UK’s housing crisis

A London resident on a typical salary can expect to spend 50 years saving for a house – just to afford the deposit on a mortgage.

The figure, published by UK think-tank Resolution Foundations, is astonishing. Bank of England Governor Mark Carney’s warning this week that the county’s housing market was suffering from “deep, deep” structural problems is just one part of a society-wide crisis in UK housing.

England’s population grows by about 400,000 a year, or by 170,000 households. About 120,000 houses are built, in a good year. There’s a gap of 50,000, which can only lead directly to overcrowding, and indirectly to rising house prices and rents.

Already, in London, the average house costs £458,000 (Dh2.8 million), while the average salary stands at £34,000 (Dh210,000). The ratio between the two, at 13.5, is far higher than levels considered “affordable” by independent researchers such as Demographia (three and less).

“There are not sufficient houses built in the UK,” Carney said bluntly in an interview with Sky TV. Comparing the situation to his home country of Canada, he added: “There are half as many people in Canada as in the UK, [yet] twice as many houses are built every year in Canada as in the UK, which just gives you a sense of the orders of magnitude of the supply problems.”

The Government’s response has been its Help to Buy scheme, which subsidises deposits on mortgages. Some economists believe the scheme is only fuelling the housing bubble with unaffordable personal debt. A debt overhang is developing again in the UK, getting ready to crash.

The structural problems aren’t just economic. Housing unaffordability plagues many democracies around the world, because solving the problem means a loss in wealth for current homeowners, and in particular rich landlords – exactly the kind of people who can make noise in politics, including most politicians.

The political conundrum goes further. Bold developments that would transform a landscape — and alleviate the social issue — are much more publicly visible, and easier to attack, than the mostly invisible problem of overcrowding, poverty, and houselessness. In the UK, such developments would encroach on the “green belts” around cities — those quintessentially English rings of fields that pen in urban sprawl. They are quaint, and understandably popular.

In other countries, such as New Zealand, which suffers from a similar housing crisis, popular opposition to high-rises that may mar the natural landscape are preventing the construction of affordable urban residences.

Demographia, an online publisher of urban planning studies, has ranked several cities around the world based on housing affordability, and found just under half of 85 surveyed cities having serious to severe unaffordability levels.

The housing crisis – in the UK and beyond – demands bold responses in order to accommodate rising world populations alongside the need to safeguard the natural environment.

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