Kristian Niemietz writes for the New Statesman
No other developed country except Australia has experienced such an extreme and sustained increase in housing costs. Spain, Ireland and the US have had their housing market bubbles, but they were transitory: Since 2008, real-term house prices there have almost returned to pre-bubble levels. Not so in the UK, where they have only fallen back to the levels recorded just before the peak.
High housing costs are not just decreasing living standards directly, but create numerous adverse knock-on effects. Most obviously, they raise the price of nearly every good or service that requires retail and/or office space, since the commercial rent is partially passed on to consumers. The cost of a standard food basket in the UK, for example, is 20 per cent higher than in France and 30 per cent higher than in Ireland. Another knock-on effect is the explosion in Housing Benefit (HB) payments. One in five households is now reliant on HB, which is not just a fiscal problem – the HB bill has doubled in real terms over the past two decades – but also erodes work incentives, due to the high withdrawal rate.
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