Labour slams ‘housing crisis’ as figures show young people unable to even buy cheapest homes
Soaring house prices have led to a drastic fall in the number of young people able to afford the cheapest home in their area, according to a thinktank.
The Institute for Fiscal Studies (IFS) found that of those between 25 and 34 with a 10% deposit, just 60% could borrow enough money to purchase a house nearby.
In 1996 over 90% of the age group would have been able to purchase a house in their area if they borrowed 4½ times their salary.
In London just one in three are able to afford a home, compared to 1996 when 90% of young adults in the capital could.
The body found a real terms jump in house prices in England of 173% since 1997, while young adults’ pay had gone up by just 19%.
In 2016, around half of the group would have needed to save more than six months of their post-tax income to raise a 10% deposit on one of the cheapest properties in their area, compared with just one in ten in 1996.
To buy an average-priced home more than three quarters of young adults would need a deposit worth six months’ income or more, up from one third in 1996.
In London, 95% of young adults would need to save at half a year’s earnings for a deposit on an average-priced home in their area, compared to just over half in Yorkshire and the North East.
The IFS also found that the biggest rises in house prices happened before the financial crisis in 2008, with only London, the southeast and the east of England being where average real house prices are above their pre-crisis level.
Shadow Housing Secretary John Healey said: “This report adds to the mounting evidence of a housing crisis that Tory Ministers are failing to fix.
“During the last eight years, Ministers have slashed spending on new affordable housing and outsourced building the new homes the country needs to big developers, so there are now one million fewer under 45s who own their home than in 2010.
Polly Simpson, a Research Economist at IFS and a co-author of the research, said: “Big increases in house prices compared to incomes over the last two decades mean that it is increasingly difficult for young adults to get on the housing ladder, even if they do manage to save a 10% deposit.
“Many young adults cannot borrow enough to buy a cheap home in their area, let alone an average-priced one.
“These trends have increased inequality between older and younger generations, and within the younger generation too.”