The life chances of young people in Scotland: report to the First Minister

Section 3 - Housing

Problem: Young people are finding that their housing options are increasingly constrained, with limited access to high quality advice.

An increasing proportion of young adults are either living with their parents or in the private rented sector. Fewer are able to save for a deposit to buy their own home.^[55] Part of the frustration seems to be not knowing what they need to do, or who to speak to, to take steps in a more positive direction.

Here's what young people said about getting onto the housing ladder:

"Can I get a mortgage when I have student debt? I don't actually know how this works."

"I think I will still be staying at home when I am 30 maybe even 40 - how do you even find out about buying a house?"

"How can I get my own home? House prices go up but my wages never rise."

As in the previous section on employment, advice on housing options also seems to be a key issue. Young people talked about how little information they had received about their housing options. Key questions included: 'What are my rights as a private tenant and who can I go to if I have problems?' 'What do I have to do to get into social housing?' 'How much would I have to save to get a mortgage?' 'What is a starter home and how can I get one?' 'What is buy to rent?'

Recommendation 13 - Improve housing advice for young people

Increasingly, information for young people tends to be focused on online platforms - an understandable approach bearing in mind the web literacy of younger generations. But housing options are often highly complex - particularly for those young people whose parents are unable to provide financial support or indeed relevant advice.

To develop my theme from Recommendation 1, housing information could be usefully integrated into a citizen's advice type website specifically aimed at young people and the people who work with them. Such a website would show what income is needed to support different levels of rent or mortgage payments. It could bring together employment, wages and costs information. It could possibly be tailored to different parts of the country, as costs of living (heating and food costs, for example) tend to be higher in rural areas.

Very often it is not the basic maths that present budgeting problems for young people, it is the understanding of what items must be considered on a weekly, monthly, or even yearly basis. Bringing together information on housing, employment, and wages using modelling techniques for different options could help prevent bad decisions and debt problems. It could also provide information, in plain English, on relevant initiatives such as Help to Buy schemes and Help to Buy ISAs. Again, a wide range of adults who work with young people would need to understand how to navigate the site, and bring together face to face and web based advice.

Problem: Fewer young adults are able to save for a deposit to buy their own home.

A key marker of the transition to adulthood is independent housing. Yet the age of this transition is steadily increasing for many young people, and aspirations towards ownership are unrealistic for a large proportion of young people. There was a dramatic increase in the level of deposit required as a percentage of income for first time buyers in Scotland after the financial crisis in 2008, and the level of deposit required remains relatively high, at around 50% of income in 2016.^[56] This has contributed to a large decrease in the proportion of younger (age 16-34) households owning with a mortgage since 1999, from 53% to 32% in 2015.^[57] Low income and insecure work have exacerbated these barriers to the housing market for young adults. Debt and/or poor credit history may also make getting a mortgage difficult for some young adults. A key concern for young people in their early twenties is the inability to save for a deposit.

The evidence suggests there may be particular issues facing young people from minority ethnic communities. Overall, people from minority ethnic communities are disproportionately likely to live in the private rented sector and are more likely to live in overcrowded homes than the rest of the population.^[58] The inability to save for a deposit and high rents in the private rented sector may mean that increasing numbers of young people from minority groups are staying in the family home, adding to overcrowding and family stress. Disabled young people are also faced with additional barriers to independent living, a major concern for parents as they get older and find it more difficult to provide appropriate support.

If fewer young adults are able to buy their own home, there are broader implications for wealth accumulation and intergenerational wealth inequality. Analysis by the Institute for Fiscal Studies ( IFS) suggests that wealth has been significantly distributed away from younger people in the UK. This shift in wealth distribution has been driven by a reduction in house ownership among young people.^[59] The inability to pass capital wealth from one generation to the next is not a new concern, but it remains a key barrier to social mobility for those knowing they will not inherit. There will be increasingly sharp divides in the future between people growing up in rented properties and those growing up in owner occupier homes.

