Housing the Economy

Housing outcomes are increasingly problematic in the UK and the OECD. A troubling trinity of rising homelessness, growing queues and high payment burdens in rental housing, and difficulties in entering homeownership are widespread. Adverse outcomes, evolved over decades, reflect both socio-economic changes and persistent failures in the governance of housing systems. Governments fail to grasp how housing outcomes frustrate goals for stability, higher growth and productivity, fairer distributions of wealth and residual incomes, and progress towards net zero. Ubiquitously macro- and sector-specific policies overwhelm the effects of 'palliative' expenditures of Housing Ministries. Governments need to disrupt policy approaches and rethink what housing is, how the system functions, what outcomes do for the economy, society, and environment, and what 'housing' policy is. They must reach beyond the mantras of meeting needs, making housing affordable, and expanding homeownership. Housing policy must be redefined as the whole of government actions that manage the overall housing system to deliver outcomes that best achieve wider missions. Economic policy must shape a better functioning housing system that delivers improved wealth and productivity effects. Current difficulties partly reflect short-term policy mismanagement. The UK, like similar economies, has experienced a decade of pressures in rental markets exacerbated by high immigration rates, growing numbers of overseas student, and potential homeowners frustrated by high downpayments, stress tests and, more recently, higher mortgage rates. Despite the 'supply side' rhetoric of policy, 'demand mismanagement' has been recognised, policy adjusted and rent rises are easing. However, two longer-term 'meta' processes have driven the current crises. First, real housing prices have risen ahead of incomes; between 1992 and 2022 average house prices rose by 377 per cent and median household disposable income by only 51 per cent. Second, the distributions of income and wealth have shifted against the poorest three deciles.