Why has buying a home become so difficult for young people in Britain?
In this Funding the Future podcast, I talk to my son James about the extraordinary generational divide in housing.
When I was 25, I bought a three-bedroom flat in London for £28,500 with a deposit of just £250. Young people today can face house prices approaching £300,000 or considerably more, while being expected to find deposits of many tens of thousands of pounds.
At the same time, high rents make saving increasingly difficult. Student loan repayments reduce disposable income and can also affect mortgage affordability, and for those without access to the bank of mum and dad, home ownership can seem impossibly distant.
But this is about much more than house prices.
James argues that young people need permanence, independence and somewhere they can genuinely call home. Housing insecurity affects relationships, decisions about having children, careers and people's ability to build independent lives.
We discuss social housing, affordable rents, shared ownership, rent controls and whether government should help provide long-term, predictable housing finance.
The housing market my generation entered no longer exists. Telling young people simply to work harder and save more does not address that reality.
If the market cannot provide affordable, secure homes, government must act, and we discussed what it might do. We hope Andy Burnham is listening.
This is the audio version:
There is no transcript for this podcast, but this is my summary of the discussion:
Why housing has become unaffordable for young people
I recently recorded a Funding the Future podcast with my son, James, who also works with me on Funding the Future. We discussed something that divides our generations in a way that is hard to ignore: housing.
When I was 25, I bought my first home in London. I was able to borrow roughly three times my earnings and bought a three-bedroom flat in Tooting for £28,500. My deposit was £250, or less than one per cent of the purchase price.
James is now around the age I was then. His experience could hardly be more different.
The average UK house price is now around £273,000. A 20 per cent deposit on that is about £55,000. In places such as Ely, where we live, homes can easily cost £300,000 to £400,000, making even a five per cent deposit a considerable obstacle.
That is before considering the difficulty of saving.
James pointed out that large numbers of young people are spending an extraordinary proportion of their income on rent. For some, half their monthly salary disappears simply to secure somewhere to live. Once travel, food, energy and the ordinary costs of having a life are taken into account, saving tens of thousands of pounds for a deposit becomes almost impossible.
Student debt makes matters worse. Under the current Plan 5 arrangements, graduates repay nine per cent of income above £25,000. When income tax and National Insurance are added, the marginal deduction rate for someone earning only a little over that amount can reach 37 per cent.
There is another sting in the tail. Student loan repayments are also taken into account when mortgage lenders assess affordability. Young graduates therefore face something that looks like a tax when it is deducted from their pay and like a debt when they try to borrow to buy a home.
James described that as the worst of both worlds. I think he has a point.
The result is a profound inequality between those young people who have access to the bank of mum and dad and those who do not. Those whose parents can provide a deposit, clear student debt or offer other financial support have an enormous advantage over those who must rely entirely upon their own income.
But our discussion went beyond the numbers.
James made what I thought was one of the most important observations in the podcast. Young people should not have to choose between living their lives and saving enough money to have somewhere permanent to live.
Housing is about much more than property ownership. It is about having a home.
Without secure housing, relationships, decisions about having children, careers and people's sense of belonging are all affected. A generation living in temporary accommodation, expensive rented housing or back in their parents' homes because there is no realistic alternative is being denied something previous generations took much more readily for granted.
James described this as a lack of permanence and a lack of place. I think that matters enormously.
So what can be done?
We agreed that simply building more expensive private housing is not enough. Building £400,000 executive homes does nothing for a young person who cannot afford the deposit or mortgage required to buy one.
We need substantially more social housing. We also need genuinely affordable housing designed around people's incomes rather than developers' desired selling prices.
We discussed whether rent controls should have a role. We considered shared ownership. We also discussed whether government could take much of the instability out of housing finance by providing, directly or through a public institution, long-term mortgages at fair and predictable rates.
James was also clear that he would have no objection to living in council or housing association accommodation. As he put it, a home is a home. What matters is that it is good, the rent is fair and the tenant is treated properly.
That suggests something important about what housing policy should be trying to achieve.
There needs to be a realistic route between living in the parental home and having a permanent home of your own. Secure social or affordable rented housing could provide that transition, allowing young people to establish independent lives while also giving them the chance to save if they eventually want to buy.
The housing market I entered nearly 45 years ago no longer exists. Pretending that today's young people can achieve what my generation did simply by working harder or saving more is absurd. The economic circumstances are fundamentally different.
And not everyone has a bank of mum and dad.
Housing is an essential need. It has to be paid for before almost anything else in life can happen. That is precisely why housing costs matter so much when we measure poverty.
If the market cannot provide secure and affordable homes for a generation of young people, government has to act.
That was where James and I ended up agreeing.
The ball is now in the government's court.
