The housing scenarios facing young people in PRS 2020

David Clapham, Peter Mackie

Recent economic, social and political change has resulted in a lot of uncertainty in the housing options of young people

JRF commissioned Cardiff University to explore what the situation might be like for young people (aged 16-30) in 2020

The study draws upon interviews with 50 young people, 50 stakeholders, and secondary data analysis primarily using British Household Panel Survey and Labour Force Survey. Follow up group discussions with policy stakeholders and individual interviews with 75 young people

This presentation outlines the emerging conclusions

Introduction and context

Access to homeownership: will be shaped by both wealth and income barriers;

average age of first-time buyers expected to rise by 2020;

changes in higher education fees may worsen housing affordability

young people’s long-term expectations for homeownership likely to remain high, however short term expectations are likely to reduce

The role of the PRS Difficulties accessing homeownership and the social rented sector will

result in an increased proportion of all households living in the PRS.

Availability of social housing: Many have predicted that in 2020 the proportion of households living in

social housing will decrease, partly as a result of the cut in the capital budget for social housing.

The context in 2020

0

5

10

15

20

25

30

35

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

Year

Perc

ent

(Tre

nded

dat

a)

Owner occupier (OO)

Social renter (SRS)

Private renter (PRS)

Parental home OO

Parental home SRS

Parental home Other

Trend-based tenure change and projections 1997-2020

Welfare benefit reform: Reductions in LHA to cover the lowest third of local rents will result in

fewer properties available at an affordable rate. The gap between housing benefit and rental costs is likely to increase as

housing benefit is calculated against the CPI; Non-dependent deductions will result in some young people being forced

to leave the family home earlier; SRR applied to those under 35 is likely to increase demand for HMOs

Housing related support services Evidence of relatively high levels of Supporting People service cuts by

local authorities. This will increase homelessness and housing difficulties.

Employment Unemployment levels for economically active 16-24 year olds reached

20.2% in June 2011 (ONS, 2011)

The context in 2020

Using the British Household Panel Survey we traced the experiences of a cohort of young people aged 16-130 up to 2008/09.

Cluster analysis was used to identify similarities and differences in terms of tenure, household type, marital status and economic activity.

Eight ‘pathways’ were identified and a ninth pathway was also added because young people with extremely chaotic lives were unlikely to be identified in the panel survey data.

For each of these groups we produced an estimate of population size in 2008 and 2020. The methods involved dividing population data from the Labour force survey by tenure data for each of the pathways. 2020 projections applied the same method based on tenure projections.

Differences from Ford et al (2002)

Young people’s housing pathways

Remain in owner occupied parental home until 30, then exit into owner occupation.

22% have Higher Education qualifications.

Median incomes of £18,739.

Young people with higher level qualifications and incomes will enter this pathway due to difficulties accessing ownership.

Young people in this pathway will remain in the parental home until later. Some will exit into the PRS.

Stay at home to own

+ 300,000

In 2008 (3.7 million) In 2020 (4 million)

Leave owner occupied parental home into shared PRS housing, often for HE.

Most stay in the PRS until they are 30 – 1 in 5 moves into owner occupation.

They tend not to form couples before they are 30.

64% have HE qualifications Median income is £15,571.

Some young people in other pathways will be forced to share in the PRS, increasing this pathway population.

Increases in HE fees will decrease the no. of students following this pathway – they will stay at home.

Fewer young people in this pathway will be in owner occupation, they will instead enter the PRS.

Young professional sharers

+ 400,000

In 2008 (1.6 million) In 2020 (2 million)

Leave the owner occupied parental home and enter PRS housing. More than half are in owner occupied accommodation by 30.

They tend to form couples before they are 30.

49% have HE qualifications Median incomes of £21,629

Due to limited access to home ownership the vast majority of these young people will enter the PRS, making these young people Dual Income, No Kids, Renters (DINKRs).

A greater proportion of young people in this pathway will choose not to pursue HE, which will probably impact on income levels and therefore housing choices.

Dual income, no kids, owners (DINKOs)

In 2008 (1.4 million) In 2020 (1.4 million)

Leave the parental home and enter either owner occupation (60%) or the PRS (30%).

Compared to the contracted pathways of early nesters, they spend longer living alone or as couples before starting a family.

18% have HE qualifications Median incomes of £17,527

Young people in this pathway are not likely to have accrued capital to access home ownership so access will be dependent upon the support of parents. Levels of home ownership will therefore decrease.

Those squeezed out of this pathway may remain at home longer, enter the PRS and live there longer before having children, or they may have children in the PRS.

Two parent families

- 250,000

In 2008 (1.1 million) In 2020 (850,000)

Remain in social rented parental home until at least 30, and then exit into a social rented tenancy.

There is some couple formation.

Fewer than 25 percent of the young people have A-Levels.

Median incomes of £8,768.

The number living with parents in social rented housing will increase because of the lack of alternatives.

Some young people will choose not to delay leaving home and will exit this pathway in to the PRS.

