Young people have been failed on housing, says Redrow chief

With borrowers facing the largest mortgage rate shock since the 1980s getting on to the housing ladder is about to get a lot tougher

GENERATIONS of aspiring homeowners are being failed by the Government and will struggle to get on the property ladder without major planning reforms, the boss of Redrow has claimed.

Matthew Pratt said saving up a deposit without help from the “bank of mum and dad” was almost impossible for a current generation of renters.

He warned that the problem will get worse without reforms to ensure more plan- ning permissions, allowing home building to ramp up.

His comments come after both Liz Truss and Rishi Sunak vowed to ditch national housing targets if they become prime minister. Mr Pratt said: “We’re letting down future generations. You can see that from the average age of first-time buyers, which has been going up year on year.

“If you don’t have access to the bank of mum and dad, I would fear for anyone trying to get on the housing market because they’ve got to pay rent while saving up and it’s not easy. I think previous generations are ignoring this issue, because they didn’t have the same problems.”

In England, a typical home now costs 8.7 times the disposable income of an average household, according to official figures. In 1999, when records began, it was 4.4 times. Mr Pratt pointed to London as an example of the problem. An average home costs £526,000, up from £304,000 a decade ago. First-time buyers need to raise a £26,300 deposit even for a 95pc mortgage.

“You’ve got a whole generation who cannot afford to do it,” he said. He also hit back at Ms Truss’s description of housing targets as “Stalinist”, saying: “I have to disagree. If you know you’ve got population growth, you should be planning properly for it.

“The only way you can improve affordability is to increase supply.”

The Government pledged to build 300,000 homes a year in 2017 but the target has never been reached. Output peaked at 242,700 homes in 2019-20. This is far less than in France, where 381,600 homes were built in 2020, according to Deloitte. Between 2010 and 2017, construction averaged 370,000 per year.

A government spokesman said: “We are changing the planning system to speed up the process so decisions can be made quicker. Before the pandemic house-building reached the highest level in over 30 years – with more than 242,000 homes built.”

It is amazing how quickly perspective can flip when you become a property owner. One housing executive who went to visit a newly finished development last week says he was accosted by a man who had bought one of his company’s homes and loved it – but wanted assurances there would be no more on neighbouring fields. The irony of the situation was not lost on the developer.

This instant nimbyism is far from unusual. Homeowners quickly lose interest in why others can’t get on to the property ladder after they get their own set of keys, often finding it more convenient to believe that those unable to get a mortgage simply can’t control their spending.

A study by King’s College London this year found that nearly half of Britons genuinely believe young people can’t get on the mortgage ladder because they spend too much money on Netflix subscriptions and takeaway coffees.

It is naive to think that people are unable to buy because they aren’t trying hard enough. My 27-year-old brother faces another few years living at home before he can even consider buying a small flat – and if he eventually decides to move out and rent, it will take even longer.

Home ownership has been a distant dream for many for years, but things are about to get a lot worse now that rents are rocketing, wages are stagnating and a recession is looming. When combing south-east London for a two-bedroom flat to rent recently I was surprised by the prices and fierce competition.

Uninterested letting agents knew they would be bombarded with requests no matter what they did. They admitted that tenants were so desperate this summer that bidding wars and blind offers are breaking out to get a property. Don’t even bother trying to negotiate on rent, one agent made clear, as we looked at a house directly overlooking a building site.

It was not the market I remember when I last sought a flat to rent in my mid-twenties, when prices were lower, the government’s tax war on landlords had not started in earnest and there was time to chew over a decision. Still, even then it was near impossible to put aside any savings after paying rent.

Those at the start of their careers now face a much grimmer landscape. Households have just been told they will suffer the biggest income squeeze on record.

At the same time, buyers face the biggest mortgage rate shock since the 1990s following the largest rate rise in 27 years. The Bank of England’s 0.5 percentage point rise means that new mortgage rates will be three times higher than they were at the end of last year.

There are serious political implications. Those unable to access an inheritance windfall or the so-called “bank of mum and dad” are at risk of concluding capitalism has failed them.

The average house now costs around nine times the average salary. Parents will lend £8.4bn to help their children to buy homes this year, 68pc more than in 2019.

Even more pain is likely in coming years. Analysts expect the Bank rate to climb to 3pc next year, meaning that to buy an average home in London you would need to earn £101,757 a year – about 50pc more than 12 months ago.

Britain’s crippling housing crisis has become too big to ignore. However, both Liz Truss and Rishi Sunak have vowed to ditch national housing targets if they become prime minister.

In a warning shot to the Tory leadership candidates, Matthew Pratt, the boss of FTSE 250 builder Redrow has told this newspaper that action is now essential.

The average age of first-time buyers has been going up for years because trying to save up for A deposit while paying huge amounts in rent is not easy, he pointed out.

An average home in the capital now costs £526,000, up from £304,000 a decade ago.

“The best deal you can get is a 5pc deposit. But in London that means you still need £25,000. I mean, how do you do that without the bank of mum and dad? You’ve got a whole generation who cannot afford to do it,” he said.

This is a problem for everyone. Ignoring the housing crisis will lead to consequences for the economy and the Tory party as frustrated young voters lose hope and grow frustrated with empty promises. Back in 2017, the government pledged to build 300,000 new homes every year but that target has never been reached.

By comparison, France built 381,600 homes in 2020, according to Deloitte.

Sunak has pledged to ease Britain’s housing crisis by forcing developers to speed up building on sites for which they have been granted planning permission after analysis found that house-builders were hoarding plots that could accommodate 441,000 new homes.

However, where and how houses are built is just as important as how many are. Homeowners – whether new converts to nimbyism or old hands at it – also need to get on board. It is time that the generational gap on home ownership finally closes.

Parents will lend £8.4bn to help their children buy homes this year, up 68pc on 2019