Introduction

This chapter turns to the first of our groups – potential first-time buyers – dealing with both household formation and tenure. Not only have current young cohorts experienced lower rates of home ownership than previous generations, but they are more likely to remain with parents for longer or share with others. This has been an international phenomenon. Intergenerational differences, not just in housing, have attracted considerable attention, and the question, therefore, arises why the declines have taken place. Is it just a question of affordability – and Chapter 2 provided the appropriate indicators available – or have there been underlying changes in household preferences, reflecting new lifestyles or aspirations? These are the central issues for this chapter.

But new households cannot be seen in isolation from the rest of the market. Changes in demand for housing arise from two sources; first from new household formation (which is a flow) and, secondly, from the requirements of existing households (which is a stock). Since approximately 160,000 net new households were formed annually between the census dates of 2001 and 2011 in England, but there are more than 23 million existing households and, on average between the census years, approximately one million households moved each year in total, then current households are likely to have a greater impact on prices and rents than the newly forming households. There has been particular concern over the extent to which existing households – particularly older households – are deemed to underoccupy housing and the policies that might be implemented to induce so-called ‘right sizing’. In addition, potential first-time buyers may face competition from Buy to Let investors and second home owners, who have advantages in terms of accumulated equity from existing homes. These issues imply that the number of first-time buyers is a response to market pressures as much as a cause. At one time it was commonly argued that sufficient numbers of first-time buyers were required to ‘oil’ the market. However, this is no longer obviously the case with the expansion of the investment market. Indeed, a key theme of the chapter is that household formation and tenure patterns are heavily affected not only by demographics but also by changes in economic conditions. This argument is reinforced in Chapter 7 when mortgage markets and their relationship to housing demand are discussed.