We all know about the UK’s ‘housing crisis’ and its result: owner-occupation is increasingly out of reach of the young, so rising generations rely on private rental. More then one household in five now rents privately, with a mean age of 40, compared with a mean age of 57 among owner-occupiers. More and more young working parents rely on one-year rental contracts to secure a home in which to raise a family. They are in the ‘squeezed middle’: the poorer may access social housing, the richer home ownership, those in the middle go into the private rented sector. 

The usual explanation for the problem is a ‘shortage’ of housing, so the solution is to build more homes, and the planning system is blamed for restricting this. But this is plainly wrong. In the mid-1960s, Great Britain had 16.5 million dwellings and a population of 51.3 million – one home for every 3.1 people. Fifty years later there were nearly 28 million dwellings for a population of 64 million – one home for every 2.3 people. During the same period, house prices grew from around three times mean annual earnings to around seven times that figure.

Why? Doesn’t this defy the iron law of economics – that price is determined by supply and demand? The problem here is a common confusion of housing stock with housing supply. The supply of housing for a purchaser in the market is not the total stock: it is the portion being offered by sellers. Roughly 5% of the stock is available at any time for sale or rent - and much of this is offered by people who wish to move and so are both sellers and buyers in the market. New buyers without these assets – notably the young – are bidding for just a tiny fraction of the total housing stock. 

What about the rest of the stock? A little over 60% is owner-occupied, mostly by people who bought when prices were far below what they are today. More than half are now debt-free. Owner occupiers who have a mortgage pay half what renters do for housing, expressed as a proportion of their income. So, unsurprisingly, owner occupiers are four times as likely as renters to under-occupy their homes. One home in three belongs to a debt-free owner-occupier, but this part of the stock houses just one adult in six. Much of our stock accommodates owners who do not pay the market price for what they consume and lack incentive to ‘downsize.’ Market pressure is displaced onto the young. The political clout of the home-owning majority – and the vested interests that lead opinion - mean the true picture is largely undiscussed. Private landlords, planners and overseas investors become handy scapegoats. 

I have no wish to encourage more scapegoating, or inflame inter-generational conflict, or applaud nimbyish hostility to building. We just need an honest discussion about how to rebalance our broken housing market, and what will happen next if we fail. Building is part of the solution, but it will not achieve much unless we use our stock much more efficiently. Since the late nineteen-fifties, governments have treated housing as a tax-sheltered safe haven for personal capital. A solution probably involves shifting taxation onto assets and away from income. The economic answers are not difficult. Politics is much harder. Until there is a serious attempt to inform electors, the work cannot start.