Banking on Property - What is driving the housing affordability crisis and how to solve it

The resource titled "Banking on Property - What is driving the housing affordability crisis and how to solve it" is published by Positive Money, authored by Danisha Kazi and Laurie Macfarlane. The report discusses the systemic drivers of the housing affordability crisis in the UK, addressing historical shifts in housing policy and economic structures that have increasingly treated housing as a financial asset.

The UK is experiencing a significant housing affordability crisis, with median house prices reaching nine times median earnings in England and thirteen times in London as of 2021. The report highlights that house prices have increased dramatically—by 326% in London between 1980 and 2021—despite policies aimed at increasing homeownership. This crisis is not merely a result of supply shortages but stems from a combination of historical policy decisions and financial deregulation that have transformed housing from a basic need into a vehicle for wealth accumulation.

The liberalization of mortgage lending and quantitative easing (QE) since the financial crisis have exacerbated the affordability crisis. The availability of mortgage credit has increased purchasing power, fueling rapid house price growth. The report emphasizes that the total value of UK housing wealth has soared from over £1 trillion in 1995 to more than £5.7 trillion by 2020, accounting for 54% of all household wealth accumulated during this time.

The report reveals stark disparities in homeownership rates across different demographics, particularly among Black, Asian, and ethnic minority households. These groups are increasingly locked out of homeownership, facing higher housing costs and lower living conditions in the private rented sector. For instance, the median household wealth of Black and minority ethnic households in London is significantly lower than that of White British households, highlighting systemic inequalities exacerbated by rising housing costs.

To address the housing affordability crisis, the authors recommend a new long-term strategy focused on stabilizing house prices. Key recommendations include updating the Bank of England's mandate to incorporate house price stability, introducing macroeconomic reforms, and implementing market-shaping policies. Specific proposals involve promoting diverse banking systems and reforming property taxation to discourage speculative investment.

The report stresses the need for alternatives to homeownership, such as implementing rent controls and enhancing tenants' rights to provide security and affordability in the private rented sector. It advocates for scaling up non-market housing options, including social housing and community-led initiatives, to better address the needs of those marginalized by the current housing market.

Public sentiment indicates widespread support for reforming housing policy, with a significant majority of homeowners expressing willingness to forego increases in their property value if it leads to more affordable housing for others. This suggests a potential shift in societal values regarding the purpose of housing, moving from an asset-centric view towards prioritizing its role as a home.