Broken homes 🏚️

What is a house? It can be shelter, or a piggy bank. Or cash cow. It can be collateral, an inheritance, or pension plan. Sometimes all at once. This is what makes housing so hard to fix. Almost everyone says they want affordable homes. Far fewer want their house to decline in value.

Britain’s housing dysfunction has endured because it serves one powerful group very well: homeowners. This cohort are generally more likely to vote. Turnout among homeowners was 21 percentage points higher than renters during the 2024 general election. The people who benefit from cheaper homes may be less politically powerful than the people who already own them.

Not only is this unjust, it’s bad for the economy. High housing costs leave households with less money to spend, save or invest. They make it harder to move to where the best jobs are. They push people to delay families, avoid risk, and depend more on inheritance. And they direct more national wealth into bidding up existing homes rather than funding new businesses, infrastructure or productivity. The result is an economy that looks rich on paper, but hollow and wonky IRL.

Castles in the sand

As if they didn’t have enough to contend with, younger adults are less likely to own homes than earlier cohorts were at the same age, and buying has become much harder relative to earnings. Homeownership among 25 to 34-year-olds fell from 51% in 1990 to 28% in 2023.

The England house price-to-earnings ratio was about 3.5 times in 1997 but 8.3 times in 2024. Homes are usually considered ‘affordable’ when the ratio is five or below. All this isn’t helped by the fact real wage growth has been broadly stagnant since the financial crisis. While UK wages have not stood still in cash terms, after inflation, the story since 2008 has been one of near-stagnation.

And for much of the 2010s and early 2020s, Britain experienced an ultra-low-rate environment. The bank rate was cut to 0.5% in March 2009, fell to 0.25% after the Brexit vote, and hit a record low of 0.1% during the pandemic. It only started rising again in December 2021, reaching 5.25% by August 2023. That is still nowhere near the historical peak of 17% in November 1979. But buyers who missed the cheap money window were left facing high prices and much more expensive borrowing.

Generation spent

Saving a 10% deposit on a median single salary took around eight months in 1975, compared with 47 months today. Family wealth now does some of the work wages used to do. The Bank of Mum and Dad supported 173,500 first-time buyers in 2024, with gifts and loans worth £9.6bn, averaging £55,572 per assisted buyer.

Rent makes buying a home even harder. The average UK monthly private rent was £1,377 in March 2026, up 3.4% over the previous 12 months. London remained the most expensive English region, with average rent at £2,280. The North East was lowest at £772.

Ideally, housing costs should sit around 30% of gross income. In expensive cities, many renters go above that. And once rent, bills and council tax approach 40-50% of take-home pay, housing starts crowding out saving (for a deposit perhaps), investing, debt repayment and the ability to absorb shocks.

Shelter and yield

The state also spends a lot on helping people afford their rent. Housing benefit and the housing element of Universal Credit are supposed to support households. But the public purse has ended up helping bridge the gap between housing costs and what many households can afford. That keeps people housed, no small thing. But the state should not be responsible for propping up renters and lining the pockets of private landlords. By some estimates, the government will pay £73bn in housing allowance to private landlords between 2024-25 and 2028-29.

‍Buy-to-let adds another loop. When supply is tight, investors and first-time buyers can compete for the same homes. High prices keep more people renting. More renters support landlord demand. Landlord demand can then support prices. Shelter and private returns end up pulling on the same limited stock.

Housing ate the economy

Therefore, the private rented sector has become a longer-term home for more people. But it’s not necessarily becoming more stable. In 2023-24, around 20% of private renters had been in their current home for less than one year, compared with 6% of social renters and 4% of owner occupiers. It’s no coincidence that renters’ rights have moved up the policy totem pole.

Chancellor Rachel Reeves is said to be considering a one-year freeze on private rents in England as part of a cost-of-living package linked to the inflationary fallout from the Iran war. Downing Street has since reportedly ruled it out, and ministers have criticised the idea. 

Anyway, rent controls do not fix the underlying shortage. Almost everywhere they’ve been tried, they make things worse. They may buy time for current tenants, but if supply does not also rise you end up with fewer homes to rent, higher starting rents, fussier landlords, and less mobility as people hold onto their controlled tenancies.

High on your own supply

A major problem is the economy has become hooked on high house prices. Fixing housing would probably involve lower prices, as well as higher wages, lower borrowing costs, more supply, or some mix of the four. But lower prices can create their own set of problems.

For one, house prices are tied to household wealth. For many households, the home is the main asset. Property wealth made up 40% of total household wealth in Great Britain in April 2020 to March 2022, the largest single component ahead of private pension wealth at 35%.

For decades, an investing-shy nation has been told their castles are the primary path to wealth creation. We are obsessed with leveraging several times our annual salaries to buy an illiquid asset that typically creates seemingly unending further costs, while shuddering at the thought of buying shares (sorry, we are a stockbroker, after all). 

A fall in prices can make owners feel poorer and reduce confidence. It can also affect banks, because mortgages are secured against property values. It can spook housebuilders, because falling prices make projects less attractive. It can affect public finances, because property transactions and values feed into tax receipts.

Demand supply

The obvious answer is to build more homes. But Britain has consistently failed to do just that. England added 208,600 net additional dwellings in 2024-25, down 6% from 2023-24. That included 190,600 new builds, with the rest coming from conversions and other gains, offset by demolitions.

That is well below the level needed. It’s estimated England needs around 340,000 new homes a year, including 145,000 affordable homes, to meet demand and address the backlog. 

Part of the problem is the Town and Country Planning Act of 1947, which made development something that required permission. It also changed the compensation logic. If planning permission is refused, landowners are generally not compensated for the development value they might have gained. That makes the default setting for planning control one of restraint.

Rule by NIMBY

Then there’s the NIMBY problem. The Not In My Backyard phenomenon is less about selfishness and more about incentives. The benefits of new housing are diffuse, spread across future buyers, renters, employers and the wider economy. But the more immediate costs are felt locally: more traffic, more pressure on services, building work, blocked views and changing neighbourhoods. And a possible hit to the value of many peoples’ biggest asset.

Labour’s planning reforms have tried to open up lower-quality ‘grey belt’ land, to support its 1.5m homes target. But the green belt is still very much a third rail because those most likely to oppose development are often already housed, older, more settled. And, remember, more likely to show up on polling day.

Dead pledge

In a creaking housing market, first-time buyers will continue to get older. More adults will rent for more of their lives. Family wealth will become an even bigger part of the deposit game. Homes will get (even) smaller. Governments will be increasingly involved in rents, planning, and landlord rules.

If the housing crisis remains unresolved, mortgages may get longer and longer. A buyer taking on a 35- or 40-year mortgage in their late thirties could still be paying it off close to retirement. It’s worth noting that ‘mortgage’ comes from Old French for ‘dead pledge’. In the near-future, many may find themselves still indebted on their deathbed. 

Maybe the status quo can limp on for another generation. But a housing market built around ever-rising prices is only making an increasing share of the country worse off. It can look like prosperity from inside those four walls. For those shut out, peeking through the window, the picture is very different. With all the focus on making homeowners richer, Britain forgot people still need somewhere to live.