We tend to conceptualise the housing crisis in terms of affordability – and justifiably so. Over the last two decades, the ratio of median house prices to earnings in England and Wales has more than doubled.
Back in 1997, house prices represented, on average, around 3.6 times workers’ annual gross full-time earnings. By 2016, however, prospective buyers could expect to spend around 7.6 times their annual earnings on purchasing a home. Drilling down to a regional level yields even more dramatic results, particularly in London and the South East, and cities like Oxford, Cambridge and Bristol.
No one doubts this worrying state of affairs, but I sometimes wonder whether we may be missing the true scale and severity of the situation. After all, the housing crisis has many hidden, human, costs that can be easily lost in the data. Firstly, exorbitant rents mean less disposable income – and correspondingly high opportunity costs.
One recent study showed that Londoners and residents of several other cities are on average spending more than a third of their monthly salary on rent, before even considering household bills or council tax payments. In practice, this equates to billions of pounds in lost consumer spending. Consider the cash boost to UK businesses – and uplift to our overall quality of life – if some of this rental expenditure could be freed up for other uses.