As a result of changes to non-dependent deductions in housing benefit payments, some may leave the parental home in a chaotic manner.

In the social queue

+ 300,000

In 2008 (1 million) In 2020 (1.3 million)

These young people, who are almost entirely female, leave the parental home and enter their own social rented accommodation.

Economic inactivity is a prominent feature

60% have GCSEs. Median incomes of

£13,065.

As a result of a lack of social housing, a small proportion of young people will no longer follow this pathway, choosing to remain at home instead and even delaying having children.

For the majority of other young people who follow the lone parent pathway the predominant tenure will still be social rented accommodation but there will be an increase in the use of the PRS.

Lone parent

- 90,000

In 2008 (680,000) In 2020 (590,000)

Leave the family home before their 21st birthday and live in couple households with or without children. Most exits from the family home were into owner occupation

34% have A-levels. Median incomes of £14,210

As a result of difficulties accessing owner occupation, the dominant tenure will no longer be owner occupation, it will be the PRS.

They face a relatively negative outlook in terms of employment which means incomes will remain low compared to many other young people living in the PRS, therefore leaving them to consume lower end properties.

Early nesters

- 80,000

In 2008 (500,000) In 2020 (420,000)

Leave the family home and enter social rented accommodation. It is different from others in the social rented sector in that most young people are living in family households.

This group has the lowest levels of education, with 36% stating they had no formal qualifications.

Median incomes of £14,424

Will be heightened difficulties in gaining access to social rented sector

Some young couples will seek accommodation in the PRS, where their relatively low incomes will restrict their housing options.

Some young people will seek alternative means of entering the social rented sector, for example through the statutory homeless route.

Social renting families

- 80,000

In 2008 (440,000) In 2020 (360,000)

Repeated entry and exit into the social rented sector and private rented sector.

Initial exits from home are often into homelessness, most frequently caused by family conflict. Further homelessness is sometimes hidden, with young people ‘sofa-surfing’.

Low levels of academic qualifications.

More young people will follow this pathway, such as those who face considerable shortfalls between LHA and rent payments.

Causes of youth homelessness, such as family relationship breakdown, are likely to persist and even worsen with less public funding being allocated to prevention and support interventions.

Increasingly likely to be accommodated in PRS.

Chaotic

increase

In 2008 (75,000) In 2020 (More than 75,000)

Private Rented Sector

1.5 million more young people living in the PRS in 2020, which means 33% of all young people will be living there.

FIRST TIER: 1.4 million young people with relatively high median incomes of £17.5K

Most new entrants to this tier will be DINKRs, some will be leaving Stay at Home to Own pathway

Two parent families will also enter the first tier PRS

SECOND TIER: 2.1 million young people with median incomes of £14-£15.5K

Nearly 44% of all new PRS demand will come from Young Professional Sharers – they will make up the majority of additional demand in the second tier

Some additional demand will also come from Early Nesters who cannot access owner occupation AND Social Renting Families unable to secure social rented homes

THIRD TIER: 550,000 young people with median incomes of less than £13K

This is new demand and will consist of people leaving the Social Queue, Lone Parents and those in the chaotic pathway.

Housing market challenges in 2020

Figure 1. Three tiers of predicted demand from young people in the PRS in 2020

First Tier

Will consist of young households with median incomes of more than £28,000.

In 2020 approximately 1.55–2.26 million young people will populate this tier of the PRS consisting of:

840,000 young professional renters who are sharing (up 300,000 from 2008)

710,000 DINKOs (up 250,000 from 2008)

380,000 two parent families where household has two incomes (potentially up 130,000 from 2008).

240,000 early nesters where household has two incomes (potentially up 80,000 from 2008).

90,000 social renting families where household has two incomes (potentially up 30,000 from 2008)

Second Tier

Will consist of young households with median incomes of £14,000 - £19,000.

In 2020 approximately 1.05–1.76 million young people will populate this tier of the PRS consisting of:

720,000 young professional renters living alone (up 260,000 from 2008)

330,000 stay at home to owners (up 120,000 from 2008)

380,000 two parent families (potentially up 130,000 from 2008).

240,000 early nesters (potentially up 80,000 from 2008).

90,000 social renting families (potentially up 30,000 from 2008)

 

Third Tier

Will consist of young households with median incomes of £13,000 or less.

In 2020 approximately 400,000 young people will populate this tier of the PRS consisting of:

190,000 lone parents (up 70,000 from 2008)

140,000 young people in the social queue (up 50,000 from 2008)

Up to 81,000 chaotic young people

 

 

Increased demand

Differentiation (many more affluent young people and families)

Supply

Increased competition for tenancies between the differentiated groups

Increased incidence of families and children across the income spectrum

Quality and security in a differentiated sector where expectations are different

Rents and affordability (both at the higher end because of deposits and the lower end because of benefits)

Challenges for the PRS in 2020

Families in different tiers

Vulnerable young people

Political guidance

Conclusion

The housing scenarios facing young people in the PRS 2020

David Clapham, Peter Mackie,