House prices across most advanced economies have risen dramatically relative to incomes over the past three decades. The ratio of median house prices to median household income has roughly doubled in many OECD countries since the 1990s, with particularly sharp deterioration in cities that have become hubs of knowledge-economy employment. In London, Sydney, and Vancouver, median homes now cost more than ten times median household incomes, a threshold once considered a marker of extreme unaffordability.
Causes of the Crisis
The causes are contested but the broad outlines are clear. Restrictive planning regimes have constrained supply in areas of high demand. Low interest rates across the 2010s inflated asset prices broadly, including housing. Growing household incomes among high earners have bid up prices in desirable locations. And demographic trends, including declining household sizes, have increased demand for housing units independently of overall population growth.
What makes the housing crisis particularly difficult to resolve is that it involves a collision between two legitimate interests. Existing homeowners benefit financially from rising prices and often resist new development near their homes. Younger renters and aspiring buyers are the losers, but they are less likely to vote and less organised politically. The result, in many democracies, is a systematic bias against the supply-side interventions needed to restore affordability.
Vienna's social housing programme, one of the most ambitious in the world, keeps rents affordable for roughly 60% of the city's residents. Photo: Arno Senoner / Unsplash
International Approaches: Vienna and Singapore
The contrast with Vienna is instructive. The Austrian capital has maintained a large-scale social housing programme since the 1920s, with the city government owning or subsidising roughly 60% of all housing. Rents in social housing are set well below market rates, and eligibility extends to a wide range of income levels rather than being targeted narrowly at the very poor. The result is a city where median rents consume a much smaller share of household income than in comparable European capitals.
Singapore offers a different model. The city-state's Housing Development Board constructs and manages public housing that accommodates around 80% of the population, with residents able to purchase their flats on long leases. The programme has been instrumental in building a property-owning middle class while keeping housing broadly affordable, though critics note that the model depends on land ownership conditions and state capacity that are difficult to replicate elsewhere.
Lessons for the UK
The UK's housing crisis is rooted in decades of underbuilding. Successive governments have set ambitious housebuilding targets and consistently missed them, constrained by a planning system that gives significant weight to local objections and limited incentives for local authorities to approve new development. The Labour government elected in 2024 has proposed planning reforms designed to unlock more sites for development, but the political economy of housing reform remains treacherous.
International experience suggests that no single policy lever is sufficient. Sustained improvements in affordability require expanding supply through planning reform, investing in social and affordable housing, and addressing the tax treatment of housing wealth, which currently provides very large subsidies to owner-occupiers at the expense of renters and younger generations. The economic case for reform is strong. The political case is harder to make, but no less urgent.
Sources
OECD, "Affordable Housing Database." oecd.org, 2024.
Demographia, "International Housing Affordability Survey: 2024 Edition." demographia.com, 2024.
Shelter, "A Vision for Social Housing." shelter.org.uk, 2023.
City of Vienna, "Wiener Wohnen: Annual Report 2023." wien.gv.at, 2024.
Housing Development Board Singapore, "HDB Annual Report 2023/24." hdb.gov.sg, 2024.
Resolution Foundation, "The state of the nation's housing 2024." resolutionfoundation.org, 2024.
