A generational divide: tackling the UK’s housing crisis

If the price of eggs had risen at the same rate as the price of housing land, a dozen eggs would have cost £91.28 by 2008.
- Professor Paul Cheshire

The damaging effects of the UK’s housing crisis are spreading throughout the economy. Radical reform is needed to prevent further harm to social cohesion, retirement planning, productivity and economic growth, according to new analysis by LSE experts.

Researchers at the Centre for Economic Performance (CEP) based at London School of Economics and Political Science show that the affordability crisis means that by 2023, median house prices in London were 12 times the median earnings.

The CEP election analysis Housing and planning shows how far the affordability crisis has spread. While the biggest problems are focused on London and the south-east, housing affordability has now plummeted along the south coast as far as Devon, in cities such as Birmingham, Manchester and York, and in coastal tourist hotspots such as north Norfolk and south Wales.

Even in the most “affordable” region of England, the north-east, median house prices were still five times the median earnings.

“The fundamental cause of our housing crisis is not building enough houses,” say authors Paul Cheshire and Christian Hilber. “This is not just a problem of the recent governments – it is an accumulated deficit of house building going back to at least 1955 – more than two generations.”

The authors point out that the knock-on effects include: growing inequality between homeowners, who tend to be older, and renters, who tend to be younger; increased commuting distances and pollution as people move away from expensive cities and drive through the green belt; reduced economic output as high housing costs discourage skilled labour from moving to our most productive cities; and a diversion of investment into “playing the housing market”.

They suggest policies to improve the situation, including:

  • Allowing development on small areas of green belt land that have no environmental or amenity value and are near railway stations.
  • Moving from the current discretionary planning system to a “rules-based” one in which proposals that conform to plans gain automatic acceptance; such a change could be piloted in some large metro regions.
  • Changes to rules around “view corridors”, which restrict the height of buildings in cities.
  • Reform of property taxes and local government finance to generate incentives for local communities to permit development.

Professor Cheshire said: “If the price of eggs had risen at the same rate as the price of housing land, a dozen eggs would have cost £91.28 by 2008. This is the economic reality of a restrictive, discretionary planning system.

“Our economy and our society need radical planning reform that rebalances local and national interests and supplies enough land.”

Professor Hilber said: “The ensuing crisis in [housing] affordability drives a wedge into the fabric of society, as the wealth is redistributed towards older homeowners, while younger renters and would-be buyers are confronted with ever rising housing costs and deposit constraints.

“Real reform requires both a rules-based system of planning and a system that embodies a proper understanding of basic economic analysis”.


The full report is available here: CEP Election Analysis: Housing and planning

Behind the article

The Centre for Economic Performance (CEP) is an independent research centre based at the London School of Economics and Political Science. Its members are from the LSE and a wide range of universities within the UK and around the world.

The Centre for Economic Performance is part-funded by the Economic and Social Research Council, part of UK Research and Innovation (UKRI)

Paul Cheshire is emeritus professor of economic geography at LSE and an associate of CEP’s community wellbeing and urban programmes.

Christian Hilber is professor of economic geography at LSE, professor of real estate finance and economics at the University of Zurich and an associate of CEP’s urban and community and wellbeing programme.

The Centre for Economic Performance, LSE, is producing a series of briefings that aim to provide an impartial, evidence-based analysis of the key issues in the 2024 UK general election.