Redfern delivers his housing insights
Taylor Wimpey chief executive Pete Redfern has delivered his review of UK housing policy that the Labour party commissioned from him.
Stripped back, Redfern concludes that homes are expensive and young people can't afford them.
Or as he puts it: “Our key finding is that the drivers of the reduction in home ownership over the last 12 years are macroeconomic, and closely connected with the relative financial strength of young people compared to older generations.”
His policy recommendations include:
1. Target the Help to Buy Equity Loan scheme “more exclusively to first time buyers and lower price points on a regional basis” to combat its inflationary risk.
2. Restrict the Starter Homes policy to ‘exception sites’ and retain the first-time buyer discount in perpetuity.
3. Encourage young people to save more.
4. Extend the Right to Buy one-for-one replacement policy so that every council home sold through the scheme is replaced.
5. Set up an independent Housing Commission, analogous to the National Infrastructure Commission, which can take a non-partisan approach to long-term housing decisions. Adding housing to the NIC’s remit wouldn’t work because “there are too many differences”, he says.
When he was commissioned by John Healey in October 2015, Pete Redfern was asked to explore the causes of the decline in home ownership. His report contains no suggestions about building homes more cheaply to make them more affordable. Unlike the recent Farmer Review into construction efficiency, for example, there is no mention of the wonders of 21st century prefabs.
On presenting his report, Pete Redfern said: “The detailed analytical work of the review reveals the challenges that young people face in buying their first home and highlights the impact on them of long-term falls in relative incomes and ability to borrow. We must focus on supporting today’s younger generation and creating a genuine long-term housing strategy independent of short-term party politics if we are to improve the position in a sustainable way for future generations.”
The Redfern Review1 looks at the causes of the 6.2 percentage point fall in home ownership between 2002 and 2014. It concludes that the biggest contributor to the fall in the home ownership rate for the first half of that period – before the financial crisis – was the rapid increase in house prices. Between 2002 and 2014, higher real house prices are estimated to have reduced the private home ownership rate by 2.6 percentage points.
Since the financial crisis the main issue has been tougher credit constraints for first-time buyer. This is estimated to have cut 3.8 percentage points off the UK home ownership rate from 2002 to the end of 2014.
The third major driver of the fall, Redfern says, has been the decline in the incomes of younger people, aged 28-40, relative to people aged 40-65. “This younger age group’s average income fell from approximate parity with the over-40s to some 10% below in the wake of the financial crisis. This reduced the relative buying power of would-be first time buyers, pulling down the home ownership rate over the period by around 1.4 percentage points.”
Despite the focus on home ownership, the review supports a mix of tenures – “while home ownership is important, a fair housing market also needs both a healthy private rented sector and a supportive social housing sector”.
Although socialism is in the ascendancy within the Labour party these days, when it comes to housing, private ownership is at least as great a priority as common ownership. Housing spokesman John Healey says in his foreword to Redfern’s report that “wanting to help boost [private] ownership is in Labour’s DNA”. He says: “Housing is at the heart of widening wealth inequality in our country. Labour is determined to tackle this and this Review gives us, and politicians of all parties, the foundation to do that.”
He quotes Labour’s 1965 housing white paper, on which Harold Wilson fought the 1966 general election: “The expansion of building for owner occupation... reflects a long-term social advance which should gradually pervade every region.”
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This article was published on 16 Nov 2016 (last updated on 18 Nov 2016).