The implications of rising housing prices on the younger gener-
ations are huge. Many will struggle to get on the property ladder
because they simple cannot afford to buy a property and are
forced to rent instead (which is very expensive in itself). They
will therefore face greater poverty in retirement as they have no
properties to sell and have to continue paying rent. Overall,
from a purely economic standpoint, rising house prices increase
inter-generational wealth inequality. This is because older
homeowners experience a growth in wealth whilst the younger
generation pay a much larger proportion of their income in sav-
ings for properties or rent.
So this leaves us with one question: How can we solve the prob-
lem? The simple answer is to increase the supply of affordable
housing; however this is no easy task.
One obvious solution is for local governments to create large
projects aimed at building social housing on Brownfield and
Greenfield sites where land is much cheaper. A Brownfield site
is urban land that has been previously used, often for industrial
or commercial purposes, that is now derelict and therefore has
the potential to be redeveloped. In contrast, Greenfield sites are
areas of land located in rural areas that have not previously
been built on. This would increase the supply of housing and
bring the market equilibrium back to a socially optimal and
affordable level. This is likely to be funded partially by central
government borrowing. Unfortunately, this will not cover the
full costs, meaning that taxes would have to increase in order to
fund the projects. This solution is therefore viable however
would prove financially quite difficult.
Another solution is taxation aimed at penalising those owning
empty properties. For instance, Government could charge up to
100% extra (double) council tax on owners who have left UK
properties empty for more than 2 years. This would reduce the
incentive for wealthy foreign investors to spend in the UK hous-
ing market, thus increasing the supply of available housing for
UK buyers. However, this policy would be difficult to regulate as
it would likely involve the monitoring of houses. In addition to
this, it would be unlikely to greatly impact the supply of lower-
class housing as it would be likely to instead impact higher class
housing and holiday homes.
A third, more interesting solution is to designate land use for
different types of housing within major cities. For instance, cer-
tain areas of land would only allow the construction of social
housing, whereas other areas would be designated for family
housing. This would stop luxury developments from being built,
instead making way for more affordable housing. It goes almost
without saying however, that this solution is extremely imprac-
tical and the Government would be unlikely to implement.
To conclude, the UK housing crisis is an extremely prevalent
issue that needs addressing, as the younger generation simply
cannot afford to buy a property. The government needs to in-
crease the supply of affordable housing across the country. Do-
ing this however, is extremely difficult and there is no way of
tackling it in the short run. The Government needs to devise a
long-term strategy that will boost housing construction in a
sustainable way. We will have to wait and see what strategy
they choose to adopt.
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