Rapidly increasing house prices that are far outstripping wage increases are driving inequality in the UK, according to the leading insurance and investment firm Legal & General. Since the mid 1990s, house prices have doubled in real terms due to the amount of houses being built failing to keep pace with demand.
In a new report, Legal & General points out that the UK only builds 125,000 houses a year, compared to 400,000 built each year after the second world war. The firm argues this has meant that baby boomers have “lived for free” with capital appreciation outstripping the cost of their mortgage. In contrast, many in later generations will find it difficult to buy their own home.
Campbell Robb, chief executive of the charity Shelter, said, “The thousands of young people and families forced to watch their dream of a stable home slip further out of reach are already paying the price for successive governments’ failure to build the homes we need. But we know that the next government can turn the tide on the housing shortage within a single parliament.
“The reality is that government backed mortgages like Help to Buy or tweaks to planning rules will only ever being sticking plaster solution that risk making the problem worse, not better.”
Instead, the organisation argues that we need to build more homes in order to create a “healthier house building market”. This could be done by boosting small builders, giving towns and cities more power, finding new investment and getting land into the hands of those who can and will build high quality, affordable homes, it adds.
Prince Charles recently called for more affordable and better housing in London as he predicted the current pace of rising property prices in the capital was “unsustainable”. His comments coincided with a report from the Prince’s Foundation for Building Community, which warned the capital city faces “acute housing shortages of both quality and quantity”.
Following the publication of its own report, Legal & General announced that it was currently involved in a pipeline of over 25,000 new homes across a range of tenures and more than 17,000 student accommodation beds.
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