Housing fairness across the generations

Property owners of my generation or older have done extraordinarily well. House prices have risen 4,300 per cent over the last forty years, so despite occasional house price decreases, regional variations and interest rate spikes, capital gains from home-ownership have outweighed interest costs, giving many of us housing for free.

There is a widening gulf between young and old, and this contributes to growing inequality. Between 1997 and 2010, the average income required to become a first-time buyer rose from £20,000 to £40,000.  26 per cent of people aged between 20 and 34 live with their parents, and as many as 90 per cent of first-time buyers only achieve ownership with financial help from the family. 

This adds intra-generational to trans-generational inequality, and has driven government to support the mortgage market through interventions like help to buy, which may be relatively easy to initiate as a policy, but very hard for a government to get out of: FannieMae and FreddieMac in the US started as temporary initiatives, but are now institutions which represent a permanent government underpin to the housing market.

By contrast, 83 per cent of over 60’s in England own their own home, and 64 per cent of them don’t have a mortgage. This means they have around £1.2 trillion un-mortgaged housing wealth. A third of them say they want to downsize, but the right accommodation isn’t available, in the right places – near the “three F’s” of Family, Friends and Facilities - and at the right price.  They need more, better-designed, specialist housing, low-maintenance, energy-efficient, and easily adaptable to enable people to live independently for longer.  If those who want to could move, it would free-up over four million properties, many of them suitable for the next generation of families.

We need a housing policy that focuses on both the first-time and the last-time buyers, that supports the creation of enough specialist housing to meet the demands of all segments of the population, and that does so across a range of tenures: owner-occupation, private rental and affordable or social. 

‘Enough’ in this context implies a doubling of current completions to over 200,000 homes annually. The money to fund this level of house building is available, including from long-term institutions like Legal & General. Our pipeline for example includes funding for 25,000 homes across a variety of tenures, and we are only just scratching the surface of what can be done.

Building the right houses, in scale, would create enough variety to ensure easy up-shifting and down-shifting as family and individual circumstances change.  We all have an emotional attachment to our house.  Many also see property as a vital part of the personal balance sheet - ‘my house is my pension’ – and indeed housing assets for many hugely outweigh pension or other savings.  But most are unable to use it as such, for example to augment income in retirement, either by downshifting or by releasing some equity. 

Equity release is a very under-developed market in the UK – contrast the reverse mortgage market in the US – but we need this market to work alongside new building if we are to develop housing solutions that help address the problem of intergenerational fairness.

Planning reform is an important part of the mix.  Things are improving, and the measures announced by the Chancellor for brownfield sites in his Mansion House speech will help further.  But we need to tackle the thorny issue of the green belt. This has expanded from just over 1.5 million acres in 1979 to over 4 million today – not all of it beautiful by any means. There is again an intergenerational issue at play: should the baby-boomers have the right to sole enjoyment of this asset at the cost of preventing the next generation getting on the housing ladder?  We need bravery and objectivity from our politicians on this issue.

Housing, quite rightly, is rising up the political agenda after decades stuck in a backwater. The issues are challenging, but they need to be addressed – both to help an increasingly long-lived elderly population, and to help younger people avoid inequality traps. It may be hopeful to expect a return to the post-War period when housing was front-and centre for politicians like Nye Bevan and Harold MacMillan.  But I hope for a pre-election debate about housing that is rational, passionate but above all productive, and in which we as builders and funders of housing will take a full part.

Nigel Wilson is the chief executive of Legal & General. He will be speaking at CIH Housing 2014.To book your place click here.

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