North-South wealth divide: Burnley houses worth just £5,000 more than in 2013 whilst London prices rocket by £122,000
Properties in Burnley are worth just £5,000 more than they were over five years ago while London properties in that time have increased in value by over £120,000, with top urban policy research think-tank Centre for Cities blaming planning policy for widened the already-gaping North-South wealth divide.
According to Centre for Cities, urban homeowners in the Greater South East are over £80,000 richer than those elsewhere in England and Wales since 2013 as a result of planning policy which impacts on property value. In London, housing wealth increased by £122,000 - the highest in the UK - while Sunderland saw the slowest growth in the country, with homes increasing in value by just £3,000.
Calling for reform to stymie the gifting of wealth to homeowners in successful cities where residents typically earn higher incomes and the planning system fails to match demand for new homes, the think-tank pointed out that the capital has seen an overall real terms increase in housing equity of £550 billion since 2013 – more than every other city in England and Wales combined.
“Our planning system is fuelling a North-South wealth divide among homeowners," said Centre for Cities’ chief executive, Andrew Carter. "Restrictive planning policies in many prosperous southern cities are gifting wealth to homeowners in the Greater South East. This creates two wealth divides: one between homeowners in the Greater South East and elsewhere in the country, and another between homeowners - who tend to be older - and renters, who tend to be younger, within the Greater South East.
“The best way to address this inequality is to build more homes in the areas that have seen the biggest increases in housing wealth," Andrew added. "This means radical reform of our broken planning system and challenging the Nimbys (Not In My Back Yard-s) whose voices dominate local politics.”
The rationing of new homes in areas of high demand drives up house prices in expensive cities, inflating the value of the property that landlords and homeowners hold. Conversely, in places such as Burnley, the average house equity has grown by just £5,000 from £68,000 to £73,000 between 2013 and 2018.
Additionally, because home ownership rates are lower in expensive cities, the planning system has redirected wealth to a relatively small band of homeowners and landlords who tend to be older whilst penalising renters, who tend to be younger, in the form of ever higher rents.
Centre for Cities have three key policy recommendations:
Reform the planning system: Ensure that housing supply meets demand in popular areas, reform the planning system, and introduce the flexible zoning system used in Japan and some parts of the USA.
Increase housing supply where new homes are needed: To reduce housing wealth inequality, build in high-demand areas - despite there being less demand for homes in Telford and Wakefield, they have built more homes than expensive and sought-after places such as Oxford and Brighton. Building in places with fewer jobs fails to address more prosperous cities’ housing crises.
Stop subsidising home ownership and tax increases in housing wealth: Despite Right to Buy, home ownership as a share of private housing has fallen in every city since 1981. The Government should stop subsidising ownership, tax housing wealth increases and treat owning and renting equally.