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Friday, February 16, 2018

Is housing policy in the UK failing young people?

This morning's Guardian contains news of an Institute for Fiscal Studies report that underlines the extent by which young people have been let down by housing policies across the UK.

They conclude that the chances of a young adult on a middle income owning a home in the UK have more than halved in the past two decades, with Wales suffering one of the biggest declines in home ownership amongst the 25-34 age group, from 56% to 34%..

The Institute for Fiscal Studies research shows how an explosion in house prices above income growth has increasingly robbed the younger generation of the ability to buy their own home. They say that for 25- to 34-year-olds earning between £22,200 and £30,600 per year, home ownership fell to just 27% in 2016 from 65% two decades ago. And middle income young adults born in the late 1980s are now no more likely than those lower down the pay scale to own their own home.

Key findings include:
This is a phenomenon that has been recognised for some time amongst housing policy makers. It is why every Welsh Liberal Democrats manifesto for each of the last three Welsh Assembly elections has talked about introducing measures to help young people get on the housing ladder.

Indeed the agreement reached between Welsh Liberal Democrats Education Secretary, Kirsty Williams and the First Minister included a specific proposal to try and address the issue highlighted by the IFS.

We advocated a rent to own scheme whereby those young people who could afford to repay a mortgage but cannot raise the deposit to buy their own home will be able to rent a home at market rent, a percentage of which will be put aside towards a deposit to enable them to buy in five years time.

I have been working with the Welsh Government on this scheme and expect it to be launched soon. However, important as it is, we know that it will just be an ameliorative measure. The real issue is the way house prices have been allowed to soar above the level of wages, as well as the difficulties faced by many young people in getting a mortgage following the 2008 banking crisis.

Thanks to the Liberal Democrats, the Welsh Government can make a small contribution to tackling this problem but all the levers to make a big difference lie with the UK Government and how they manage the economy. In particular, the failure to address housing supply is pushing up prices, whilst the apparent inability to reflate the economy means that wage levels continue to stagnate.

It is time for the UK Government to step up to the plate and deal with this problem.
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