Recommendation 14 - Deliver more affordable housing options for young adults

Housing is a key concern for young people. It is an important signifier of how the most recent generation of young people is so much worse off than previous generations. The Scottish Government should be actively considering how it can maximise the availability of more affordable housing options for young adults across all tenures. A key gap in provision is where there are low income households who, due to their particular circumstances, would not be eligible for social rent but are not currently able to buy a home with a mortgage, perhaps because they do not have the required deposit even if they could afford the mortgage repayments.

There needs to be a focus on targeting owner-occupation schemes at lower income first-time buyers. I fully support the ending of the right-to-buy programme, as it stripped affordable homes from the social rented sector and limited housing choice. But one result of right-to-buy was that it did allow people on lower incomes to access owner-occupation and thus build up housing wealth. Now right-to-buy is no longer able to provide that function, government must do more to help low income households build up housing wealth.

Most demand for current home ownership schemes such as Help to Buy and Open Market Shared Equity ( OMSE) is from households with gross annual income over £20,000 (estimated at around 56% and 96% respectively).^[60] The requirement in the mortgage market for a deposit - usually 5% of the amount they need to borrow - is considered to be the main barrier to households in lower income deciles taking up these schemes. Low income households may have difficulty saving or may not qualify for a mortgage due to their contractual status. The Scottish Government should explore the options for schemes that would allow households who are able to meet their housing costs consistently but are currently unable to access a mortgage to buy their own home. Other options to help young people onto the housing ladder - like 'rent to buy' and more innovative solutions (self-build [niche], off-site construction and modular houses) - could also be usefully explored. All these will generate a relatively small increase in available housing, but if successful, could be brought to scale in the medium term.

Problem: Young adults may face issues with costs, quality and insecurity in the private rented sector.

Alongside this decline in owner occupation, there has been a substantial increase in the proportion of younger households living in the private rented sector, from 13% in 1999 to 41% in 2015, to the extent that this is now the most common tenure for these households.^[61] The proportion of young adults living with their parents has also increased slightly.^[62]

The cost of housing as a proportion of income for those who own with a mortgage is substantially lower than for those who are renting privately (at 9% of income compared to 24% for private renting).^[63] The cost of private renting may also contribute to difficulties saving for a deposit. Recent research has found a continued long-term preference for homeownership among young adults in Scotland; while private renting is often regarded negatively due to a lack of tenure security. Qualitative research suggests that the private rented sector is unaffordable for many young people, particularly in areas with thriving labour markets. Some low-income households, especially those reliant on social security benefits, are particularly vulnerable in the private rented sector.^[64] Young people living in poorer areas suffer the double disadvantage of poor access to better paying jobs that may generate the income to save for a deposit and get a mortgage.

While the flexibility of the private rented sector may be attractive to some groups, high costs, quality and insecurity can be an issue for some young adults. Without being able to access suitable accommodation, young adults may continue to live with parents and be unable to transition fully to independence, or be at risk of homelessness, for those without family support. Housing insecurity may also lead to an inability to build community ties.

Most of the private rented sector is dominated by small landlords who own fewer than four properties. Tenants on the Priesthill estate told me they sometimes had difficulty locating landlords. And that several landlords owned flats in one building, making general building maintenance hard to pin down. Tenants also feared that complaints would lead to loss of the tenancy. It is particularly infuriating that those in the worst situations are often supported through housing benefit, so tax-payers' money winds up in the pockets of unscrupulous landlords.

There is legislation controlling rent charges and property maintenance in the private rented sector. Responsibility for enforcement is spread across the Scottish Government, local authorities, and courts and tribunals. By the end of 2017 three further pieces of legislation aimed at improving the private rented sector will be implemented by the Scottish Government:

• The existing tenancy regime will be replaced by the new Private Residential Tenancy. This open-ended tenancy is intended to provide tenants with greater security and stability.
• The Housing and Property Chamber of the First-tier Tribunal will consider all disputes in relation to the private rented sector. There will be no fee to access the Tribunal.
• A robust framework for regulating letting agents will be put in place.

