QuickTake on the UK Housing Crisis
Despite UK house prices growing at just 1.4% in the year to April 2019, the housing crisis persists. Compared with the 1990s, 25 to 34-year-olds are twice more likely to rent privately, which has led to a distinct age gap in home ownership. In addition, the percentage of 16 to 24-year-olds privately renting has shot up from 51% in 1998/99 to 73% in 2017/18. Furthermore, a report published by PwC in 2016 showed that potential buyers with no family support may now have to save for 19 years, compared to three years in the 1990s, to buy their own property.
The increase in those renting is sometimes associated with greater flexibility for workers that wish to relocate, but due to the ratio of median rents to median incomes being so high in the UK, the contrary is likely to occur. In fact, this ratio is 53% for 22-29-year-olds living in London compared to 30.5% for the UK as a whole. The geographical immobility caused may lead to key worker shortages (e.g. teachers and NHS staff) in some areas, especially considering prison service officers in London pay 45% of median income on rent.
The case for government intervention here is strong, but such policy must be focused on the supply side. This is rooted in the fact that the Help to Buy loan scheme failed to address the issue at the heart of this problem, which is high house prices. By increasing demand in the face of inelastic supply, prices kept climbing and more importantly, 60% of those on the scheme could have bought a property without such help, according to the NAO. Striving for more affordable renting or house prices is paramount to ensuring people can move to where they are needed in the labour market.