As the housing crisis in Britain’s most prosperous cities has grown, so has the wealth of their homeowners. While local demand for housing is driven by the strength of the local economy, supply, in contrast, does not respond to demand or economic performance. The housing shortages caused by these planning failures push up house prices in growing cities. This drives housing equity growth for a few existing homeowners, fuels increasing housing costs for renters and first-time buyers, widens regional inequality, and destabilises the national economy and the financial system.

This report explores the relationship between urban economies and housing wealth in England and Wales.

Key findings

• Planning policy has made urban homeowners in the Greater South East over £80,000 richer than those elsewhere in England and Wales since 2013.
• London saw the largest increases in housing wealth and Sunderland the smallest.
• Planning reform is needed to stop the gifting of wealth to homeowners in successful cities.
• As housing wealth for homeowners in the Greater South East grows, so do rents for private renters.
• The planning system makes inequality worse and threatens financial stability.

Policy recommendations

Addressing wealth inequality requires reconnecting the supply of new homes to housing demand in city economies, reducing the subsidies homeowners receive from the Government and exploring how other asset classes could allow households to build wealth.

• The planning system must be reformed to allow housing supply to respond to local demand and reduce inequality.
• Homeowner tax breaks and subsidies should be reduced.
• The Government should explore alternative wealth-building vehicles to housing.
• Nimby campaigns’ influence in the planning process must be reduced because they deepen wealth inequality.