Ebook Rapid Evidence Assessment of the economic and social consequences of worsening housing affordability
In June 2008, the National Housing and Planning Advice Unit (NHPAU) commissioned the Centre for Housing Policy at the University of York to undertake a Rapid Evidence Assessment (REA) of the ‘Economic and Social Consequences of Worsening Housing Affordability’.
The cost of market housing has attracted considerable political and media attention over recent years with house prices rising twice as fast as earnings since 1990, producing severe difficulties for first-time buyers in many areas (Barker, 2004). However, it is now clear that 2007 was the peak of the housing market cycle and house prices across England have fallen by four per cent over the past year (CLG, Table 508), and a variety of analysts forecast further falls in 2009.
The past year has been characterised by the global financial turbulence and the severe ramifications these monumental events have had on the UK housing market. The ‘credit crunch’ has reduced the ability of banks to lend mortgages, and as economic recession is now apparent in the UK and the labour market weakens, negative sentiment in the market means that many prospective buyers continue to defer house purchases. At this stage the depth and duration of the housing market downturn is uncertain.
Yet, despite house price falls, in the short term, access to homeownership remain as mortgage lending has become more cautious, with lenders requiring larger deposits from first-time buyers and offering less favourable interest rates. This prudent lending market may persist until the financial institutions have been able to re-capitalise but it is possible that the lending environment will remain cautious and more highly regulated in the longer term.
Moreover, underlying social and demographic trends, such as the move towards more single person households, relationship breakdown, greater longevity, and migration, are all likely to continue over the long-term, increasing pressure on the demand for housing (Holmans and Whitehead, 2008). House-building targets have been affected by the housing market downturn so the lack of housing supply will remain into the near future, a disjuncture in the market that means that housing affordability still matters (NHPAU, 2008a). Survey data suggests that despite the falling market 68 per cent of people believe house prices remain a concern and view housing affordability as a legitimate concern of the government (NHPAU, 2008b).
This rapid evidence assessment therefore seeks to consider what the impacts of housing affordability problems have been for individual households and the wider economy, and what the consequences might be in terms of social inequalities if some households are unable to achieve homeownership. Rapid evidence assessments are used to review the literature relating to policy concerns and although they are based upon the methods of systematic reviews, they are conducted to a timescale more closely attuned to the needs of policymakers (GSRU, 2007; 2008).
Rapid evidence assessments therefore include pragmatic decisions, for example regarding how extensive the literature searches are, but offer a robust evidence review that limits the perceived or potential biases of a traditional literature review. This chapter continues by providing an overview of the methods used to conduct this assessment, explaining the basis for this approach to literature reviewing.
Contents
Executive Summary
1 Reviewing the evidence
- Introduction
Establishing review boundaries
Searching for the evidence
Quality appraisal
Study retrieval
Interpreting the evidence
Structure of report
2 Housing Affordability, Measurement and Trends
- Introduction
Housing affordability
Housing market conditions
The geography of housing affordability
Changed market conditions
Why does affordability matter?
3 Changing access to homeownership
- Key points
Introduction
Market trends
Characteristics of first-time buyers
Financing the purchase
4 Household Formation and Tenure Choices
- Key Points
Introduction
Household formation and tenure choices
Homeownership
Student debt
Private rented sector
Social rented sector
Overcrowding
5 Public services and the Labour market
- Key points
Introduction
Employee affordability problems
Impact of recruitment and retention evidence
Aspirations of key workers
Private sector experiences
Residential mobility and the labour market
Rural communities
6 Sustaining Homeownership
- Key Points
Introduction
High housing costs
Mortgage products
Supporting homeowners
The consequences of mortgage default
7 The Potential for Homeownership and Housing Wealth
- Key Points
Introduction
Value and distribution of housing wealth
Use of housing wealth during life course
Inheritance
Social inequalities
Education
Health
8 Conclusions
- Introduction
Summary of findings
Changing market conditions
Research gaps and weaknesses
References
Appendix A – Literature searches
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