How broken is our housing market?

Last month the government released its Housing White Paper ‘Fixing our Broken Housing Market’; the title is an ambitious promise. The industry response to the White Paper was fairly consistent: it was welcome movement in the right direction but it was too little too late. In short, the plans are not radical enough to solve the housing crisis.

Strutt Parker QuoteNot only is home ownership unachievable for many households now, it’s also likely to become significantly less achievable over time. Since 2002, house prices in England and Wales have nearly doubled (89% increase) compared to just a 32% increase in earnings. This means that houses become even more unaffordable in the time that it takes to save for a deposit. This further increases the inequality between those who are able to get onto the housing ladder – normally with external help – and those who cannot.So just how broken is the housing market? According to the Halifax House Price Index, the average house in the UK currently costs £219,950. The median annual (gross) earnings in the UK stood at £23,100[1] in 2016 and therefore, on average, houses cost 9.5 times earnings. This is a major barrier to home ownership: mortgage providers will typically only lend up to four times a households income and therefore a couple who both earn median wages for the UK would need a deposit of £35k in order to be able to buy a (median) property.  The situation for sole buyers is even more unachievable.

The tendency is to assume that while people cannot afford to buy, households can always fall back on the Private Rented Sector (PRS); it is true that the number of people living in the Private Rented Sector has grown rapidly over the last decade or so, but it is still not an altogether affordable option for many households. The median monthly rent[2] in England was £650 in 2016 which is 34% of the average gross earnings. In London, the median monthly rent (£1,473) is significantly higher which means that, despite higher wages, Londoners have to spend a significantly higher proportion of their earnings on rent (median rent is 61% of median earnings). This has resulted increasing number of people living in flat shares: 30% of people in the PRS in London live in house with other adults who aren’t family compared to 16% nationally[3].

The extent of the housing crisis is geographically specific and is particularly evident in cities. Indeed, a survey by the London Chamber of Commerce found that 42% of businesses felt that their ability to recruit or retain workers was negatively affected by increased housing costs in the capital. The housing market is certainly in crisis. The Government has at least acknowledged the scale of the problem in the White Paper but solving it will be much more difficult.

Lucy Dean, Associate

[1] All workers gross annual income.
[2] Private Rental Market
[3] Knight Frank Tenant Survey, 2015/16

Image: Houses and Coins by Images Money is licensed under CC by 2.0

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Alex O’Byrne, Associate at Volterra, is an experienced economic consultant specialising in economic, health and social impact, economic strategy, project appraisal and socio-economic planning matters.

Alex has led the socio-economic and health assessments of some of the most high profile developments across the UK, including Battersea Power Station, Olympia London, London Resort, MSG Sphere and Westfield. He has significant experience inputting to EIAs and s106 discussions as well as drafting economic statements, employment and skills strategies and affordable workspace strategies.

Alex is also experienced at economic appraisal for infrastructure. He was project manager of the economic appraisal for the City Centre to Mangere Light Rail in Auckland. He also led the economic and financial appraisals of the third tranche of the Transport Access Program for Transport for New South Wales, in which Alex developed and employed innovative methodological approaches to better capture benefits for individuals with reduced mobility.

He is interested in the limitations of current appraisal methodologies and ways of improving economic and health analysis to ensure it is accessible to as many people as possible. To this end, Alex recognises the importance of transparent and simple to understand analysis and ensuring all work is supported by a robust narrative.

Alex holds a BSc (Hons) in Economics from the University of Manchester and he was a member of the first cohort of the Mayor’s Infrastructure Young Professionals Panel.


Senior Partner

t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.