The "Housing Ladder" is broken.

The Economist reports that the private rental sector is still seen as a transition zone where people save for a mortgage deposit and then begin to climb the housing ladder. No more.

"The ladder is deeply embedded into British thinking. On its most narrow definition, it is usually taken to mean the idea of first-time buyers purchasing a modest dwelling (a flat, say) and then trading up to something larger as their incomes grow and their housing equity increases."

Between 1961 and 2001 the proportion of owner-occupied housing increased from ~40% to ~70%. Now it is falling.

Only a third of those aged thirty are owner-occupiers and affordability and borrowing constraints limited the ability to “trade up”.

"Talk of reforming the planning system to increase English house-building to 300,000 new units a year is welcome. But the most optimistic analysts believe that even a decade of building at such levels would reduce house prices by only around 10%; the house-price-to-earnings ratio would still be around seven."

It is not just the young who will suffer.

"In 2021 there were almost 1.2m private-sector tenants in England aged between 45 and 64, a rise of 70% on a decade before. As they begin to retire over the coming decade their incomes will fall but their housing costs will not. The result will be a large rise in pensioner poverty, a large rise in the housing-benefit bill as the government subsidises their housing costs, or, most probably, some combination of the two."

More in The Economist

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