The last 30 years have seen house prices in London soar to dizzying heights.
The average home has leapt from £81,536 in 1988 to £473,882 in 2018 – that’s a 481 per cent increase.
If the cost of a pint of milk (26p in 1988) had jumped up at the same pace, it would now cost a whopping £1.52 – three times the current price.
Anyone who has watched the news or read the papers in recent years will know that we are neck-deep in a housing crisis, and it extends way beyond the capital. Half of young people in the country have no chance of ever buying a home, and private renters on lower incomes spend an average of 67 per cent of their earnings on rent.
Already the situation is out of control, and that’s before we factor in Brexit, the harbinger of economic instability.
Many have blamed Brexit for the recent slowing and occasional fall of house prices in London – but could this actually be a blessing in disguise?
Could falling prices mean that a few more young professionals will be able to climb onto the first rung of the housing ladder?
As they move into homeownership, will that free up rented homes, causing private rents to fall? Will those on lower incomes then be able to afford their rent again? Will the whole market become more affordable, suddenly meaning that – hallelujah – the housing crisis is over?
Alas, I’m afraid not. And here’s why.
First, falling house prices are often a symptom of an economic downturn or recession. This affects people’s spending power, whether they are first-time buyers saving for a deposit, or homeowners who see the value of their existing property stall or fall into negative equity.
That will make houses harder to either buy or sell in relative terms.
Second, inflation is expected to go up after Brexit, which means that people’s incomes will be squeezed regardless of their homeownership ambitions. And banks are generally less keen to lend when house prices are heading downhill.
And finally, house prices are still at historic highs. In London, the average property is 13 times the average wage.
House prices may fall, but it’s the fundamentals of the London market – volatility resulting from under-supply – that causes these problems.
A drop in house prices is yet another symptom of the crisis, not a cure for it. We have a severe and worsening housing shortage in this country, and in particular a shortage of homes at the more affordable end of the market.
There are more than a million households on the social housing waiting list, but the government only delivered 6,000 new social homes in the whole of England last year.
The sadness we all feel at the number of rough sleepers on the streets turns to dismay when we realise that this is just the tip of the iceberg: almost 280,000 people in England are currently homeless.
To truly solve our housing crisis, we must build a whole raft of homes that are affordable to a whole lot more people. That is why Shelter is calling for 3.1m new social homes over the next 20 years.
Some naysayers will claim that it’s impossible to do, but we’ve done it before – after the Second World War – to great economic success and public acclaim. We can do it again.
Our vision for social housing would offer the chance of a stable home to millions of people who fail to qualify under the current system. It would provide much-needed security and a step up for younger renters desperate to get on in life and build a brighter future for themselves and their family.
The current housing situation amounts to a national emergency. Brexit-induced price falls won’t solve the problem. Building more will.
Shelter’s tower-running challenge Vertical Rush takes place on 14 March 2019 at Tower 42 in the City of London.