Building more homes will do little to rein in soaring UK housing prices as long as there are not enough subsidies for first-time buyers and young families, a non-profit set up by former UK Prime Minister Tony Blair said in its research out Wednesday.
The UK government has pledged to build up to 300,000 homes a year by the mid-2020s but economist Ian Mulheirn from the Tony Blair Institute for Global Change argues in his 48-page paper that the need for more homes is a popular misconception.
“The available academic evidence suggests that no plausible rate of supply would significantly reverse the price growth of the past two decades,” he writes in a summary.
The study for the UK Collaborative Center for Housing Evidence estimates that house prices have jumped 160 per cent since the low point in 1996 despite a faster growth rate in the dwelling stock compared to the household count.
Hitting the government’s home building target would put more downward pressure on prices and rents but modelling exercises suggest that housing prices would go down by a modest 10 per cent over the course of 20 years.
A far more effective strategy, Mulheirn argues, would be helping young, low-earning people to take their first step on the housing ladder and increase the social housing stock, while encouraging landlords to sell their property.