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I suggest reading
https://policy.bristoluniversitypress.co.uk/the-property-lobby
But a few observations
1. Richard, when you and I first bought it wasnt easy to get finance for ‘non owner occupied’ homes and almost all mortgages were provided by Building Societies who all offered the same ‘loan to income’ ratio which kept a lid on potential property price increases. BUT second homes in Wales were already an issue so it wasnt perfect.
2. ‘Buy to Let’ and ‘AirBnB’ etc purchasers are known to be less ‘price sensitive’ than owner occupiers so are tending to ‘bid up’ prices
3. A lot of property in London has been bought by non resident owners mostly as a ‘money box’ with multi million pound luxury homes going to rack and ruin. Much of this money is ‘suspicious’ to say the least. This has pushed up property prices in London allowing DFL’s (Down From London) buyers to inflate prices outside the capital
4. The ‘Big 4’ Housebuilders restrict the build out rate so as not to depress prices
5. The Right Wing Bow Group have suggested that The Government sets a target House Priced to Earnings Ratio and adopts policies to ensure that its met, including restrictions on sale of land and property in the UK to non UK nationals
6. You pay very little in tax to own property in the UK so if you are a non UK resident holding it as a ‘money box’ its very attractive.
I would suggest that – and this is limited by the post length allowed
There needs to be severe restrictions on purchasing property that is not for owner occupation
Build more Council Houses
Planning Consents need to include the ‘build out rate’ for large developments AND sale prices
Controls on mortgage lending
Much to agree with
High house prices are strongly influenced by neoliberalism which seeks to make as much profit as possible, regardless of human needs.
Thatcher began by selling off council home, initially to tenants who then sold them on to private owners.
Private equity companies have also bought large portfolios of residential UK houses so it can rent them at ever-increasing prices.
Sources:
Blackstone bets on UK rental homes in $740 million deal, By Reuters (June 2024)
How Blackstone killed the homeowner Zombie foreclosures are a democratic horror show (Sep 2025) (US)
Thank you
If the prices of eggs had risen at the same rate as house prices since 1955 they would now cost £32.50 a dozen.
There are over 1.5 million derelict houses in the UK, over a million unbuilt homes with planning permission, and an estimated 165,000 empty commercial properties that could be renovated. So there is much room for improvement before mandating a massive amount of new builds, most of it on Green Belt land.
https://homesforeveryone.org/
I am goping to look into that
But your statistic is wrong. £11.00 would be the current price of eggs using ONS and Nationwide data.
I agree with your conclusions.
Apologies, I should have mentioned that figure came from a BBC report, which was quoting research by Professor Paul Cheshire at LSE:
https://www.bbc.co.uk/news/articles/cgewlld498xo
No problem.
I cannot reproduce it. What I can produce is still stark, and I may use it.
I bought my current home in the early 1990s when interest rates were over 10%. At that time mortgages were governed by loan to income ratio. This was abandoned after the 2008 bank crash. Affordability was the used to set mortgage levels. At that time rates were close to zero which allowed high loan to price to income ratio. As house prices are determined by what a lender will loan they rose to meet the loans.
See my post on QE this morning.
Osborne provided more than £100 billion to banks to specifically boost mortgage lending. House price inflation was the inevitable consequence.
My Dad used to think that back in the days of full-employment you should be able to buy your house from the government – having seen it build for rent, he thought why not for buying too – the scale of it would make it affordable and in his own way he realised back then that the state cannot run out of money. He also thought that if you owned it you would look after it. Having seen how some tenants behave, he had a point.
All I see from Labour is a crude numbers game that will eat up green space which I think will be a big mistake. They think it is a ‘supply’ side problem’. No – its a system problem.
Central government has walked away from providing local government support to the management and maintenance of existing stock. Housing Revenue Accounts (HRAs) are now stand alone capital management facilities meeting supply of new stock AND maintenance of existing (some still paying down the debt that made their housing stock many years ago!). RTB sales are still allowed but now restricted but all the sales the Tories allowed under their lower qualifying criteria are still being processed as I write. At some point, HRAs will cross a line where they will have used up their reserves for development and will just need money to maintain and manage (they are creating assets AND liabilities when they build). They may have to sell off stock to maintain their residual.
The only answer is what Richard suggests – the state MUST put its hands in its pockets and invest in management, maintenance, relieve overhanging debt AND new build. Yet all we still have is Thatcherism even after all these years.
We agree….now, there’s a first!
That’s interesting………I always thought I supported your views on most things – maybe detail differences here and there and perspectives. I means that’s why I come here. You’ve taken an awful lot of beatings over the years. Hmmm……………..
I was joking!
“Council Housing” of the past was always built to a high standard and was usually accompanied by a spacious garden, enabling occupants to live decently and thrive.
