London Daily

Focus on the big picture.
Thursday, Oct 30, 2025

The answer to Britain's housing crisis is more houses - not risky mortgages

The answer to Britain's housing crisis is more houses - not risky mortgages

Housing experts were left scratching their heads this week after Prime Minister Boris Johnson announced his flagship policy to get young people on the housing ladder: bigger mortgages.

Johnson plans to turn “generation rent” into “generation buy” by offering long-term, fixed-rate mortgages of up to 95 per cent of the value of the home.

He is no doubt concerned by the shocking decline in the rate of homeownership amongst young people, who are becoming increasingly angry about spending much of their adulthood paying for their landlord’s mortgage.

Conservatives have already recognised that the decline of “property owning democracy” poses a risk for their electoral future. So making the saving process easier and boosting homeownership by dropping deposit requirements might seem sensible. There’s just one problem: it’s a terrible idea.

Let’s look at the economics of why homes are so expensive. Prices are set by supply and demand. Supply is very simple: it’s the number of homes available to buy or rent. The oft-misunderstood concept of demand means the extent to which people are willing and able to pay for them.

It includes many factors, including the number and size of households, their incomes, and the availability and cost of mortgages.

When demand increases (for instance interest rates fall, making mortgages cheaper), developers have an incentive to build more, because there is more money to be made. This increases the supply, and prices should remain relatively stable.

But this hasn’t happened. We’ve built far less over the last 30 years than we have for most of the last century. New supply peaked in London in the 1930s at 80,000 homes a year, and easily hit 30,000 for much of the post-war period. Since the mid-80s we’ve struggled to hit 20,000. While strong population growth, smaller households, higher incomes, and low interest rates have all fed into greater demand.

Prices have skyrocketed


Accordingly, prices have skyrocketed. In 1970s London, an average home cost just £5,000 – or just under £78,000 in today’s prices. It’s now sitting at £486,000. That’s a 620 per cent increase. No wonder the kids can’t afford it!

Johnson’s plan does nothing to address the core problem: the supply of homes is not meeting the demand for them. It will simply lead to higher prices. Just as lower interest rates increased prices because the supply of homes didn’t rise in response, bigger mortgages will do the same.

Then there’s the other problem with 95 per cent mortgages. They’re risky. High loan-to-value mortgages dried up after the financial crisis to prevent riskier customers (those who can’t save a large deposit) being exposed to falls in prices. We’re facing another recession now. It is reckless to encourage young people to rush and buy at present high prices when that could leave them trapped in negative equity.

What should Johnson do instead? Rather than encouraging young people to further stretch the limits of their finances, he needs to stop letting prices rise. No one wants inflation in energy bills, food, or transport.

But when house prices rise, it’s somehow “growth” or a “strong market.” We need people to recognise it is absolutely not positive news for those who don’t already own. Government should explicitly target 0 per cent house price inflation, and ensure enough homes are delivered every year to meet that target.

Our planning system needs reform


The first challenge is boosting housing supply of all types and tenures, especially in high-demand areas like London. The main barriers to this relate to our planning system. It restricts the availability of land and turns every new development into a local political battle. Government is right to reform it into a simpler, rules-based system.

However, the most urgent need is for social housing. Current plans to divert funding to First Homes (discounted market sale homes) will help a lucky few who would probably buy soon anyway, but do nothing for the 8.4 million people who are in far higher need. Johnson needs to reverse these plans and invest in a new programme of social homebuilding to rival the post-war period.

Our property tax system is also a problem. Council tax is horrifically regressive, taking more proportionately from poorer households. Stamp duty discourages people from moving. These conspire to make staying cheap and moving expensive, gumming up the market and encouraging people to under-occupy. Johnson would do well to listen to the Fairer Share campaign and replace these taxes with a proportional property tax.

Finally, many people are going to be renting for much (or all!) of their lives. Government should get in renters’ good books by making this a less horrible experience.

They need to crack on with their promise to abolish unfair evictions, support renters to get redress from landlords and agents who fail to meet their contractual responsibilities, and fund proper enforcement of property standards. The political stakes are too high not to.

Newsletter

Related Articles

0:00
0:00
Close
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
Essentra plc: A Closer Look at a UK ‘Penny Stock’ Opportunity Amid Market Weakness
U.S. and China Near Deal to Avert Rare-Earth Export Controls Ahead of Trump-Xi Summit
Justin time: Justin Herbert Shields Madison Beer with Impressive Reflex at Lakers Game
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
Giuffre’s Memoir Alleges Maxwell Claimed Sexual Act with Clooney
House Republicans Move to Strip NYC Mayoral Front-Runner Zohran Mamdani of U.S. Citizenship
Record-High Spoiled Ballots Signal Voter Discontent in Ireland’s 2025 Presidential Election
Philippines’ Taal Volcano Erupts Overnight with 2.4 km Ash Plume
Albania’s Virtual AI 'Minister' Diella Set to 'Birth' Eighty-Three Digital Assistants for MPs
Tesla Unveils Vision for Optimus V3 as ‘Biggest Product of All Time’, Including Surgical Capabilities
Francis Ford Coppola Auctions Luxury Watches After Self-Financed Film Flop
Convicted Sex Offender Mistakenly Freed by UK Prison Service Arrested in London
United States and China Begin Constructive Trade Negotiations Ahead of Trump–Xi Summit
U.S. Treasury Sanctions Colombia’s President Gustavo Petro over Drug-Trafficking Allegations
Miss USA Crowns Nebraska’s Audrey Eckert Amid Leadership Overhaul
‘I Am Not Done’: Kamala Harris Signals Possible 2028 White House Run
NBA Faces Integrity Crisis After Mass Arrests in Gambling Scandal
Swift Heist at the Louvre Sees Eight French Crown Jewels Stolen in Under Seven Minutes
U.S. Halts Trade Talks with Canada After Ontario Ad Using Reagan Voice Triggers Diplomatic Fallout
Microsoft AI CEO: ‘We’re making an AI that you can trust your kids to use’ — but can Microsoft rebuild its own trust before fixing the industry’s?
×