In my day job, I point out that a single person must be in the top 3% of earners if s/he is to afford the average house. My gut instinct is that this is not a desirable state of affairs.
But I try not to think with my gut. Here are some attempts to rationalize this instinct. They start from the premise that an average house, unlike say a Ferrari, is the sort of thing which a reasonable person might strongly want.
1. It’s welfare-inegalitarian. For most people, houses are only affordable if you are in a meaningful relationship. People with such relationships, or the illusion thereof, are happier than others. In giving these greater opportunities for home-ownership, we are giving more to the better off.
2. Home-ownership, as Thatcher realized, is a material stake in society. Should this be confined to a rich minority?
3. Adverse incentives. For many people, the way to afford a house is not to work hard - £50,000 is out of reach for many hard workers – but to get a partner. Efforts to do this, however, require one to work less hard – to do less overtime, to wake up later in the mornings.
Also, if you don’t own a house, it’s even harder to convert income into welfare; there’s a limit to how many books you can read or CDs you can listen to. This too limits one’s desire to earn more.
4. There’s something undesirable about being a tenant – about handing money over to a landlord, and being dependent upon his whims. It’s unmanly.
This raises two questions. Are my instincts right? If so, what should be done? A few months ago, I’d have said: “nothing, prices will fall and the market will solve the problem.” But this looks less likely now.
* Here are the numbers. According to HBOS, the average house price is £175,215. Assuming a loan of 90% of the price at 3.11 times income (the averages for first-time buyers according to the CML) this means you need an income of £50,700 to buy it. This neat tool shows that such an income would put a single person in the top 3% of earners.