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Housing more affordable - but first-time buyers struggle to get on ladder

Housing has become more affordable for existing home owners, but less so for those trying to get on the property ladder, according to a report.

In an overview of England's housing market, the National Audit Office (NAO) said the need for housing has grown faster than supply, and to keep up, housebuilding needs to increase across the country.

The Government's target of increasing the supply of homes by one million by 2020 will not require a substantial increase in current levels of housebuilding, the report said.

The NAO said: "Although owner-occupation has become more affordable in recent years, it has also become harder for people to become home owners in the first place."

In 1990, first‑time buyers in the UK on average paid a deposit of 13%, which increased to more than 28% in 2009, but has since fallen to just over 21%, the report said. The average amounts borrowed as a proportion of the buyer's income have also increased, from 2.3 times average income in 2000 to 3.2 times average income in 2014.

The NAO added that for existing home owners, low interest rates have helped to make mortgage payments relatively affordable. Since 2008, the proportion of UK owner‑occupiers who spend at least 25% of their disposable income on housing has halved, falling from 40% to 19% of people with a mortgage. The incomes of retired households, many of whom own their home outright, have also generally grown faster than those of other households in recent years, the report said.

The NAO also said projections suggest there will be at least 227,000 new households formed each year between 2011 and 2021 - "substantially" higher than the annual average of 166,000 extra homes in England over the last 10 years.

The Government's ambition to boost the housing supply by one million homes by 2020 would not require a substantial change to the number of new homes which have already been built across England in recent years, the report found.

To do this would require 174,000 net additions to the housing stock each year, including newly-built homes as well as converted properties. While this annual number is greater than the number of homes being created yearly immediately following the 2008 downturn, it is lower than in 2015-16, when around 190,000 homes were added to the stock in England.

But there could be risks should there be a reduction to market activity following the decision to leave the EU, the report said.

In June 2016, the month of the EU referendum, major UK developers saw an average drop in share value of 22% the report said, adding that it will be some time before the longer-term impacts of the referendum are known.

Homelessness has also increased over the past five years, the NAO said. At the end of March 2016, 71,500 homeless households in England were in temporary accommodation, up from around 48,000 in 2010-11.

It said changes to one area of housing policy can also impact on other areas. In July 2015, for example, the Government announced a reduction in the rents housing associations and local authorities could charge of 1% per year. This reduced the ability of housing associations to finance the construction of new housing, the NAO said.

Amyas Morse, head of the NAO, said: "The need for housing in England has in recent years grown faster than its supply, and housebuilding needs to increase across the country.

"The Government has responded to this by putting in place a range of policies to increase housing supply and home ownership.

"Central to this is an ambition to increase the supply of housing by one million homes by 2020, largely through support to private house builders. Delivery of this target will not require a substantial increase in current levels of house building."

A spokeswoman for the Department for Communities and Local Government said: "Housebuilding has reached its highest level in eight years.

"We've got the country building again with nearly 900,000 homes delivered and helped more than 362,000 households to buy a home since 2010. We know there's more to do - that's why we're investing more than £25 billion in housing and have the largest affordable housing programme of any government since the 1970s.

"Ministers will set out further plans to boost housebuilding in our Housing White Paper to make this a country that works for everyone."

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