Ian Shepherdson says encouraging 70-80% of people to become homeowners is "nuts"

Government targets to increase the number of homeowners in the country are “ridiculous” and have contributed to the current housing market crash, according to senior economists.

Ian Shepherdson, chief US economist for High Frequency Economics, told the Chartered Institute of Housing annual Harrogate conference that trying to force people in to home ownership was “nuts” and left people a lot poorer than they started out.

Shepherdson said: “It’s hugely damaging when those who can’t afford it are pushed in to home ownership. All that happens is they store up bigger problems for themselves. There’s a limit to home ownership and to pull people in does everyone a massive disservice.”

The government has a long-term goal to increase the proportion of homeowners from around 70% to 80%.

Shepherdson said the proportion of homeowners in the US had stayed at the same level – around 65% - for 40 years despite huge tax incentives in favour of home ownership. However, the proportion rose to 69% with the expansion of subprime lending, which subsequently triggered the housing crash and credit crunch.

David Smith, economics editor at the Times newspaper, echoed his views. He said: “70% of the population being homeowners is pretty much the maximum you should aim for; 80% was always a ridiculous aspiration for the government.”

Their comments follow those of former Conservative MP Michael Portillo earlier in the week, who said house prices needed to fall for the health of the economy, but that politicians of either colour were unlikely to admit it.