Home ownership among young people has halved in 20 years

Average prices are now 7.9 times incomes and a buyer in London needs an £85,000 deposit

A critical shortage of homes has helped to boost prices and keep many young people in rented accommodation (Reuters)

The proportion of 25-year-olds who own their home has more than halved in the last 20 years, a new report has found.

Two decades ago 46 per cent were homeowners - that proportion is now just 20 per cent, the Local Government Association said.

The LGA, which represents councils across England and Wales urged government to kickstart housebuilding, especially of affordable and social rent homes, construction of which has plunged by 88 per cent since 1996.

The report highlights the growing divide between homeowners and people forced to remain in increasingly unaffordable rental accommodation.

Private renters now pay 34 per cent of their total household income on rent, while homeowners pay around half that proportion - 18 per cent - on their mortgage.

Record low interest rates have helped to keep repayments low for those already on the ladder but have served to keep prices buoyant, pricing out those seeking to buy their first home. Average house prices are now 7.9 times average earnings, the report said.

LGA housing spokesman Martin Tett said: "Our figures show just how wide the generational home ownership gap is in this country. A shortage of houses is a top concern for people as homes are too often unavailable, unaffordable and not appropriate for the different needs in our communities.

"The housing crisis is complex and is forcing difficult choices on families, distorting places and hampering growth.

"But there is a huge opportunity, as investment in building the right homes in the right places has massive wider benefits for people and places.

Ministers must give councils powers to build and also implement measures to increase in the number of suitable properties available for older residents, the LGA said, adding that the Government’s housing white paper, due to be published in January should recognise the important role councils can play in supplying new homes.

The report also revealed the extent to which many young people must rely on inherited wealth or gifts from wealthy parents. In London, the average first-time buyer now requires a deposit of £85,000, the LGA found.

The report said: "Many first-time buyers across the country, and in particular in high value areas like London, are therefore dependent on help from the 'bank of mum and dad'.

"Home ownership for younger generations is increasingly determined by the extent to which their parents benefited from previous housing market booms."

The LGA’s housing commission recommended making it easier for local authorities to use compulsory purchase powers on land that has planning permission for homes but which is not being built on. Currently large developers can buy up huge tracts of land and sit on it, restricting supply in order to squeeze prices up further.

A Department for Communities and Local Government spokesman said: "We've halted the decline in home ownership, with the number of first-time buyers up nearly 60%, and over 335,000 households helped into home ownership through Government-backed schemes since 2010.

"We've also set out the most ambitious vision for housing of any Government since the 1970s, investing £9.4 billion over the course of this Parliament. Our upcoming housing white paper will clearly set out how we plan to build the homes this country needs."