Modern, privately built housing, by comparison, even when specified as “Affordable”, generally are poorly built (to maintain profit margins) with a pocket handkerchief size garden.
Shared ownership schemes often result in the rent for the un-purchased part of the property being higher than it would be if it were mortgaged. Also, these schemes, shared ownership, longer mortgages. assisted buying etc do not get to the root cause of the problem and only maintain high housing costs.
Land prices are a big proportion of housing costs and If the government, etc, can compulsorily purchase land for the wasteful HS2 then surely it can compulsorily purchase land for housing. Only at agricultural land prices though, or whatever the current use of the land is, not at housing prices.
Coupled with not for profit organisations to build housing with directly employed trades/subcontractors, organisations such as local councils, could significantly reduce house prices.
Probably doesn’t suit the lobbying property developing or land owning fraternity though
Much to agree with
Hamish
You need to watch Adam Curtis’ ‘The Great British Housing Disaster’ (1984). It was on Youtube. It is a documentary about the the use of ‘system build’ housing – using concrete slabs with cast iron linkages – that were used to create the outer skins of the superstructures of many new council homes – flats and houses (with names like Unity, Airey, Reema etc). There have been huge problems with poor quality manufacture in the factories to poor quality assembly on site and a heck of a lot of it has had to be demolished or re-skinned with proper brick and insulation despite big gardens etc. All this was done to speed up the much needed provision of units. It’s cost a lot of money to put right. Some of this housing still exists and even the short life system build housing (shelf life 35 years) is now in it’s 70th plus year and defined as unfit housing under the 1985 Housing Act and is still being used.
That aside I will go back to the existence of ‘overhanging debt’ on housing revenue accounts (HRA) – where it seems to me the cost of central government housing policy programmes was unfairly in my view placed on some local authorities (just an accounting exercise). Birmingham City Council for example is reportedly £3.35 million in debt and £1.27 million of that is in the HRA still paying down the cost of its council housing and more borrowing is anticipated to improve its stock. I mean WTF? What is government playing at?
This supports my view that rather that austerity in this country being sporadic, it has ALWAYS been at play in the public sector – it is hard wired into the Treasury.
The other distorting factor, not mentioned, is housing benefit. A son is engaged to a single mother of 1, part-time job, housing benefit. If they move into a cheap house they could afford, she loses housing benefit, currently more than income from part-time job. This sort of situation is probably not rare.
It is shocking the amount of incorrect information that is circulating. For working age people housing benefit no longer exists – all ongoing claims have moved to universal credit. What used to be called housing benefit was replaced by the housing costs element of universal credit. The overall amount paid by universal credit reduces by £0.55 for every £1 of additional earnings so that earning more almost always makes people better off overall.
However, the problem you appear to be looking at is the change in benefit entitlement if two households merge. That has always been a problem and never had much to do with housing benefit per se.
For James
https://propertytorenovate.co.uk/search?place=cambridgeshire%2Fely&radius=15&min_price=&max_price=120000&min_beds=2&types=127&sort=newest&bbox=
Type location (Ely or otherwise) within 15 miles, max price say £120k and min beds 2… see what comes up. I am looking at Dereham. Always read the buyers pack and get advice if unsure. I will be in Ely next month so will be able to give you some in depth hands on advice if this is a possible path. Having worked in property maintenance most of my life I am acutely aware of the housing problems in this country.
Like with anything in life you need luck, but in my experience you can make your own luck. Then all you need is shear determination.
But there is a good reason why many of these are cheap – they are literally in the middle of nowhere. I cannot imagine who would want to live where most of these are. Sorry. I can do country, but not as isolated as these are.
I cant comment on properties around Ely or the ins and outs of life there BUT
I have lived in the country and first you get hit by an awful lot of driving as you cant even get a paper or a pint of milk without getting in the car as either everywhere is to far away and/or there is no safe walking route, bus etc.
Then there are the additional costs of no gas or mains drainage – ‘So How’s your Septic Tank then’ and the likelihood that you will be required to replace it either when you buy or in the future.
Then there is the cost of ‘doing up’ a property which can wildly exceed your budget and goodness only knows what you can come across in the process – and you need the skills to ‘project manage’ it.
So buying a ‘fixer upper’ let alone in the out of town can be a very difficult and expensive experience
Agreed.
I often wonder what happens to housing prices when we, the Baby Boomers, depart from our mortal coil. Any thoughts?
Ownership gets ever more concentrated. Other factors will cause the fall – and will come much sooner.
David Byrne says:
In the words of Dean Baker and Robert Reich, “We are all being shafted”.
In particular, the plight of the young in the UK is caused by deliberate government policy and a failure to regulate.