Intelligence: 29 March 2017Housing affordability worsens in 70% of local authorities

Data released by the Office for National Statistics (ONS) on 17 March 2017 reveals that housing affordability has worsened in 248 local authorities in England and Wales (c70%) between 2015 and 2016. 

The recently published Housing White Paper identifies housing affordability as a key issue that needs to be ‘fixed’, identifying a particular issue for younger people trying to get on to the housing ladder. To put this issue in context, the White Paper identifies how home ownership in the 25-34 year age group has fallen from 59% to 37% in just over a decade; and how since 1998, the ratio of average house prices to average earnings has more than doubled.

This latest release by ONS indicates the real crux of the issue. 

On average working people in England and Wales could expect to pay around 7.6 times their annual earnings on purchasing a home in 2016 compared to just 3.6 times in 1997.  However, to purchase a home in Kensington and Chelsea (London) would require 38.5 times annual earnings making this the least affordable authority in England and Wales.  Copeland (North West) is the most affordable authority with an affordability ratio of 2.8.

Whilst affordability is clearly worse in London and the South East, there are parts of northern England that have affordability ratios above the national average as shown in Map 1 below.  For example, in Harrogate (Yorkshire and the Humber) the affordability ratio is currently 10.1 which is in excess of the affordability ratio for many southern authorities.

Map 1: Affordability Ratio 2016

Similarly worsening affordability is not confined to the South of the country. For example, the affordability ratio in Redcar and Cleveland (North East) has increased by 12% between 2015 and 2016; Isle of Anglesey (Wales) by 10.2%; and Broxtowe (East Midlands) by 10% placing all authorities within the top quintile. Map 2 provides further detail.

The Housing White Paper seeks to tackle housing affordability by increasing overall housing supply and through the introduction of the Lifetime ISA; continuation of the Help to Buy Equity Loan; the supply of discounted starter homes; extending Right to Buy; and extending the Affordable Homes Programme to include affordable rent.

The success of the strategies outlined in the Housing White Paper can be monitored by continued analysis of the ONS affordability ratios which are due to be updated on an annual basis.

How is it calculated?

Housing affordability is calculated by dividing house prices by annual earnings. Our analysis is based on median house prices and workplace-based earnings. Workplace-based earnings refer to the gross full-time annual earnings recorded for the area in which the employee works. This measure of affordability indicates the extent to which employees can afford to live where they work, not where they necessarily already live.


Map 2: Affordability % Increase

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Affordability, ONS, Development Economics