The battleground

No area of intergenerational disparity is perhaps as contentious as housing. The Resolution Foundation website observed on 20 September 2017 that ‘families headed by 30 year olds are only half as likely to own their home as the baby boomer generation was at the same age’ and that 40% were in private rented accommodation (compared to 10% 50 years earlier).

I have a flat list of Islington properties from when I was a new lecturer, and a flat cost about £20,000. Today, the average flat in Islington costs about £800,000. Inflation in general has been such that prices have gone up by a factor of five, so there's a lot left there to explain. It certainly cannot be explained on the basis of traditional house price to income ratios of three to one. The average wage in the UK in 1980 was about £6,000, so it is seen that the Islington flat was priced about right on traditional standards. Average full-time earnings in the UK are now about £30,000. Of course, London earnings are higher than the UK average, and Islington has been gentrified. But today's London university lecturer is unlikely – on a salary of about £40,000– 45,000 – to find an affordable flat in most of London.

The Financial Times wrote an editorial on 13 October 2022 on how the ‘[h] ousing shortage risks breaking the American dream’. They ascribe the cost of houses to ‘[d]eclining interest rates … constrained land supply, zoning issues, and over-regulated markets’. In the UK, there has been a constant refrain about the need to build on the green belt to alleviate the ‘housing shortage’.

The Department for Levelling Up, Housing and Communities reported (on 31 March 2021) that there were 24.9 million dwelling units in England in 2021, an increase of 216,490 (0.88%) on the previous year. Of these units, 15.9 million were owner-occupied, 4.9 million privately rented and 4.1 million social housing. There were 653,000 vacant units.

The point – as with other asset markets – is that it is the ‘stock of housing’, not the ‘flow’, that determines the price. A doubling of house building to a rate of roughly 2% would still have a trivial effect on the total stock of housing.