Lindsay Judge is Research Director at the Resolution Foundation.
We have recently seen fresh evidence of the dire state of housing across Britain. The ONS’ latest housing affordability data showed that average earnings may have doubled since 1997 in England and Wales, but house prices have increased four-and-a-half times over the same period.
But while this is unarguably bad, it is often said that Britain is one of many countries with unaffordable housing: we’ve heard similar stories from New Zealand, Australia, and cities across Europe. Maybe it’s the inevitable blowback from being a rich urbanised economy?
To try to answer this question, new Resolution Foundation research assesses the UK’s position relative to other advanced economies when it comes to what we pay for our housing and, crucially, what we get in return. The results are damning – we are officially the worst in (the OECD) class when it comes to getting value for money for our housing.
It’s not straightforward to compare housing affordability across countries given different places have a different mix of tenures. In the UK, for example, a relatively large share of households own their homes outright (36 per cent) or rent socially (20 per cent). That’s why on average, we spend a lower share of income on housing than in a country like Germany, where 26 per cent of households own outright and just 7 per cent live in social rent. If we want a like-to-like comparison we have to measure housing costs differently.
And that’s what the OECD helpfully does for us by combining data on actual and imputed rents for advanced economies. Imputed rent is the amount a household would pay for its housing if it were privately renting. If all households in the UK were fully exposed to our housing market, 22 per cent of consumption would be spent on housing, far higher than the OECD average (17 per cent), and the highest level across all advanced economies with the solitary exception of Finland.
There’s a good reason why the Finns stand out on this measure however: it is quite common for households in the Scandinavian nation to own a second home for their own use (17 per cent). The same is not true of UK households, where an estimated 4 per cent are lucky enough to have a holiday cottage, a base in town, or the like.
And British housing is not bigger and better than everyone else’s. In 2018, for example, the floorspace per person in England was 38m2, compared to 43m2 in France (in 2020) and 46m2 in Germany (in 2017). Even more strikingly, our homes are not only more cramped than in the US overall (unsurprising given its large land mass), but floorspace per person in England is no bigger than in the notoriously check-by-jowl central city district of the New York metropolitan area, where on average, residents enjoy 43m2 of room.
The UK performs badly on other measures of housing quality too. We have the oldest housing stock of any European nation for example, with close to one-in-four (36 per cent) homes built before 1946 compared to three-in-ten in France (29 per cent), two-in-ten in the Netherlands (19 per cent) and just one-in-ten in Finland (10 per cent).
Older properties were constructed when environmental standards were either non-existent or far weaker than today, and can be harder to insulate than newer homes (for example, having solid rather than cavity walls). It is unsurprising, then, that the UK also performs very badly compared to our European peers when it comes to energy efficiency of our homes.
Bring together the fact that housing forms a very large share of our consumption basket in the UK, and that our homes are less spacious and poorer quality than in many other advanced economies, and you have to conclude that the UK’s housing stock offers the worst value for money of any advanced economy.
When we compare ourselves to countries with a similar level of prosperity, the truth hits home: the cost of housing in the UK is 57 per cent higher than in Austria, for example, and 36 per cent higher than in Canada.
This should settle any remaining doubts that Britain has a housing crisis. But who is to blame?
This parlous situation is a long time in the making – it speaks of inaction by successive governments at national, local and city-wide levels. Likewise, turning it around will inevitably be a long-term game. There have been some strides in the right direction in recent years: 200,000-plus net additions a year to English housing stock has become the new norm.
But it’s time to be bolder still. That means not just ramping up the numbers of new homes we build in the UK that are so essential to match growing demand, but also getting serious about the need for wholesale modernisation of our crumbling – and currently very expensive – homes.
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Author: Lindsay Judge
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