Tenants Take 22 Years To Save For Home Deposit

Rock-bottom interest rates and an ever-growing selection of cut-price mortgage deals on the market have done little to relieve the pressure on living costs, according to an independent research and policy organisation.

The Resolution Foundation, a think-tank that works to improve the living standards of British families on low to middle incomes, says that the cost of property over the past two decades has had a similar effect on households as a 10% rise in the basic rate of income tax.

A lot has changed in the past 20 years, says Eden Harper – an estate agent with branches in Brixton and Battersea.

In 1996 – the year England hosted the UEFA European Football Championships – a family in rented accommodation that budgeted carefully and put aside 5% of the household’s income each month could save for a deposit on a home of their own in about three years.

With Euro 2016 underway in France, it now takes 22 years to save enough for a deposit on a home.

And that’s not all. Housing costs in London are also becoming less affordable for tenants thanks to a lack of supply of rental properties.

This has pushed up the prices landlords can charge. East London estate and letting agent Peach Properties reports that the average cost of renting a two-bed property in Bow is now £459 per week – or £23,868 per year – at a time when the average salary in London is £34,314.

Families in the UK are now spending 21% of their income on housing, according to the Resolution Foundation – four percentage points up from 17% in 1995. For a dual-earning couple with one child this is the same as the basic rate of tax rising from 20% to 30%, or £1500 per year.

The effect is even more pronounced in London, where the rise in housing costs is equal to a 13% rise in the basic rate of income tax.

In popular areas of London, the rising costs of housing is put down to a shortage of supply of homes on the market.

Despite the number of new homes registered to be built in the UK being the highest since the financial crash in 2007, that figure is close to 25% short of the government’s 200,000 target.

According to the National House Building Council, 156,140 new homes were registered to be built in 2015, up 7% from 2014 and the highest number since 2007.

Construction industry partner Proskips, which supplies the building trade with thousands of skips every year, reports that housebuilding activity is being hampered by a dire shortage of skilled workers.

It points out that just 25,994 new homes were registered to be built in 2014, down 9% on 2014.

What is the solution? Lindsay Judge, senior policy analyst at the Resolution Foundation, is reported as saying: “The government must be more ambitious. It should look beyond simply giving a few people a leg up onto the housing ladder and tackle the bigger issues of supply that is the admin cause of rising housing costs.

“As home ownership moves out of reach for ever more families, the government should also reform a private rented sector that is simply too insecure for many finding themselves dependent on it.”