The supply of new homes in the UK has not kept pace with demand, fuelled by population growth. The Government has repeatedly failed to meet the target of 300,000 it set for new homes in England each year.
“There is a reluctance on behalf of a lot of people to allow development in their area,” says Goodwin. “There’s planning red tape, but that’s often encouraged by people not wanting houses built where they live.”
At the same time, income growth has been fairly stagnant since the 2008 financial crash, which has widened the gulf between incomes and prices.
Goodwin says: “It’s a direct consequence of a very bad economic performance over that time. I suppose in the simplest terms, you only generate income growth if you can generate GDP growth and we’ve had 15 years now of pretty poor economic growth by normal UK standards and that’s really been reflected in poor income growth as well.
“Until we actually sort of solve that problem, particularly the productivity problem, then we’re just not going to see the income growth that we would like to see.”
He says low investment levels have been a “perennial problem” for the UK’s economy. Building – not only residential homes but also things like infrastructure – is mired with red tape.
“The UK has had a growing problem for a number of years and thus far there’s no sign that there’s any real coherent plan to actually solve it,” he says. “So you would expect the malaise to continue.”
Josie says the “productivity puzzle” could also be down to the types of industries – such as the creative sector – that have dominated since the financial crisis.
Technological advancements should have increased productivity but there may still not be enough people who can do those jobs, she says.
For those who do not have help from their parents, there can be serious consequences.
Anderson says: “The people that do better and can afford to live where the jobs are are those with wealthier parents.”
Goodwin says he suspects this is contributing to the problem of low productivity in the UK, which is hurting the economy.
Anderson says: “There is quite persistent tightness in the labour market and businesses are still struggling to hire. And if people whose parents are not supporting them to buy houses in inner city areas can’t move to those areas, because they can’t afford to, then that just further exacerbates labour shortages and skill shortages, because you don’t have as much access to as many people as you previously would have.”
The cost of housing is likely to be another factor that puts pressure on employers to offer hybrid working, which allows people to move farther out of cities to buy cheaper homes. It also means that employers have more access to talent pools outside of wealthier homeowners in cities.
Hudson says: “It pushes people further afield in both counts. The post-pandemic working environment where people are more able to work from home will help offset that to some extent, but that also creates the danger that prices will increase where those people move to, which just spreads the problem further.”
4.9 million people living with parents
To help save for a deposit, many people are now living with their parents well into adulthood.
Hudson says: “The pandemic accelerated that process for some people. The decision to move back home rather than rent allowed them to build up the savings that they needed.”