1. Governance
February 26, 2018updated 31 Oct 2022 10:00am

Home ownership rates will keep sinking – until the government gets involved in housing again

By Sara Gariban

New figures from the Institute of Fiscal Studies show that levels of home ownership among middle-earners aged 25-34 are collapsing. In 1995-6, 65 per cent of this group were owner occupiers, compared to just 27 per cent today.

This has prompted fears among Conservative MPs that they risk losing a swathe of potential voters with no stake in the economy. Nick Boles described it as an “iceberg warning”, that could, “sink us at the next election”. While the government has taken a variety of steps, including the abolition of stamp duty for first time buyers and dedicating £45m to funding housing projects building up to 7,280 homes on council owned land, these policies are limited to pumping up demand or subsidising developers.

They fail to address the deep structural issues in the market, which prohibit building at a higher pace and greater scale. That’s why ResPublica’s recent report, A National Housing Fund to Build the Homes we Need, outlines how a partnership between government and a number of housing associations could help to address the key issues.


A key barrier to increasing scale and pace is the lack of Small & Medium-Sized Enterprise (SME) builders in the market. In the 1980s, SME builders made up around 57 per cent of the market; now they make up around half of this figure. Importantly, SMEs generally develop the land they purchase quickly, while larger developers tend to hold onto land for longer periods. Furthermore, SMEs can progress smaller housing sites which are generally of little interest to larger builders. As such, SMEs could help to increase the pace of building, and facilitate the use of more, smaller areas of land.

At present, government policies have failed to acknowledge the dearth of SMEs in the market or acted to encourage a resurgence of SME builders.  A greater place for SMEs in the market could help to address the limited pace and scale of house building which contribute heavily to the affordability crisis.

Land banking

As described above, big housing developers, who purchase most of the land for sale in the UK, tend to hold onto land rather than building on it immediately. This may seem counter-intuitive, but builders will only build what they think they can sell. After paying a substantial amount for the land, the developer will have to hit their sale price targets to make a profit. So, developers will build slowly to avoid flooding the market, and to ensure that prices remain high and they recoup their investment in land.

Although planning permission was granted on 1,725,382 housing units in England between 2006 and 2014, only 816,450 had been completed after three years. While ministers have threatened some developers with losing their right to build if they do not use the land, more substantive action must be taken to address the market conditions that create land banking.

New models of delivery

Rather than simply inject more money into housing, the government must create a broader strategy for building. Our proposal is for a national housing fund that could operate as a private organisation. The fund would act as a guaranteed buyer of new homes, to provide counter-cyclical support to deliver more homes and capacity amongst housing associations and SMEs.

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Certainty of purchase, as well as pre-purchase agreements, would allow SME developers to secure the funding to deliver homes. In this plan, government would invest £100bn over 10 years to ensure the creation of a minimum of 40,000 new homes each year. The aim is that the housing associations would buy out the government over a 10-year period, capitalising on low funding costs, without contributing to the deficit.

This type of funding instrument would encourage SMEs into the market, reduce land banking, and ultimately, deliver houses at the pace and scale that we need to tackle this crisis. The government must stop plastering over the cracks and start getting involved the housing market again. If the Conservatives really want to win over ‘generation rent’, they must take bold measures to demonstrate that capitalism can work for them, too.

Sara Gariban is policy & projects Officer at the think tank ResPublica.

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