UK housing market is an engine of inequality

Is the housing market fostering inequality between the generations and across society? Kevin Gulliver gives an evidence based analysis of the current situation.

Kevin Gulliver is the director of Birmingham-based research charity the Human City Institute and chair of the Centre for Community Research; he is writing in a personal capacity

The UK housing system, which was a significant driver of the UK’s slide into recession in 2008, is now recognised as an “engine of inequality”.

The latest evidence is presented by the Joseph Rowntree Foundation Housing Market Taskforce, which shows how the UK’s persistently volatile home ownership market distorts the housing system overall, instills damaging cycles of boom and bust and underpins the growth in wealth inequalities.

There appears to be little upside to housing market volatility in the UK; despite falling house prices since the recession began in early 2008, this is not feeding into improving affordability because wages are stagnant or declining. The government’s measure of housing affordability – the ratio of median house price to median income – fell from 7.2 in 2007 to 6.3 in 2009, but has since increased to 7.0 while most house price indices, including those published by the Nationwide and Halifax, indicate sliding house prices.

Stagnating housing supply in all tenures is an associated by-product of housing market volatility, the outcome of which is ballooning social housing waiting lists and homelessness, so storing-up housing problems for the future.

Professor Mark Stephens, the chief author of the ‘Tackling Housing Market Volatility in the UK’ report, published on May 17, commented that “ownership is being turned into an engine of inequality between generations as the young pay for the wealth generation of older people”.

Forthcoming research by the Human City Institute (HCI) underscores how inequality is embedded in tenure patterns in the UK; home owners have an average of £90,000 in equity whereas social housing tenants have £400 in savings on average and two fifths have no assets at all.

Alongside increasing the overall housing supply then, realising an asset-owning democracy irrespective of tenure should be central to a future, progressive housing policy. HCI recommends helping tenants build assets by setting-up asset accounts. The creation of a Social Investment Bank, controlled by a Tenants Mutual, to fund social housing and community infrastructure investment, would hold asset accounts for all tenants, operating like the Children’s Mutual.

The strategy would not only provide new homes and regenerate neighbourhoods but would encourage saving among disadvantaged communities, narrow the wealth divide between home owners and tenants, support the creation of a ‘Big Society’ for real and aid national economic recovery through increasing capital investment and employment.

34 Responses to “UK housing market is an engine of inequality”

  1. Jamie Milne

    Is anyone going to act on this? No. via @leftfootfwd: UK housing market an engine of inequality: //bit.ly/jcMSc4

  2. paulstpancras

    RT @leftfootfwd: UK housing market is an engine of inequality: //bit.ly/jcMSc4 writes @kevingulliver

  3. Kevin Gulliver

    RT @leftfootfwd: UK housing market is an engine of inequality: //bit.ly/jcMSc4 writes @kevingulliver

  4. AltGovUK

    RT @leftfootfwd: UK housing market is an engine of inequality: //bit.ly/jcMSc4 writes @kevingulliver via @UKactivist

  5. Michael

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  6. paurina

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  7. margaret green

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  8. Abigail Scott Paul

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  9. 13eastie

    Housing Benefit doubled in a decade. The effect of this on the housing market was predictable.

    One of the fundamental drivers of property prices is rental values.

    Housing benefit, to cover often exploitative rents, frequently in neighbourhoods where most people not on benefits cannot afford to live, has driven property prices up artificially.

    At the same time, it has added fuel to the buy-to-let fire, reducing supply and thus further driving up property prices.

    Expansion of immigration has added to demand which has not been met.

    These were all allowed deliberately to happen under Labour, with no regard for those being priced out of the market by an asset-price bubble the perpetuation of which was the foundation to Brown’s profligacy.

    Affordable homes depend on cutting housing benefit, cutting immigration and cutting planning cycles.

  10. Ed's Talking Balls

    Buy-to-let is a serious scourge. Its destructive impact cannot be underestimated. Simply, it must be sorted out now; worryingly, no political party shows any appetite for taking on these awful land barons.

    This is one of those issues that really could secure votes. Not only would it be politically sensible to address it, it would be the morally correct thing to do.

  11. William

    13eastie, you are right, but there is one further point.Once the restriction on lending not more than 3 or 3.5 times income had been removed,a bubble in a CGT free asset was guaranteed,assisted by the uncontrolled lending to buy to let speculators.In the end, however, the market will sort this out-outside prime central London, house prices will fall another 20 percent in the next 4 years.Look at the US, and repay your mortgage if you can.

  12. Property Solutions

    UK housing market is an engine of inequality: The UK housing system, which was a significant driver of the UK's … //bit.ly/jdEHmS

  13. Wm

    UK housing market is an engine of inequality | Left Foot Forward //bit.ly/mCuXux

  14. margaret green

    UK housing market is an engine of inequality //bit.ly/jG8hPI

  15. Nadia Cole

    UK housing market is an engine of inequality //bit.ly/kEHpaS

  16. Dave Citizen

    Labour’s record on housing is a disgrace and, as a result, Britain is now in a real mess. Unfortunately it suited Labour to allow property to be treated as just another asset, to be accumulated on the open market with no concern for wider economic or social impacts.

    The question now is, which party has the motivation and guts to sort out the mess. Clearly not the Tories who instinctively support landowner and landlord interests and probably see nothing wrong with the Duke of Westminster inheriting great chunks of London plus tens of thousands of acres of rural property.

    The only realistic path to a healthy, property owning society i can see is via a land & property tax system that encourages owner use over owner accumulation – plus perhaps right to buy for farmers and anyone with a distant / foreign landlord?

  17. UK Property Forum

    UK housing market is an engine of inequality | Left Foot Forward //bit.ly/jufoqa

  18. teachmeproperty

    UK housing market is an engine of inequality | Left Foot Forward //bit.ly/k5h6sw

  19. Property Solutions

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  20. Property Investment

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  21. Propertyexpert

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  22. D4P Limited

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  23. JRF

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  24. HelenWoods

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  26. Paul Smith

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  27. Sheila Manchester

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  29. Sue Pellegrino

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  30. Female Independent

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  31. colin falconer

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  32. Lara Oyedele

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  33. Steve Twomlow

    UK House prices in the midlands have fallen back from their 2007/8 peak by less than 20% – back to the levels they were at in 2005/6. In the US there are examples of house values that have dropped by 66% from their 2007 peak. And our housing markets volatile ?

  34. Dank Castle

    Here in Australia, several trends over past years related to household income and household formation have worked together to excessively and unsustainably force up property prices to unfair levels. These factors are combined with unchecked commodification of shelter for the population. This is caused by misguided governments who omit to regulate house prices, while unfairly allowing over-leveraged bidders to force up housing costs so they, the government, can benefit from vast streams of land tax, stamp duty, and council rates revenue. Australia’s dangerously unregulated property environment includes many unfair elements that are described well in these blogs on Australian housing affordability…..

    //s4.zetaboards.com/Australian_Property/pages/blogs

    Sadly the truth in Australia is that every spare dollar of household income is spent on overpriced housing and capitalized into ever increasing house prices as young families battle for decent shelter while speculators unfairly hoard the available housing stock! Quite unfair really.

    Dank Castle
    AustralianPropertyForum.com Housing Affordability Blog
    //australianpropertyforum.com/blog/main/3271816

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