The government's new housing white paper boasts of "fixing the broken housing market". But all it reveals is that ministers still haven't worked out the crisis is caused by monetary policy.
The reason that so many young people can't afford to buy isn't primarily about a lack of supply. Were that the problem – as Moneyweek's Merryn Somerset Webb observes – rents would be rising in tandem with house prices.
But they're not. House prices have rocketed, but rents have only increased in line with cost price inflation.
That's because the Bank of England has stoked a housing bubble. Nine years of record low-interest rates have kept house prices rising even as wages have stagnated. Our central bank is actively subsidising those who already own assets at the expense of those who don't.
But rather than deal with the real cause of the crisis, the government has merely come up with new ways to compound it – e.g. extending George Osborne's Help to Buy scheme, which enables first-time buyers to get a mortgage with only a 5% deposit.
Cheap credit and government-backed mortgages aren't the solution to a housing crisis, but the cause. It's what precipitated the subprime crisis in the United States – and the global financial crisis that followed.
To fix the housing crisis, policymakers need to stop meddling with the market. Interest rates should return to normal, and house prices must be allowed to realign with wages. If not, we know all too well how the housing crisis will end.
"A revolutionary text ... right up there with the Communist manifesto" - Dominic Lawson, Sunday Times
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