How addressing the housing crisis helps everyone – not just renters

When I launched Dot Dot Dot in 2011, one of my motivations was to create good homes for people who were struggling in the private rented sector. This matters to me personally – as a millennial, I know from my own and my friends’ experiences just how hard it can be to find a good place to live within an ordinary budget. But it also matters at the scale of the country as a whole. Tackling the housing crisis is a way to make the economy as a whole work better, as well as to help individuals, and I wanted to play a small part in doing just that.

Looking at the situation twelve years on, my feelings are mixed. I’m very proud of what Dot Dot Dot has achieved so far – we’ve housed thousands of people for less than 66% of equivalent local rents. By doing so, we have freed up our residents’ time, energy and resources to volunteer for good causes – our guardians gave 32,013 hours to good causes in 2022, worth £482,660.  As well as this, our guardians regularly tell us that our housing has allowed them to save up, to pay off debt, to retrain for the careers they really want or simply to live slightly easier lives with fewer money worries.

However, the wider housing picture for those who rent is even more bleak now than it was in 2011, and that holds the country as a whole back. Today’s situation makes Dot Dot Dot’s work even more relevant and useful, and it’s a daily motivation to keep improving and developing what we offer. But it also points to the need for wider action to address the problem of housing affordability.

Today, home ownership is further out of reach than ever for those who don’t already own or who don’t expect to inherit money from their parents to help them towards a deposit. House prices are at record levels, with the median house in England costing 8.7 times median earnings in 2021, the most recent data available, compared with 7.8 times median earnings in 2011, and 4.9 times median earnings in 2001.

Despite a recent dip in prices, higher interest rates leave first-time buyers spending just under 40% of net pay on their mortgages, based on

data from Nationwide, the UK’s third largest lender. Meanwhile, private-sector rents cost 42% of net pay on average. Both of these are well above the 30% of income which is widely considered to be the maximum a household can reasonably afford.

This is challenging for individuals, and at Dot Dot Dot we are inundated with applications from people who would like to reduce their living costs by becoming a guardian with us, so that they can access a good home at a price they can afford, while getting involved in volunteering for a cause they care about.

However, the impact of the UK’s expensive housing on the wider economy is also becoming increasingly visible. This affects everyone – not just those struggling to afford a house to buy or rent. Writing in The Observer, Will Hutton argues that it is a key reason for the decline in the birth rate in the UK, which is below the level needed to keep the population stable, as couples postpone having a child or choose not to have a second or third child because they can’t afford a larger home. This results in an aging population, with fewer workers paying towards the cost of the NHS and other services which are particularly needed by older people.

Meanwhile, The Economist points to academic research showing that rising property prices discourage banks from lending to businesses, leading to a slowdown in productivity growth.  This is because banks tend to engage in more mortgage lending during housing market booms, using up their ability to lend. As a result of capital constraints, this means they have less available for businesses to borrow, meaning that it is harder and more expensive for organisations to invest in efficiencies and improvements, making the country poorer overall.

In addition to this, expensive house prices in cities reduce national productivity by preventing workers from accessing good jobs, academic research shows. If there is a shortage of affordable housing in urban areas where jobs are concentrated, workers will be less likely to move to these areas. This means that they will miss out on potentially higher earnings, while businesses will find it more difficult to hire the staff they need. In turn, this reduces businesses’ ability to grow, so they contribute less to the economy and generate less tax.

The absence of a diverse range of people in our cities as a result of unaffordable house prices also reduces the so-called ‘agglomeration effects’ of urban areas – the exchange of ideas, innovations and improvements that result from large concentrations of people working on a range of projects alongside each other, one of the reasons why cities are more productive than other areas.

These large-scale impacts are harder to see first-hand than the effects on individuals and neighbourhoods. But they are good reasons why everyone – even those who own their houses mortgage-free – should care about making sure that people in the UK can afford the homes they need. At Dot Dot Dot, we’re glad to play our part by creating as much inexpensive housing as we can for those who the property guardian model suits, and we see how our work unlocks people’s time and energy to contribute to good causes.

However, Dot Dot Dot’s work can only ever be a small part of the solution – a long-term national strategy is needed to build the right homes in the right places at prices their residents can afford.  Working towards it would directly benefit people like our guardians – but it would also benefit the country as a whole.