London Daily

Focus on the big picture.
Friday, Aug 22, 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
After 200,000 Orders in 2 Minutes: Xiaomi Accelerates Marketing in Europe
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
Taylor Swift on the Way to the Super Bowl? All the Clues Stirring Up Fans
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Apple Expands Social Media Presence in China With RedNote Account Ahead of iPhone 17 Launch
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Cambridge Dictionary Adds 'Skibidi,' 'Delulu,' and 'Tradwife' Amid Surge of Online Slang
Bill Barr Testifies No Evidence Implicated Trump in Epstein Case; DOJ Set to Release Records
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
Emails Worth Billions: How Airlines Generate Huge Profits
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
JPMorgan Plans New Canary Wharf Tower
Zelenskyy and his allies say they will press Trump on security guarantees
Beijing is moving into gold and other assets, diversifying away from the dollar
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
The Drought in Britain and the Strange Request from the Government to Delete Old Emails
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
"No, Thanks": The Mathematical Genius Who Turned Down 1.5 Billion Dollars from Zuckerberg
The surprising hero, the ugly incident, and the criticism despite victory: "Liverpool’s defense exposed in full"
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
×