Invest & Fund says housing crisis may be inequality issue
The UK’s housing crisis may be an issue of inequality rather than supply, Invest & Fund has suggested.
In a new blog post, the peer-to-peer development lending platform noted that “surging interest rates have made it harder for people to buy homes” and said that this will have far-reaching consequences on society.
“A workforce burdened by exorbitant housing expenses encounters reduced disposable income, impeding their capacity to allocate resources to other sectors of the economy,” Invest & Fund said. “This, in turn, constrains consumer spending and curtails economic growth. Furthermore, heightened housing costs foster socioeconomic disparities, inhibiting social mobility and exacerbating inequality.
“Businesses will then have to contend with talent acquisition and retention difficulties as employees grapple with prolonged commutes or choose to relocate, disturbing operational efficiency.”
Read more: Invest and Fund predicts “exodus” of London BTL landlords
The blog referred to an article posted online in The Land Magazine, which drew some comparisons with famines. It noted that victims of famines are often relatively close to food sources but it is the inability to buy rather than supply which is the issue.
“The argument presented is that the sheer number of houses isn’t the issue; it’s the distribution, and even though this has left-leaning undertones and we are committed to being neutral and apolitical, from a mathematical perspective at the point of writing, there are over a million houses in England alone standing empty, so there is a strong argument for correcting the imbalance,” Invest & Fund said. “The debate centres around a research piece from the London School of Economics that discovered that new developments increase house prices in local areas rather than reducing value by diluting the supply, an interesting fact that would potentially be useful when arguing a case at a village planning committee – one imagines.”
Read more: Invest & Fund calls for more brownfield developments
However, Invest & Fund said that the counterargument, “and perhaps the one we lean towards in our thinking”, is presented by Christian Hilber, Professor of Economic Geography at the London School of Economics and an affiliate at the Centre for Economic Performance.
Hilber calls for reforms to the planning system, “away from the extraordinarily restrictive and idiosyncratic development control system towards a rule-based zoning system.”
However, Hilber notes that these changes will be massively unpopular with government policymakers who need to win votes from the median average voter, and median average voters who already own a home and will benefit from endlessly continued price appreciation.
Read more: Invest & Fund blames fragmented systems for slowing down homebuilding
“The conclusion to this debate is complicated; it’s a mixture of both rather than a binary right or wrong answer,” Invest & Fund said. “We believe that the median average voter referenced above will benefit enormously from sustainably and positively developed communities. That, in turn, will create jobs and opportunities around the housing developments that are built, with the added benefit of starting to address some of the inequality at the heart of the problem.”