Why are house prices so high and why are prices in desirable areas becoming ever more extremely detached from the national average?
London homes now cost 12 times the median salary of those who live there. That seems absurd and unsustainable.
The usual suspects – housing supply not meeting demand, overly onerous planning restrictions –fail to provide a satisfying explanation on their own. Last month we were also told that the government’s Help to Buy scheme is not the main driver. Where then does the answer lie?
We need to start focusing our attention on the underlying, big picture factors that are shaping and distorting housing supply and demand. Aditya Chakrabortty, the Guardian’s Economics Commentator, has recently pointed to regional imbalances. Another possible explanation, the focus of our new working paper, is rising economic inequality.
More from this article at the New Economics Foundation Blog
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