Mary Dejevsky: The property ladder that threatens to become a snake

It is beyond time to question the very idea that a home will remain even a modest personal asset, let alone the cash-cow it has recently been

There are few more pernicious expressions in the English language than the "housing ladder". Its cultural specificity is illustrated by the difficulty of finding any exact translation in any of the more common European languages. The British, though, still seem hooked on getting a foot on that first rung, even though the warnings should be sounding loud and clear that in many places it is already rotting, to expose a slithery snake.

True, recent figures for house prices are mixed. In some parts of the country, and desirable micro-regions, prices are up; elsewhere they are stagnant, if not down. And the ups, which include the huge distortion that is London, permit a more positive general picture than would otherwise be the case. A clutch of recent think-tank reports, however, look beyond small price movements to more profound trends. In different ways, they question the very idea that a home will remain even a modest personal asset, let alone the cash-cow it has recently been.

Andrew Heywood, in a study for the left-of-centre Smith Institute, finds that home ownership in Britain reached its peak in 2003, when more than 70 per cent of people were owner-occupiers – more than in the US or much of Europe. Since then, the proportion has declined to 67 per cent, and could fall to 60 per cent within 10 years. Given the lack of tax incentives for people to own their homes, the squeeze on lower-income households and the plunge in lending to that same group, he predicts that the slide will go on.

James Plunkett, in a report for the Resolution Foundation's Commission on Living Standards, focuses on the way a rise in national income no longer necessarily translates into higher household income, especially at the lower end. GDP growth is necessary, he says, but may "no longer be enough". Illustrating the vanishing prospects of home-ownership for this group, he says they would have to save 5 per cent of their income for 46 years (or 10 per cent for 23 years) to afford an average first-home deposit, given the lending figures of 2008. The number of young people on low to middle incomes who owned their own homes halved in the 20 years to 2008-09.

And in a report published this week for the TUC, James Gregory of the Fabian Society considered the – neglected – plight of low-income householders who, by conforming to the national trend to own their homes, are now trapped. Not so much by negative equity – the phenomenon of the early 1990s – as by mortgage payments, maintenance obligations and sharp regional price disparities, which prevent them moving to find a job. Noting that more than 50 per cent of those people classed as being "in poverty" are owner-occupiers, he posited measures, including different types of mortgages, shared ownership and more secure private rented accommodation, that might be developed to help.

In different ways, all these reports question the assumption that buying a house is, or necessarily will be, in someone's best interest. And in so doing, they try hard to call a halt to a national obsession that has shaped the attitudes of at least two generations. Perversely, though, the dream goes on. Plunkett says that 86 per cent of under-30s cite home ownership as a "key life goal", even as the proportion that will actually realise it falls. The ambition to "get a foot on the ladder" risks becoming the most lagging of lagging indicators, consigning another generation to penury and disappointment.

The combination of stagnating (or falling) incomes, stagnating (or falling) house prices and tighter bank lending require nothing short of a transformation in the national mindset, at individual and government level. Yet it is a transformation barely broached in these reports; hardly recognised either in most discussion of housing, where a rise in prices is still hailed as good – a sign of a strong economy – and a fall as bad. The perspective remains that of the contented owner, not of those who have been trapped by their choice or priced out of the market.

Heywood comes closest to appreciating the magnitude of the change that will be needed. Responding to the argument that a long-term fall in house prices could help to make housing more affordable, he points out that there could be other – less welcome – repercussions, including "serious ethical issues" about whether those on lower incomes should be encouraged to own their homes at all.

The implications of stagnating house prices go much further, however. They include the likelihood that home ownership could lose some of its attraction; that existing stock could be neglected; that lenders could be less willing to provide long-term mortgages; and that local authorities, housing associations and others could be deterred from investing in home building.

There are implications for the Exchequer, too. This government, like New Labour, is trying to shift responsibilities that formerly belonged to the state on to individuals. The notion of a home as an asset, to supplement an inadequate or non-existent pension, would be undermined. Similarly, the assumption – underlying the recent Dilnot report into care for the elderly – that many people have money tied up in their home that can be released. This could change within a generation, throwing the obligations, and the costs, back on to government, whose income from stamp duty, inheritance tax and VAT generated by the home improvement sector would already be dwindling.

If prices fall, then there could be many people for whom a first rung on the "ladder" turns out to be all there is, until a bequest or other windfall intervenes. Patterns of personal saving, as well as spending, would change.

At best, a decline in ownership could spur lenders to offer more flexible mortgages, the Government to reinstate incentives for owner-occupiers, not just landlords, and the law to require higher standards and greater security for tenants. And there is always the possibility that prices could start to rise again, if the economy and mortgage-lending looked up, and the overall shortage of housing fanned out beyond the capital. But for a government and a population that has relied on private housing as a cushion for living standards they could not otherwise afford, the next few years could impose a painful reacquaintance with reality.

m.dejevsky@independent.co.uk