Affordability gap locks out 1.5 million potential homeowners from the housing market
The gap between what aspiring homeowners can realistically afford and the actual cost of purchasing a home has widened significantly in recent years, according to the latest HBF report on the growing home ownership affordability crisis, Broken Ladder: The Affordability Gap. As a result, despite strong demand for housing, millions are unable to turn that demand into a purchase, with young people and first-time buyers worst affected.
The findings of this new research show that home ownership in England has fallen significantly over the past two decades. The share of households owning their home peaked in 2003 at 71%, equivalent to 14.7 million homes. By 2024, ownership had dropped to 64.8%. Adjusted for population growth, this represents more than 1.5 million “missing” homeowner households who would own a home today if early 2000s ownership rates had been maintained.
The fall in ownership has affected every age group under 65, with the largest decline being among 35 to 44 year olds, who would otherwise account for around 800,000 additional owning households. Ownership among those aged 25 to 34, 45 to 54 and 55 to 64 has also fallen by around half a million in each group. By contrast, ownership among over-65s has risen by more than 500,000 households, highlighting the growing concentration of housing wealth among older generations.
While headline demand for housing remains extremely high, converting this into effective demand from buyers who are both willing and financially able to purchase is becoming increasingly difficult due to a growing number of structural barriers. Higher deposit requirements, stricter lending criteria, elevated interest rates, and house prices that continue to outpace wage growth have all constrained access to mortgage finance and made home ownership harder to achieve.
The closure of the Help to Buy scheme in 2022 meant that we are in the first sustained period in decades that first-time buyers have been left without meaningful government support, further weakening the opportunities for households to access the market and widening the affordability gap.
Most mortgages, particularly for new apartments, are now issued at loan-to-value ratios at or below 90%, meaning buyers typically need at least a 10% deposit. It would take a median-earning first-time buyer, saving half of their remaining disposable income, more than seven years to raise a deposit on an average first-time buyer home. In London, it would take close to two decades.
Even once a deposit has been saved, a substantial affordability gap remains, as the average first-time buyer home costs around £240,000, but a typical buyer can borrow only around £148,000 based on standard income multiples. After adding a 10% deposit, this leaves an affordability gap of nearly £70,000. In London, the gap increases to £275,000 for average earners aged 22 to 29 and £220,000 for those aged 30 to 39.
In practice, the only region in which average earners can now realistically afford to buy is the North East. Across much of the country, including the South East, South West and East of England, even buyers in the top income decile struggle to afford an average first-time buyer home. Among under-30s, home ownership in most regions is effectively restricted to the very highest earners or those with access to significant family wealth.
HBF is calling on government to introduce a new targeted equity loan scheme for first-time buyers. The proposal would provide a 15% equity loan on new build homes, funded through a combination of government support and a developer fee, ensuring value for taxpayers. By reducing deposit requirements and loan-to-value ratios, the scheme would allow buyers to access more affordable mortgage products and re-enter the housing market at a time when home ownership is increasingly out of reach.
The proposed structure is designed to build on the proven success of Help to Buy, and will offer improved affordability, encouraging lender participation and be accessible to smaller and regional home builders. Home builders would not have an equity stake, ensuring government retains the full 15% share and benefits from future house price growth.
Neil Jefferson, chief executive of the Home Builders Federation, said: “The gap between what people can afford and the cost of buying a home has become a major barrier to home ownership. For millions of younger households, saving a deposit and bridging that affordability gap is no longer realistic.
“Without government intervention, home ownership will continue to fall and become the preserve of a smaller, older and wealthier group. Help to Buy demonstrated that well-designed equity loan schemes can support buyers, boost supply and deliver strong returns for taxpayers.
“A new, targeted first-time buyer equity loan scheme, part-funded by developers, would restore access to affordable mortgage finance, support new housing delivery, create jobs and growth and give a new generation a fair chance to get onto the housing ladder.”