Forecasts for the Joseph Rowntree Foundation (JRF) show how rents will rise twice as fast as incomes and without action now, more people will be at risk of poverty due to rising housing costs.
A continuing decline in home ownership and social renting, together with a lack of new homes, will result in more people living in private rented homes.
What will the housing market look like in 2040?– by experts at Heriot-Watt University – analysed trends affecting the housing market, looking at factors such as economic and income growth, changes in house prices, housing supply and rent levels.
Taken from the start of the recession in 2008, the report found that by 2040:
- People who rent will be more than twice as likely to be living in poverty than homeowners.
- Private rents are forecast to rise by 90%, twice as fast as incomes. The average private rent today is £132 per week – it will be £250 per week in 2040 in real terms.
- One in five (10.6 million people) will be living in private rented homes, up from 7.2 million today. Half of these, 5.7 million, will be in poverty (a rise of 2.6 million).
- One in 10 will be living in social housing, down from the current figure of 8.2 million to 5.7 million in 2040. Social rents will increase 39% to reach £92.10 per week in real terms.
- If social rents continue to rise towards market rates, the cost of Housing Benefit could rise by 125% - adding £20 billion to the current bill.
- Real median house prices for owners will increase to £263,000, a rise of 57%. 35.3 million people will be home owners by 2040 (a reduction of 820,000 people from 2008). Real household incomes will grow from £32,300 to £45,500.
In light of today’s figures, JRF today calls on the government and housing providers to work together on an action plan to solve the housing crisis and keep poverty in check. Poverty levels are likely to reach one in four by 2040 and can be contained if:
- Housing supply doubles to more than 200,000 units a year;
- Social rents continue to go up by inflation plus 1%, rather than move towards market rents;
- Housing benefit continues to support housing costs at similar levels;
- The fall in the proportion of affordable social housing in the overall market is halted.
Julia Unwin, Chief Executive at JRF, said:
“These stark findings are a wake-up call for political leaders. After decades of failing to build enough, those in power have a responsibility to act now to build more genuinely affordable homes. Without that we are storing up trouble for the future – a price that will be paid by children starting school life this year. These high costs are bad for families, the economy and Government.
“We need a clear strategy that builds the homes we need in the right places and avoids locking low income households out of affordable homes. This is about more than frustrated aspirations of home ownership from Generation Rent: the reality facing many people is a life below the poverty line because of the extortionate cost of keeping a roof over your head. Addressing the rising cost of housing is crucial to tackling the high levels of poverty in the UK.”