Over recent years, one of the major stories reported by news channels has been the rise in house prices. In the UK, with the average salary being around £25,000 and the average house price rapidly approaching £200,000, it is incontestable that the majority of the general populace will not be able to buy a property. However, this is not the biggest problem. Indeed, the most pertinent problem is that this problem is not looking like it will be fixed any time soon. House prices in the UK are set to rise 25% over the next five years, according to The Royal Institution of Chartered Surveyors (RICS), with wage growth seemingly not able to match that. This is largely due to a large imbalance between supply and demand, so the logical first step to make housing more affordable has to be to increase the supply of housing.
The supply of housing can be increased, in my opinion, by making construction more productive. This could be done by encouraging private construction companies to get into the market, by perhaps subsidising the cost of construction for them. This would mean that these companies have bigger profit margins, and so are incentivised to get into the housing market, thereby increasing the supply of housing, and, logically, reducing house prices. Although there is a shortage of land to build on, especially in congested areas such as London, more areas of land need to be made available to build housing on, including greenfield sites. Some may argue that we must prevent the urbanisation of all land, however I would argue that people would care about finding an affordable place to live far more than the greenery around them. As such, the “green” community need to make some concessions to allow cities such as London to become more affordable.
The methods which I have suggested will not only be supply-side methods, however. To make housing more affordable, demand orientated methods also need to be employed, for example making the deposits needed larger. Some would argue that the current deposit needed encourages borrowing before the buyer is perhaps ready to buy a house. To combat this, required deposits must be larger, so that the only people who buy housing are the people who can realistically sustain the burden of a mortgage. Although this would indeed mean that less people will be able to buy a property at the present time, it means that only the people who can, will. This will also decrease the demand for housing, for the time being at least, which would also reduce the house prices.
The final method which I shall propagate here is actually not related to housing! This method is to increase the wages of the general populace, so more people can afford housing quicker. This can be done by increasing the productivity of labour, by providing business with more, higher value, capital, so that increased revenue can allow for an increase in wages given. The education levels of the general populace should, also, be increased, so that more workers are equipped with better skills from an early age. When more people have skills, this means that the corporations which they work for will become more productive, which will, again, increase revenue, which increases the scope that these corporations have to provide higher wages.
I must stress that these methods are only only my suggestions, and I do not confirm them to work, if implemented. These are simply my suggestions as to what I think can make housing more affordable, and I do not proclaim them to be perfect, in any way. I also welcome critique in the comments section – that’s always good.