There were positive headlines last week which suggested that the government may finally be making modest progress in its battle against the housing crisis. For the first time in a decade, home ownership rates remained stagnant, rather than falling.
Yet younger generations still have huge issues with the housing market.
Ownership rates continue to fall among younger people. Half of 25-34 year olds and 1.6 million families with dependent children now live in private rented accommodation in England, where short-term contracts deny them stability.
With interest rates at rock bottom and salary growth not much higher, would-be first-time buyers are chasing their tails trying to save for a deposit. Every time they turn around, the cash pile needed as a down payment has grown, and the purchasing power of their savings shrunk.
We need to think innovatively about how to make housing fairer. The government’s tactic to date has been to subsidise home ownership for first-time buyers. But, as the new statistics show, this is having limited success. A bigger change is needed.
New SMF research, which we’ve worked on with Property Partner, a property crowdfunding platform, describes how property crowdfunding offers this opportunity. These online platforms allow would-be investors to club together and purchase a property, putting in as little as £10.
This breaks down the barriers to housing market entry, and offers young savers a way of tracking house price growth, so at least a share of their deposit will keep pace with market price increases.
These tools could potentially help tackle the cause of the housing crisis, boosting supply by channelling funding to small and medium-sized builders who have found it difficult since the crisis to access the finance they need.
Property crowdfunding could play an important role in democratising access to the housing market and ensuring more people can benefit from house price growth.
While no first-time buyer is scoffing at the government’s offer to match 25 per cent of saving in a help to buy Isa, the fact is that putting £200 a month away in a cash savings account isn’t going to make much difference when prices are rising so rapidly.
Extending the product to allow first-time buyers to invest in property crowdfunding, and ensure their savings keep pace with price rises, would be a much bigger help for those trying to buy.
It would also be beneficial to make property crowdfunding eligible for the new Innovative Finance Isa. Currently, it's been lumped in with equity crowdfunding in firms, a much riskier business which already benefits from tax relief on seed investment.
Property crowdfunding, being asset backed, is much safer – and doesn’t benefit from these existing tax reliefs as a result.
Given the potential of property crowdfunding, this seems like a strange decision.