New league tables reveal the least affordable areas for young homebuyers

Districts in the South East and Eastern regions also feature in a league table of the 40 least affordable housing areas for younger earners, including Epsom & Ewell, Hertsmere, Cambridge and Oxford. But the presence of 15 South West districts on the index demonstrates how relatively low pay rates can place home ownership beyond the reach of reach of younger households, even though local house prices are below those in London and the South East.

This important and neglected point for policy makers is reinforced by another main finding from the study ­­- that London boroughs and districts in the South East are the least affordable housing areas for nurses, teachers, police and social workers. This is because pay rates for ‘key workers’ are often set at a national rather than local level. Altogether there are more than 40 districts in and around the capital where a key worker couple, even with two incomes, would find it hard to take out a mortgage.

The report, by Prof. Steve Wilcox of the University of York, presents three different ‘affordability’ indices comparing younger workers’ earnings with house prices for 4 and 5-room homes in every borough and district in England. These are:

These analyses reveal that:

• There are 33 local authorities where a small home costs more than five times the average annual income of local working households with earners in their 20s or 30s. The 10 ‘least affordable’ areas on house price to income ratios are the London boroughs of Westminster, Camden, Islington, Kensington & Chelsea, Hackney, Richmond, Ealing and Haringey, plus Purbeck and East Dorset in the South West.
• House price to income ratios are generally greater in the South West than in the South East outside London. Average prices for 4 and 5-room homes are higher in the South East (£152,555) than the South West (£124,508). But the differential between average incomes for younger working households is even wider: £38,478 in the South East compared with £29,626 in the South West.
• The access index shows 18 areas where fewer than one in five of younger working households living locally could afford to start buying even a less expensive starter home. The 10 ‘least accessible’ districts on this measure are the London boroughs of Westminster, Camden, Hammersmith & Fulham, Islington and Brent, plus Purbeck, North Devon and East Dorset in the South West and Runnymede in the South East.
• The evidence that access to home ownership is more difficult in London than anywhere else in the country is reinforced by the fact that the City of London, Barking and Dagenham, and Merton are the only local authorities in the capital where house price to household income ratios for younger workers fall below four to one.
• The 10 least accessible housing areas for nurses, teachers, police officers and social workers are the London Boroughs of Kensington & Chelsea, Camden, Westminster, Hammersmith & Fulham, City of London, Islington, Richmond and Wandsworth, followed by Mole Valley in Surrey and Windsor & Maidenhead in Berkshire. The income of a nurse, qualified for 3 or 4 years and working in Kensington & Chelsea, would be barely a sixth of the estimated £134,700 a year income needed to buy a typical small home in the borough. Even in Epping Forest in Essex - number 40 in the league table - it would be less than half the £46,275 a year needed to set foot on the housebuying ladder.

Prof. Wilcox said: “These figures provide startling evidence of how the housing affordability crisis is affecting large swathes of southern England. The house price boom in London and surrounding districts of the South East means that very modest properties are often beyond the reach of young, working households. Even in dual-income households key workers such as nurses and teachers still cannot afford to buy in many parts of London and the South East.”

He added: “The analysis challenges any assumption that the crisis is confined to London and the South East. When local incomes are part of the calculation, and we focus on the price of starter homes, it is clear that young working people in many south western districts, from Cornwall to Dorset, face severe difficulties finding even a small home they can afford. Policy makers would be foolish to ignore the way that affordability problems are spread across the South West and many districts in the Eastern region as well.”

Lord Best, Director of the Joseph Rowntree Foundation, said: “This analysis adds a new dimension to the warning we issued a year ago about the shortage of affordable homes across the South and the dire long-term consequences if it is allowed to get worse. If existing home owners living in those districts want local hospitals, care homes, schools and police stations to be properly staffed, they can no longer ignore the case for more housing. In the same way, families in these areas will recognise that children, once they become adults, may be forced to move away by housing shortages and unaffordable prices – or else depend heavily on funds from their parents.”