This week saw the cost of living crisis begin to bite. With the energy price cap increasing by £693 from April and the Bank of England predicting that inflation will peak at over 7 per cent, households will face huge financial pressures in the months to come. Given the situation, why is that no one in Westminster wants to talk about the biggest squeeze on the cost of living, housing?
The housing market has indicated for some time that the cost of living was set to rocket. But politicians and media commentators in Westminster have largely ignored the signs. In fact, you might even be led to believe by the way in which rising house prices are reported in the media that a surging housing market is good for the economy. In the past year alone, housing costs have increased significantly. As well as asking prices for homes being sold on the open market rising, private rents have also surged significantly across the country. The trend looks set to continue this year, with social rents also set to rise by up to 4.1 per cent in April.
Burdensome rents were once considered unique to London and the South East. Now, regions outside London and the South East are recording the biggest increases in rental growth. Major northern cities like Manchester and Leeds are not far behind London’s rental growth rebound. While renters in London continue to spend more of their income on rent than others, there are worrying signs that more people in more places will begin to spend over a third of their income on rent alone. In terms of those looking to buy their own home, the picture isn’t much better, with annual house prices rising by over 9 per cent.
Given that housing costs are the biggest single expense for most households, you would think as the cost of living crisis bites, a plan to control house prices and stabilise rents would be top of the political agenda. Instead, runaway housing costs are completely absent from the debate in Westminster.
Politicians have taken for granted that a surging housing market is seen as a measure of a booming economy, but this increasingly isn’t true. Very few people benefit from rising house prices. According to the English Housing Survey, roughly one third of people own their own home outright. Another third of people have a mortgage. This means that surging prices require further borrowing to upsize, with any equity gains only really being realised when a household downsizes. For the other third of the population who rent privately or via social housing, rising prices simply make homeownership an even more distant prospect.
Given that for that majority of the population, housing is the single biggest squeeze on their income, it’s about time politicians started talking about housing in relation to the current cost of living crisis. In terms of tackling it, politicians need to come together to challenge the prevailing narrative on housing. Instead of celebrating surging house prices, they need call it what it is, house price inflation. Being honest with the public and explaining exactly how the country’s runaway housing market will impact them should be a political imperative. This would be a step in the right direction and would help people understand that rampant house prices are unlikely to benefit them or their families in the long-run.
As part of this new narrative, it’s also crucial we finally acknowledge the relationship between high house prices and the low supply of new homes. There’s both an absolute shortage of homes and a distribution problem. This means we are neither building enough homes in England, and we do not have the right policies to create more sustainable credit conditions to ensure fair access to housing for people on all incomes.
The timing is ripe for us to reframe how we talk about housing in this country. The current moment must be used as an opportunity to forge a new progressive vision for housing focussed on supply, quality and affordability. Our politicians must be brave enough to realise this vision, both to tackle the immediate crisis and secure long-term prosperity and housing stability for millions of people across the country.