An underclass of people who are unable to afford their own homes is developing in the UK because of a lack of low-cost housing, an industry group claims.

Housing availability in Britain was among the worst in the European Union because of a huge drop in the level of social and affordable housing available, said the Royal Institution of Chartered Surveyors.

It said building levels of private housing had continued at a steady pace during the past few decades while the provision of affordable and social housing had dropped to crisis levels.

It blamed the fall on the "continuous erosion" in subsidies for social housing, combined with reducing incentives for house-builders.

The United Kingdom, it said, now had an average of 10 per cent fewer homes than Germany, Italy and France when population size was taken into account.

The group has outlined its concerns to Kate Barker, who is conducting a review of the UK housing market announced in the Budget by Chancellor Gordon Brown.

RICS chief executive Louis Armstrong said: "A housing underclass is being created and its numbers are swelling to include people who traditionally would have been able to purchase their own home.

"House prices in the UK have doubled since 1995 and this means that large numbers of people, particularly in high value areas, have little hope of accessing decent housing."

Meanwhile property web site Rightmove said house prices remained static during the four weeks to the middle of August while annual house price inflation fell for the eighth consecutive month to 12.4 per cent from 26.5 per cent at the beginning of 2003.

But it also reported an increase in activity among potential buyers, as historically low mortgage rates helped underpin demand.

The north-south property divide continued, with the North seeing the biggest price rises of 4.5 per cent, while the cost of property fell by 3.6 per cent in East Anglia.

Monday August 18, 2003