There are few things more important to any of us than where we live.
Not the towns, cities, streets or communities, but the home itself. We spend billions on our homes each year, and even in a cost-of-living crisis that’s growing. One estimate puts the current size of the UK’s home décor market at $24bn – and forecasts it to grow to $30bn by 2029.
It figures: we spend most of our time at home, even discounting time spent asleep. Homes are increasingly valuable, so keeping them in good order is rational. They’re also places for leisure, socialising and entertainment – so it makes sense to keep them nice too.
In many ways, homes and home ownership are one of the most enduring trends out there. It’s slightly surprising it’s taken me nearly a year to include them in this newsletter. There’s a lot of slow moving trends here.
Housing Trends
For decades, most people have owned their homes, either outright, or with a mortgage. The data in the charts below are mostly from the English Housing Survey (EHS).
There’s some fluctuations – for example, in the early 2000s, the proportion who owned their home briefly topped 70%. But in 1988 the proportion of owner-occupiers was 66%, and in 2021-22 it was 64%. So far, so slow.
That said, there is movement. It’s worth noting how the balance between those who own outright and those buying with a mortgage has shifted. In every year before 2014 the proportion of outright owners was smaller than the proportion of mortgaged owners. Since then, that’s flipped. The proportion of people with a mortgage has never been smaller (at least since official figures started getting collected in 1981).
As the proportion of home owners has remained so stable, the proportion of renters has also remained stable. But just as with owners, it’s the trends beneath the surface that are really moving.
In 1981, social renters outnumbered private renters by three to one. But over the past four decades that balance has shifted. Private renters have gone from being a small proportion of the population (9% of households in 1992) to around one in five (private renters have accounted for at least 18% of households since 2013).
There are good reasons for this. The advent of Right to Buy in the 1980s allowed many council tenants to buy their homes. This has driven a rise in home ownership overall, but also helped fuel a decline in available social housing in the UK.
But all of this is relatively short-term history.
The UK has not been a country of homeownership for very long. And social renting was only the dominant mode of renting for a few decades.
The chart below uses data from the English Housing Survey. It combines EHS data (since 2009) with Labour Force Survey data (1981-2008) and estimates produced by Dr Alan Holmans of Cambridge University that go back to 1918. They suggest a very different, and far less steady, set of trends around home ownership in the UK.
A century ago the vast majority of people were private renters (although the realities of that would have been very different to today). Fewer than one in four were owners.
Looking ahead
Although trends in housing tenure feel pretty fixed, they’re actually changing all the time. This means that the relatively new normal of majority ownership could change again in the future. It’s not hard to see where that comes from.
House prices have spent most of the last 15 years growing as demand outstrips supply. Recent research undertaken by Trajectory for OSB found that those who are yet to get on the housing ladder are starting to lose hope. Almost half of current renters think they’ll never be able to afford to buy, and 71% are put off by the amount they’d need to borrow to do so.
There’s also a bit of a demographic timebomb here. The Millennial generation – and I hate to admit this as much as anyone – is hurtling towards 40 with indecent haste.1 They’ve spent their 20s and 30s less likely to own homes than previous generations were at the same age. They’ll reach state retirement age later than those generations, but not massively later. In short, we have a generation heading towards (early) middle age less likely to be on the property ladder, at a time when to get on that ladder buyers are signing up to bigger mortgages and longer terms.
There’s one trendline in all of this that is remarkably flat: the proportion of over 65s that rent privately. In 25 years, between 1993 and 2017 it never fell below 4.2% and never rose above 6.3%.
So, a prediction for the future: that trendline turns upwards, significantly.
What does this mean?
This raises as many questions as it answers about how non-home-owning 20 and 30 somethings move through the life course. The first will be when do they give up on home ownership, if at all? The second will be what does retirement provision look like for a generation that don’t age with an asset that’s rapidly accumulating in value?
This cohort will require different products and services from a range of institutions. Financial services will be keenly affected. Some products, like surveying and building insurance will become far less relevant. But they’ll need new kinds of products to help them plan and save for retirement or secure leases that last longer than 12 months.
The build to rent sector is likely to get more attractive to investors, developers and existing businesses. Some of this will be aligned with social purpose: John Lewis have indicated their new developments in West Ealing and Bromley will be targeted at public sector workers.
Lifestyles will change. Untethered by a mortgage, this may be a generation that gets used to a more nomadic lifestyle by default. The rhythm of moving at more regular intervals might mean more changes of job, less accumulation of stuff and smaller family units.
Whisper it quietly, but rumour has it some Millennials are already 40. 😱