Why building affordable homes won’t really help young people find property.

London Housing, a photo by Roomic Cube on Flickr.

A BBC article earlier this week cited a Joseph Rowntree Foundation (JRF) report which claimed that a million young people would be “locked out” of home ownership by 2020. It pointed not only to the high house prices faced by first-time buyers, but also to the ever-increasing costs of renting faced by young working professionals.

The article suggests that a way around these problems is to instigate a programme for building affordable homes and to produce a better working rental system. Here however, I argue that such initiatives will merely paper over the cracks that we are likely to see in the housing market. Instead, the root problem needs to be addressed: the UK’s hugely imbalanced economy.

Many articles about young people and housing markets tend to be focussed on issues in London. The BBC article I’ve cited is no different. The problem that we’re seeing in London is that the demand for housing is far greater than the supply, especially amongst young professionals. This problem will continue to persist long into the future, and in all probability will get worse still.

The fact is that graduates and young people continue to gravitate towards London. After all, this is the city that is a major centre for the financial and professional services, government and public sector work, and the creative industries. With London offering unparalleled career opportunities compared to other parts of the UK, young people will continue to flock to London in their droves. As more people continue to move to London, more pressure will be put on the housing stock and prices will increase further still.

Building affordable homes will only provide a short-term fix. If they’re built in London then they’ll be snapped up quickly anyway and we’ll be back at square one again. If they’re built outside London, then there’s a danger you’ll be building unnecessary houses in places where there’s no demand for them.

Ultimately, what’s needed is a more profound transformation of the economy so that it’s less focussed and reliant on London and the South East. We need to build up other cities and areas so that they become viable alternatives to London for young career-minded individuals. That way we have a chance of relieving the long run pressure on houses (and in turn house prices) in London as well as creating other potentially cheaper areas that people can move to.

Adding to this, London’s a city that can’t really geographically expand any further, ultimately meaning there’s less physical space to build new affordable houses. By regenerating and economically stimulating areas beyond London, we can develop regions where there may actually be space to build new accommodation. Again, as the supply increases there’s less competition for housing helping keep prices in check.

Building affordable houses is in itself not a solution to the problem of getting young people onto the property ladder. A house building programme will only be beneficial if it’s part of a broader policy that creates jobs outside London and means that young professionals are less dependent on our capital city.