Can Generation Rent be Helped by Older Homeowners Downsizing?
By Ellen Bowers | 21st April 2017
Could older homeowners downsizing help struggling first-time buyers and their desire to own a property? Online estate agents Tepilo investigate.
It’s a topic that regularly features in the news and political discussions – what are the best ways of helping younger people (often known as Generation Rent or millennials) to get on the property ladder?
If the latest research, commissioned by Equifax and carried out by YouGov, is anything to go by, many people believe extreme steps will need to be taken to help the younger generation achieve their home ownership dream.
Almost half (46%) of the respondents to a survey stated that they would back a government initiative that incentivised older homeowners to downsize and free up space for younger buyers.
The government’s recent Housing White Paper outlined how older homeowners could be encouraged to downsize their property to help ease the supply-side crisis. The idea being, if an older homeowner downsizes from a big property to a smaller one, third and fourth-steppers would pounce on these homes and this would subsequently filter downwards, with second-steppers moving on from starter homes to bigger abodes and the properties second-steppers vacate then becoming available to first-time buyers across the country.
The government’s plan would involve the building of more sheltered accommodation to cater towards increased demand from older people, making it easier for this generation to move from their existing homes to a new, more suitably sized dwelling. The plan would be to make the transition as quick and easy as possible, to ensure stock is freed up in a fast and efficient way.
Equifax’s research found that more people were in favour of the initiatives (46%) than against them (40%), but they would still prove controversial and would be likely to attract significant opposition.
One strong argument against might be: “why should older homeowners be forced to downsize to try and fix the housing crisis, when the government should be doing more to help young people by building more homes?”
Encouraging elderly and potentially vulnerable people to up sticks and move home – a home they may have lived in for decades or even all their life – might also be deemed as pushing things too far.
If older homeowners are happy and willing to downsize, then that’s great. But others might be less enthusiastic, and might feel too pressured to downsize to help out the younger generation. They might feel they are being forced to downsize rather than encouraged, which would only help to create a whole new set of problems.
Unsurprisingly, the younger generation were most in favour of the above scheme, with those aged 18-24 showing the most support for the initiative (65%).
What’s more, figures have suggested that many older homeowners are willing to downsize, or at least consider downsizing. Previous YouGov research has revealed that a typical ‘last-time buyer’ resides in a four-bed house but wants to live in a two-bed property instead, while nearly a third of older homeowners have actively considered downsizing in the last five years but only a measly 7% have carried through with this.
The findings also showed that there is strong public support for the plight of the younger generation and their home ownership struggles, with 68% of Brits either very or fairly concerned that Generation Y is struggling to take those first steps on the property ladder.
The government has been accused of not doing enough to help Generation Rent in their attempts to purchase a property, with mixed views about government schemes and initiatives such as Shared Ownership, Right to Buy and first-time buyer inspired ISAs (Help to Buy and the recently launched Lifetime ISA, for example). Some label them as ineffective and too narrow in focus; others suggest they help people onto the ladder who otherwise wouldn’t have been able to afford it.
The Lifetime ISA is a case in point. On the face of it, it seems like a pretty decent idea, enabling those aged 18-40 to save towards a house deposit or their retirement by offering a government bonus – dependent on how much has been saved in the ISA – at the end of each tax year. For every £1 saved, the government will hand over £4. The maximum amount that can be saved each year is £1,000; if savers reach this target, they receive a more than handy £4,000 government bonus.
However, take-up of the initiative by banks and building societies has been very low and the launch of the Lifetime ISA received little fanfare, with only Skipton Building Society and a few investment ISA providers signing up so far.
All the major high-street names – Santander, Lloyds, Barclays, HSBC, Halifax, Nationwide, etc – aren’t offering a Lifetime ISA and have no plans to do so in the future. Their biggest concern is the prospect of mis-selling the Lifetime ISA as being better for young savers than a pension, when all the figures suggest otherwise.
If only very few providers offer the Lifetime ISA, the chances of it being a success are much, much lower. This is the main problem for the government’s first-time buyer schemes – from Starter Homes to Help to Buy. They only tend to help a limited number of people and have faced criticism for being too ineffective and for not helping the very people they are supposed to be there to support.
Like first-time buyer schemes, downsizing on its own won’t solve the housing shortage. That said, it could have an impact. If the will is there from older homeowners to downsize, any incentives to make the process easier would be fully welcomed. But, thinking long-term, the government will require much more than older homeowners downsizing to help younger buyers onto the ladder. If not, the Generation Rent tag will continue to stick.
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