The UK’s housing market is under scrutiny again, as the Resolution Foundation’s latest Housing Outlook report draws stark comparisons between British homes and those in other advanced economies. Leveraging OECD data, the analysis aims to shed light on the nuances of the UK’s housing crisis, often a point of contention in policy debates.
The traditional measure of housing affordability, the share of household income spent on housing, is reevaluated in this report. This measure is deemed less effective for international comparisons due to variations in outright homeownership rates across countries. For instance, the UK, Italy, and Spain have higher proportions of outright homeowners compared to Germany and the Netherlands, influencing the perceived affordability.
To offer a more uniform comparison, the Foundation’s analysis considers the market cost of housing across different countries by evaluating what it would cost to rent all homes at market rates. Under this metric, the UK stands out for its high housing costs, only surpassed by Finland among advanced economies.
Contrary to what might be expected, the high costs do not correspond with superior housing quality or quantity in the UK. In fact, the report reveals that English homes offer less floorspace per person compared to many counterparts, including the US, Germany, France, and even Japan. English homes are also more cramped than those in New York City, offering 24% less housing per person than Austria and 22% less than Canada, countries with comparable overall consumption levels.
Moreover, the UK’s housing stock is among the oldest in Europe, leading to issues such as poor insulation, higher energy bills, and increased dampness risks. This, combined with the limited floorspace and high costs, culminates in the UK housing offering the worst value for money of any advanced economy. The report places UK households as paying 57% more for comparable quality-adjusted housing than those in Austria, and 36% more than in Canada. Other countries facing housing crises, such as New Zealand, Australia, and Ireland, follow the UK in terms of poor housing value.
Adam Corlett, principal economist at the Resolution Foundation, emphasises the significance of the UK’s housing crisis in the forthcoming election campaign and the need for policy interventions. He said: “Britain’s housing crisis is decades in the making, with successive Governments failing to build enough new homes and modernise our existing stock. That now has to change.”
