Weak Economic Demand

The challenges described in the earlier part of this section have generally focussed on the most unaffordable of markets, usually in terms of house price. However, even the markets with the lowest house price to earnings ratios have considerable affordability challenges. Recent work by Geoff Meen showed that 30% of renters in the North East could not afford a property at the lowest house price decile. For many people in this area and others, the challenge is not just the cost of a home but also the underlying economic conditions.

Recent years have seen many people across the UK experience a cost of living squeeze as wages have risen slower than inflation (chart below). Meanwhile a lack of job opportunities and employment insecurity all contribute to a situation where people are unable or unwilling to rent or buy appropriate housing.

With much stricter mortgage lending regulations, many prospective first-time buyers in economically weaker areas may struggle to pass affordability tests. Even when they do, the underlying insecurity of their employment situation may leave many wondering whether a long-term commitment to paying a mortgage is a sensible decision, especially when the cost of renting is relatively affordable.

Measuring the economic challenges in local areas is relatively easy thanks to large amounts of ONS data. However, it can be more difficult to assess who is most affected by these issues below a regional level without primary data collection through surveys.