The UK housing crisis: High demand, low supply, and failed regulations
The challenges surrounding the UK housing market are no secret to residents of the country. The combination of failed regulations, high demand, and low supply has created a situation where housing costs far outweigh those found in any other nation in the OECD. A recent study from the Resolution Foundation revealed that while Finland technically pays more for housing, the total amount the average Brit spends on housing costs surpasses that of any other nation. In fact, housing in the UK is nearly 50% more expensive than the cost of other goods and services according to the study.
At the 2019 World Economic Conference in Rome, warnings were issued about variable rate mortgages, and these warnings have proven to be accurate as mortgage rates remain high following the economic fallout from COVID-19. In February, the UK saw a higher rate of inflation compared to the general Euro Area, standing at 3.4% versus 2.6%. Despite the Bank of England’s aim to reach a 2% inflation target, misaligned monetary and fiscal policies continue to pose challenges.
As a result of the housing shortage, around 40% of housing in the UK dates back to the early 1900s, making it the oldest inventory in the EU. Homes in the UK are noticeably smaller compared to other countries, leading to a rise in co-housing arrangements as individuals struggle to find suitable living spaces. The Resolution Foundation’s report also highlighted the fact that one in six young adults between 18 and 34 are living in poor-quality housing, with a total of 6.5 million people across the UK residing in subpar conditions. The rise in homelessness, particularly among the youth, is a growing concern, with statistics showing a 20% increase in youth homelessness in London and an 8% rise in young people seeking homelessness prevention measures nationwide.
With housing set to be a major talking point in the next election, both sides of the political spectrum are proposing plans to assist first-time buyers. However, little progress has been made in streamlining the homebuying process or addressing the multitude of issues plaguing the housing market. One significant challenge is the migrant crisis, as the country faces the dilemma of accommodating an additional 1.2 million new residents while struggling to house its current population. In essence, the UK is facing a housing crisis that shows no signs of abating.
Source link