Recommendation 15 - Ensure that tenants and landlords understand the arrangements for enforcing private rented sector regulations, and that monitoring is in place to make sure the new arrangements work as intended

The Scottish Government should publicise these changes and explain to tenants and landlords the rights and responsibilities they will have under the new arrangements. In particular, it should highlight the greater security that tenants - including younger tenants - will enjoy, and the availability and process of dispute resolution. The Scottish Government should also identify ways in which it can monitor and assess the impact of this new legislation for those in the sector to ensure it is having the intended impact.

This problem affects the most disadvantaged tenants who have the least voice. It therefore requires joint working across the various bodies responsible as well as vigorous enforcement. Keeping tenants who do complain informed on progress and consulting with them on various solutions will also help to relieve the desperation that people in very poor housing often feel.

Problem: For those on low and/or insecure incomes, there are barriers to access to social rented properties.

The housing issues identified above are likely to affect a wide range of young adults, although different groups will have different needs and face different problems. For low to moderate income young adults, the ability to buy their own home is an issue, particularly for those who cannot afford a deposit and whose parents are not able to help with a deposit. For those on low and/or insecure incomes there are issues around access to social renting, the suitability of the private rented sector - in terms of cost, security and quality - and ability to pay the rent (especially for those with no family support).

Some groups face additional barriers in finding suitable accommodation including young people who are disabled, or carers, or parents or care leavers. Some young disabled people need housing modified to their requirements. Others may have difficulty getting the care support they need outside of the family home, although their aspirations for independent living are not different from other young adults. Young people leaving care are overrepresented in the homeless population.

Recommendation 16 - Encourage social landlords to make the social sector easier for young people to access

The Scottish Government has committed to deliver 50,000 affordable homes by 2021. Of these, 35,000 will be for social rent, and a significant proportion will be designed with disability access. This is very positive. But considering the needs of younger tenants and first time young buyers should also be on the table.

New builds in the social sector should include smaller properties suitable for young people living independently. I understand that Local Authorities are required to undertake a Local Housing Strategy which is underpinned by an assessment of housing need and demand. This assessment is important for a number of reasons including the evidence it provides to inform policies about the proportion of affordable housing required, and the need for different types and sizes of provision in different parts of the country. I do recognise that smaller homes will not suit all groups of younger people - for example, we know that some minority ethnic groups tend to have larger families and will therefore need larger homes. Smaller homes may also suit single older people households who are looking to downsize.

Social landlords should be pro-active in considering the needs of their tenants and use the incentives available to them, including financial incentives, to make it easier for people to move to smaller properties if they wish to; this would also have the benefit of making larger properties available to those who need them.

One idea would be to make a grant available to support those who are under-occupying a property to move to more suitable accommodation. These grants could be extended to include young people who have received a job offer beyond a reasonable commute time and for those moving to properties adapted to suit disability requirements. Where possible, funding might also be directed towards local 'moving partners', preferably from the third sector, who could support those who were unable to move home unaided.

UK Government regulations that came into effect on the 1^st of April 2017 remove entitlement for housing costs within Universal Credit for new claimants aged 18-21 years (in full service areas). The UK decision makes little sense in policy terms: it risks making some young people homeless and the costs of dealing with homelessness are much higher than housing benefit costs over three years - and in some cases the effects and costs of youth homelessness can be life-long. The Scottish Government has already made the Scottish Welfare Fund available on an interim basis to 18-21 year olds, to ensure those young people who will be excluded from financial support by the UK Government will still be able to receive assistance with housing costs. Scottish Government mitigation helps make sure that young people will still be able to get some help with housing costs, but on its own this isn't a perfect solution. I'm aware 18-21 entitlement to housing benefit is an issue that the Scottish Government has already raised concerns about with the UK Government, and I'd suggest that Scottish Ministers continue to press this issue, as the right to housing is so key to young people's life chances.