Banking on Property - What is driving the housing affordability crisis and how to solve it

The growing disconnect between the housing market and the rest of the economy is a symptom of the UK’s longstanding housing crisis. [...] At the same time, the liberalisation of the financial sector and the downward trajectory of interest rates have increased the availability and attractiveness of mortgage credit, which in turn has led to a significant increase in the amount of purchasing power available for buying a house. [...] Capital gains tax is charged on gains realised due to the disposal of assets, calculated as the difference between the cost of acquiring the asset and the income acquired due to the disposal of that asset. [...] Because local authorities were prevented from using the proceeds of sales to build more public housing, the effect of the policy was to dramatically reduce the stock of, and the number of people living in, council housing throughout the 1980s and 1990 – and significantly increase the level of homeownership. [...] However, the impact of QE on household wealth has been unevenly distributed: around 40% of the aggregate boost to wealth from changes in financial asset prices and property prices went to families in the highest wealth decile, while only 12% of the benefit went to the bottom half of the distribution.