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Who is being affected by the housing crisis?

Posted on 26 July 2013 .
Tags: Shelter, bank of mum and dad, first-time buyer, housing market

Across the country, and especially in the South East and London, demand for housing is outstripping supply. For those already making their way up the ladder, rising house prices might be good news. But for those yet to buy, a lack of housing coupled with soaring prices is not a good combination and there is talk of a ‘housing crisis’.

We have already highlighted the negative effects that a poor housing situation can have on people, especially children, for example: the longer children live in bad housing, the more likely they are to face health problems, to be bullied and struggle to keep up with their homework. And our work on Generation Rent highlighted the extent of younger people who have little or no expectation of getting on the housing ladder.

Shelter, the housing charity, is commissioning a series of projects in an attempt to highlight the realities of the housing market. They asked us to look at the extent to which first-time buyers receive financial support from friends or family when getting together the money for their deposit.

We found that between 2011-2012, nearly four in ten first-time buyers received financial assistance from a friend or family member in one form or another. This compares to around two in ten in 2005-2006 and three in ten between 2007-2008. Considering financial assistance just from parents, 27% of first-time home purchases in the years following the financial crash were completed using a gift or loan from parents, up ten percentage points on the pre-crisis period. So it’s not just the lack of housing, the economic climate seems to be having an impact too (although, of course, these figures do not prove cause and effect).

Where parents contributed to the deposit for first-time homes, they gave or loaned £17,000 on average, amounting to 58% of the total deposit. On this basis, we estimate that the total annual parental contribution to the housing market is £2bn. Shelter have pointed out that this is nearly double the £1.1bn the government inEngland is spending on affordable housing schemes.

This report makes clear then that it’s not just those who are yet to get a foot on the ladder that are paying for the current state of the housing market but it’s their (probably homeowning) parents too.

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