The world has an urban housing crisis. More and more people are moving to the cities, while, in many developed economies, household sizes are shrinking. What are the answers? By Georgina Power
House prices in countries around the world have been galloping ahead of wage growth. In a report released by PwC this summer, for example, private rents in four regions of the UK are now considered unaffordable for workers on or below the median wage. These are London, the South East, the South West and the East.
Housing was a key topic at MIPIM 2019. The conference session on Building Housing Justice was moderated by Nicolas Buchoud, President of the Grand Paris Alliance for Metropolitan Development. Buchoud was joined on stage by:
- Dr Abel Schumann, Economist, OECD
- Helen Gordon, Chief Executive of Grainger plc, and the new President of the British Property Federation
- Dr Orna Rosenfeld, Global Advisor on Housing
- Ricardo Veludo, Lisbon Affordable Housing Task Force Coordinator, Lisbon City Council
The housing crisis is a global issue
The ‘least’ affordable cities in the world include Auckland, Hong Kong, San Francisco and Vancouver and the ‘most’ affordable are Dubai, Kuala Lumpur and São Paulo, according to Knight Frank’s Global Affordability Monitor. Across all 32 cities tracked, average real house price growth has outpaced average real income growth by 16% over the past five years.
Building housing justice at MIPIM 2019
The intergovernmental Organisation for Economic Co-operation & Development (OECD) put out a call at MIPIM to work with national, regional and local governments and other organisations on housing affordability.
Dr Abel Schumann, Economist, OECD, told the MIPIM audience that the price of housing as a national average – so not just urban areas, where rises have been “more severe” – has risen by an inflation-adjusted 30-50% in the 36 OECD member countries since 2010.
These high prices are caused by a variety of reasons, said Dr Schumann, including:
- Quantitative easing since the 2008 financial crisis, as central banks pump new money into the money supply, and historically low interest rates.
- Demographic trends, as household sizes shrink and people move to cities. The population in cities of over 250,000 in OECD member countries is growing by around one per cent a year.
- Low productivity in the building sector; rates have even fallen off since 1995, compared with big increases in other sectors.
- Planning policies and land use regulations that prevent densification or development on greenfield sites. Dr Schumann quoted Glaeser & Gyourko, 2017, that 10% of US housing is more than twice as expensive due to land use restrictions to the housing supply; and the Deschermeier et al study of 2017 quoting Germany building 40% more single-family homes than needed in rural areas compared with only 32% of units needed in the cities.
Full article here.
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