1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Improving the Functioning of the Housing Market in the United Kingdom

A well-functioning housing market is essential for economic prosperity and well-being. A combination of favourable economic and financial conditions and tight housing supply led to sharp increases in real house prices between the mid-1990s and end 2007, which spurred household consumption. While this boosted output growth, economic imbalances and financial weaknesses mounted, leaving the economy vulnerable to the global financial crisis. Current land use planning policy is excessively restrictive, making supply unresponsive to demand and contributing to creating housing shortages and reducing affordability. While additional supply in the private rental market provides an alternative to homeownership for a significant number of households, social housing waiting list numbers have increased rapidly over the past decade. A reform to replace top-down building targets with incentives for local communities to allow development is underway, but the outcomes are somewhat uncertain. Housing taxation is regressive and encourages excessive demand for housing. More effective taxation could help contain demand and stabilise the housing market. Relying more on long-term and diversified funding for mortgages would also improve the stability of the housing market.

English

Keywords: housing policies, housing markets, housing prices, construction, property taxation, land-use planning, mortgage markets, household saving, United Kingdom, household wealth
JEL: L74: Industrial Organization / Industry Studies: Primary Products and Construction / Construction; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes; R52: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Regional Government Analysis: Land Use and Other Regulations; E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth; R38: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Production Analysis and Firm Location: Government Policy; R21: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand; G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages; R31: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Housing Supply and Markets
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