Britain is no longer a meritocracy, and inflated house prices are to blame

The supply of new homes in the UK has not kept pace with demand, driven by population growth. The government has reiterated it missed the target of 300,000 new homes it set in England each year.

“There is a reluctance on the part of many people to allow development in their area,” says Goodwin. “There are red tape for planning, but often that is encouraged by people who don’t want houses built where they live.”

At the same time, revenue growth has been fairly stagnant since the 2008 financial crisis, which has widened the gap between revenue and prices.

Says Goodwin: “It’s a direct consequence of very poor economic performance during that time. I guess in the simplest terms you only generate revenue growth if you can generate GDP growth and we’ve had 15 years of pretty low economic growth by normal UK standards and that has also been reflected in poor revenue growth.

“Until we really solve that problem, particularly the productivity problem, we’re just not going to see the revenue growth that we’d like to see.”

He says low investment levels have been a “perennial problem” for the UK economy. Construction, not just residential housing, but also things like infrastructure, is mired in bureaucracy.

“The UK has had a growing problem for a number of years and so far there are no signs that there is a real coherent plan to solve it,” he says. “So one would expect the unrest to continue.”

Josie says the “productivity puzzle” could also be due to the kinds of industries, like the creative sector, that have dominated since the financial crisis.

Technological advances should have increased productivity, but there still may not be enough people who can do those jobs, she says.

Now read: 18 things you need to know to buy a house in 2023

job shortage

For those who do not have the help of their parents, there can be serious consequences.

Anderson says, “The people who do best and can afford to live where there are jobs are those with wealthier parents.”

Goodwin says he suspects this is contributing to the problem of low productivity in the UKIt’s hurting the economy.

Says Anderson: “There’s pretty persistent stress in the job market and companies are still having a hard time recruiting. And if people whose parents aren’t supporting them to buy houses in inner-city areas can’t move to those areas, because they can’t afford it, that just further exacerbates the labor shortage and the skills shortage, because you don’t have as much access to as many people as you used to.”

The cost of housing is likely to be another factor putting pressure on employers to offer hybrid work, allowing people to move further out of cities to buy cheaper housing. It also means employers have more access to talent pools outside of the city’s wealthiest landlords.

Says Hudson, “It pushes people further on both counts. The post-pandemic work environment where people can work from home will help offset that to some degree, but that also creates the danger that prices will go up where those people move, which only further spreads the problem.”

4.9 million people living with their parents

To help save for a deposit, many people now live with their parents well into adulthood.

Hudson says: “The pandemic sped up that process for some people. The decision to come home instead of renting allowed them to accumulate the savings they needed.”