Today, private renters in Britain pay an average of 47% of their income on rent; in London, they pay 72%. As a result, renters face exclusion not only from property wealth—but also from the major cities in which rent is exorbitantly expensive, as well as from the employment opportunities they afford.
This research stream addresses housing inequality from two perspectives. First, we aim to develop policies that reduce the negative impact of housing costs on living standards. Recent political attention to the housing question has focused almost exclusively on the number of units that parties promise to build. We identify a broader set of common-sense reforms that will continue to add to the housing stock while rendering existing units more affordable and cities more inclusive.
Second, we need to recognize that houses are financial investments as well as homes. Over the last three decades, as wages in the OECD have stagnated, households have come to rely on their homes as a source of income through equity release and a “nest egg” for retirement. In 2016 alone, retirees in Britain withdrew £2.1 billion from their property in equity release. This imbalance damages economies by driving up house prices and drawing billions of pounds away from more productive investment. But it also damages policy by raising the political costs of reforms that would lower house prices in order to raise living standards.
We are working to identify the background policies that have driven households to view homes as investment vehicles, and propose a new system of incentives for households to redirect their savings toward higher-value investments in the economy. By balancing the urgent needs of renters with the financial concerns of homeowners, a forward-looking strategy would resolve the economic challenge of the housing crisis and build a broad political coalition to support it.