We have had enough. Enough of our neighbours not being able to earn a decent wage in our no-growth economy. Enough of today’s young adults being stuck at home with Mum and Dad because they can’t afford to move out. And, as two economists, we know there is a way to (literally) build a better future. Building the homes we need will get wages and the economy growing while helping today’s young move into homes of their own.
We need to build 1.5 million homes over the next five years, and we strongly support the Labour government making this a core mission. This target—representing around 100,000 more homes than the Conservative party was building when it left office—is ambitious. And it won’t be easily achieved. Interest rates have surged, and we face the worst economic inheritance since 1945. The last government decided to scrap housing targets, worsening the housing crisis.
It’s clear we need more houses. Rents have risen by almost a third since Covid while four in ten 18-35-year-olds are now living with their parents. More homes would help struggling renters because more supply means lower rents. A reasonable estimate is that a 1 per cent increase in housing supply leads to a 1.5 per cent fall in rents and in house prices, which suggests that Labour’s plans could lead to annual rents being at least £350 lower. In addition, renters spend more of their income than landlords, who are richer, and so this represents extra spending and growth which will benefit us all.
Beyond this, the larger economic effect is simply the impact of more things being built. Building homes means more income for builders and the companies that supply them. This extra economic activity has ripple effects throughout the economy, ultimately meaning more money in all our pockets.
When considering the cost of a new-build home and the knock-on effects this creates through the economy (as the plumber uses the cash they earn to take the kids out to the cinema, and so on), we’d estimate that 100,000 additional new homes will generate as much as £40bn in additional economic activity each year—equivalent to £600 per person. That’s the same as adding 1.4 per cent to the size of the economy every year, a large effect in an economy has been stagnant for 14 years. It would mean about £17bn more in tax revenue that can be used to spend on our public services.
The prize though is about more than just economics. It’s about the lives we want today’s young people to lead and whether we can restore hope in our country. The Tories’ failure on housing has contributed to a sense that things can no longer get better—that saving for your own home is forever going to feel like swimming against the tide.
With a new government, we have the chance to do something that’s become all too rare in 21st century politics: restore hope. If we build homes this will help the young adults of both today and tomorrow fulfil their aspirations. It will put more money in everyone’s pockets. It will make us all better off. Let’s get building.
