But not all parts of the economy have been suffering. While UK GDP shrank by 10% in 2020, house prices increased by 10% on average — the fastest rate of growth since 2007. Similar trends have been observed in many countries around the world. How can it be that house prices are booming during an unprecedented economic downturn?

“Conservative thinkers popularised the idea that workers can be convinced not to join the revolution if they own a house with a nice garden”

In the decades that followed, successive governments enacted a series of major reforms in order to widen access to the benefits of homeownership. Taxes on land and property were removed, and subsidies for home ownership were introduced.

With the arrival of Margaret Thatcher, the state withdrew from house building, and councils were forced to sell their housing stock through ‘Right to Buy’ and prevented from building more. Rent controls were abolished and the private rental market was deregulated, fuelling a new ‘buy-to-let’ frenzy.

Crucially, restrictions on mortgage lending were removed, and banks were incentivised to become active players in the mortgage lending market. This unleashed a flood of new mortgage lending, as the role of banks in the economy shifted from lending to businesses to lending to finance home.

“Conservative thinkers popularised the idea that workers can be convinced not to join the revolution if they own a house with a nice garden”, Kohl explained.

At the same time, the housing boom has been accompanied by soaring homelessness in almost every advanced economy. As Leilani Farha, Global Director of The Shift and the former UN Special Rapporteur on the Right to Housing, explained in the webinar, the rise in homelessness should not be viewed as separate from the rise of housing as a financial asset, but as an inevitable counterpart to it. “The increasing value of housing as an asset and increasing homelessness are not disconnected phenomena. They are symbiotic”.

Perhaps the key lesson of the home ownership experiment of the past half-century is that it is a zero sum game. While expanding home ownership can improve peoples’ lives by giving them security and access to a capital asset, beyond a certain point it creates the conditions for its own demise.

This is because the wealth that is accumulated through the housing market is gained at the expense current and future generations who don’t own housing, who pay the price in the form of higher rents and higher rates of homelessness. Rising prices eventually choke off demand from first-time buyers, and although this can be temporary alleviated via looser credit constraints and more government subsidies, the effect of this is simply to push up prices further — creating a severe affordability crisis and a range of other harmful side effects.

In reality, the stubborn commitment to home ownership likely has more to do with politics than economics. In countries where the majority of the electorate are homeowners whose wealth is tied to house prices, there is a strong political incentive to keep stoking house price inflation. In addition, the interdependencies between the banking sector and the property market mean that any downwards pressure on house prices would pose a threat to financial stability.

As Kohl put it during the event: “The repayment of mortgages is now essential for macroeconomic stability. But if house prices collapse, there is a risk that many mortgages won’t get paid back.”

This has placed politicians in somewhat of a bind. Any policies aimed at tackling the affordability crisis risks generating an electoral backlash from the majority who don’t want to see their wealth eroded, and destabilising the banking sector and triggering a possible recession. Faced with such incentives, it is perhaps unsurprising that few politicians have openly challenged the home ownership agenda.

Among the panellists participating in the webinar there was a strong consensus over the broad measures that need to be introduced to tackle the housing affordability crisis: tax land and property more effectively; regulate the private rented sector; restrict the flow of speculative funds into the property market; and scale up social and cooperative housing.

But deciding what needs to be done is the easy bit. Establishing how to do this while commanding the support of the electorate and avoiding a financial crisis is perhaps one of the greatest political challenges of our time.