 2030 and 2040, taking the overall total to 32.3 million. Of these 38% will likely be older households, with 67% being occupied by one person. By contrast, family households are expected to grow by only 1.6% from 6.4 million to 6.5 million between 2020 and 2030 and by 0.5% between 2030 and 2040.
To provide additional context, the analysis, using both the Dwelling Index and government space standards, has compared the type of housing available in the UK with what the public realistically need. It found that while 60% of homes have three or more bedrooms, dwelling needs could comfortably be matched if only 46% had this amount. Generational wealth disparity is therefore likely to be exacerbated, as is the degree of misalignment, as the population ages.
‘The case for downsizing strengthens as people age, but current policies are having a deterrent effect due to high transaction costs and a lack of suitable properties to downsize into. This area needs urgent attention, whether it is building more attractive age-friendly and suitably sized apartments, or more retirement communities,’ the report says.
The research also predicts that significant changes to the overall UK demographic will see house prices fall during the 2020s, as baby boomers slowly die out, allowing for demand from those of working age to level out. These changes will be benefit younger buyers, provided average earnings climb steadily to ease affordability pressures. It adds that, despite the findings, there is still a need for more new homes, but other measures are required to prevent more cases failed occupancy, suggesting that housing stock could be better utilised.
‘This means building more affordable houses for ownership and rent. House builders and local authorities hold the key to investment decisions, with reform of the planning process playing an integral part,’ the report points out.
‘Central Government has the power to reform the planning system and reduce transaction costs, notably taxes, in a targeted way to encourage downsizing,’ it says, adding that currently housing policy is piecemeal and too focused on first time buyers, addressing symptoms rather than the underlying causes.
‘We recommend that attention should also focus on last time buyers to ensure that downsizing plays a bigger role in the solution and the role of financial services is crucial. The industry controls mortgage lending, including equity release, and can also provide housing backed insurance to cover future care costs,’ the report adds.
Reacting to the report, Nick Sanderson, chief executive officer of the Audley Group, said that the Government must prioritise incentives and schemes to support the building of specialist retirement properties and encourage downsizing.
‘The onus shouldn’t sit solely with the Government. The whole housing sector, including mortgage lenders and homebuilders, must be more innovative to support older home buyers. If done correctly the entire country will reap the societal and economic benefits,’ he said.