January 12, 2024

Major economies tackling the housing crisis: Implications for the youth

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Terraced houses in the North of England.

Picture by: Teamjackson | iStock

The major economies, like the US, China, and the UK, aim to address the housing crisis in their countries amid growing concerns about widening affordability gaps and the resulting instability for individuals.

This article will also explore how the situation will impact the younger generation who are at greatest risk of debt accumulation in the future.

A basic promise when buying a home in a major economy is that its value will rise over time, essentially it’s an asset that provides security and self-determination through potential growth. However, the issue arises when the barriers to buying get exponentially higher.

Housing is a key contributor to economic growth due to the wealth effect, a behavioural economic theory. It suggests that people spend more as the value of their assets (such as the price of their house) increases even if their fixed costs remain the same. This is beneficial to an economy because it results in higher economic growth as consumer confidence rises which promotes the consumption of goods and services.

Real estate is also the most dominant type of asset for the middle class in terms of wealth composition in most countries.

In 2017, American economist Edward Wolff found that 61.9% of middle class gross assets came from their principal residence (an individual’s primary home). This high percentage amplifies the wealth effect theory since the middle class make up the majority of the US economy

Why is it so difficult to buy a home in the US right now?

The United States is facing a housing market crisis, stemming from the gap between median income wages and the increase in the cost of housing. Additionally, the housing supply shortage is worsening the situation.

According to the US Census Federal Reserve Economic Data in 2022, median income was $74,580 compared to $479,500 of home prices (a staggering six times the average American income), in contrast to data in 1972 which showed that median income was $9,697 with home prices at $29,200 (three times their income).

This shows that there is a major gap between income and house prices whereby consumers now have to save much more to purchase a home.

The other reason behind elevated prices is the housing supply shortage. According to official data, the US homeowner vacancy rate (the percentage of homes that are for sale) in 2023 was the lowest (at -0.25%) since 1956.

Restrictive zoning laws, governing factors like location and building density, have resulted in a decline in home construction, reducing the overall availability of homes for purchase.

But not everything is gloom and doom: Morgan Stanley’s chief economist, Ellen Zentner, forecasts housing affordability improvement in the US by 2024. According to the expert, the inventory will grow alongside homebuilding activity, which will offset an increase in demand.

China’s housing accommodation battle spans 30 years

In the 2000s, China initiated an enormous construction boom with the fundamental belief that property prices could only go up. The boom was further amplified as a result of the substantial rise in urbanisation and privatisation of property.

Following it, the housing crisis arose especially when buyers started speculating over the potential price increase – they were seeking to invest and turn it into profit, rather than living in the houses they bought.

Real estate developers stalled construction of many pre-sold properties as they did not have enough cash flow to finish construction. This resulted in a decline of consumer spending and investment falling, which heavily impacted the oversupply of housing which strained investors and developers.

Over time, this has resulted in smaller companies struggling and eventually even the biggest construction developer in China, Evergrande, declared default in late 2021.

Oxford Economics lead economist Louise Loo predicts that China’s big property market problem will take at least 4 to 6 years to resolve.

Read more:

China says it will step up policy adjustments to spur recovery in 2024

Nie Wen, an economist at Hwabao Trust, announced at the annual Central Economic Work Conference that China’s “fiscal policy will focus on stabilising investment to help offset the decline in real estate and external demand.”

According to state media, China will speed up the establishment of a new model of property development, quicken the construction of affordable housing, and coordinate the resolution of local debt risks and stable development.

“Seismic shift” in the UK housing

The UK is experiencing low affordability in its housing market because of rising demand and diminishing supply. Similarly to the US, incomes have not kept pace with the rise of house prices.

In 2021, the average cost of a house was 65 times higher than in 1970, while earnings have only gone up 35 times. The average UK house price was £287,782 in October 2023.

Earlier this year, Hasting Borough Council’s Labour leader, Paul Barnett, told The Guardian: “The financial difficulties that we are facing are a result of national housing crisis. The system is broken, and as a result is forcing many of our residents out of secure accommodation into temporary housing provided by the council.”

Authorities attribute a “seismic shift” in housing affordability as a result of several factors – demographic change, long-term erosion of social housing and housing benefit levels, failure to build sufficient new homes, and the defunding of local authorities.

Andrew Baggot, Conservative leader of Basildon Borough Council Essex, said that radical solutions were needed such as long-term government investment in social housing and regulation of the private rented sector. But, Savills, a real estate agency, predict that prices will start to bottom out in 2024 due to the fall in interest rates and return to growth in 2025.

Speaking to The Guardian, Lucian Cook, its head of residential research, declared that “the growth is expected to accelerate as affordability pressure eases, with the strongest growth forecast for 2027 when rates reach their long-term neutral level.”

How will a housing crisis impact us?

The Cost of Living Crisis: Financial impact on young people

The combination of limited affordability of housing and increased rent will cause physiological and financial stress in the form of debt accumulation, reduced consumer spending and a widening wealth gap between generations.

These factors will affect our daily lives by allocating a significant proportion of income to housing costs and hindering the achievement of our financial goals (such as education, starting a family or saving for retirement). It might also affect our material living standards.

Written by:


Timur Boranbayev

Economics Section Editor

London, United Kingdom

Born in 2005 in Berlin, Germany to a Kazakh family, Timur now studies in the UK.

Timur speaks Russian and English and learns Kazakh. He chose Economics, Politics, and History for his A-levels, having completed his GCSE exams in the summer.

He started in Harbingers’ Magazine with articles about sports – football is his favourite discipline  – to move to become the Economics Section editor in 2023.

Edited by:


Nadia Diakowska

Economics Correspondent

Warsaw, Poland


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