Low- to middle-income families in Britain are far poorer than their counterparts in western Europe because of sky-high housing costs, according to an analysis by the Resolution Foundation.
The thinktank said that while prices in the UK were 8% higher than the average in the 38 member countries of the Organisation for Economic Cooperation and Development (OECD), less well-off Britons were more affected by the cost of housing, which is 44% higher in the UK than the OECD average.
Higher housing costs in the UK more than offset the benefit of food, another major area of spending for those on lower incomes, being 12% cheaper than the average in those developed countries.
When lower-income families’ tendency to spend more on necessities and less on luxuries is factored in, German families are 21% or £2,300 a year better off than their UK equivalents and the gap with Dutch families is even wider, at 39%.
Without that adjustment, poorer German families would be 16%, or £1,700 a year, better off than poorer British families.
Simon Pittaway, a senior economist at the Resolution Foundation, said: “Britain’s housing costs crisis is a major driver of child poverty, and contributes to poor families being £2,300 worse off than their German counterparts. The crisis needs to be tackled urgently – from building more affordable homes to providing better support for low-income renters.
“While food and clothing are relatively cheap, the sky-high cost of housing – which accounts for almost a quarter of all spending by lower-income households – makes Britain a particularly pricey country for poorer families.”
The UK’s largest lender, Halifax, reported last month that the average cost of a home had risen to just under £300,000 after a 1.3% jump in November.
Despite the Covid pandemic, a cost of living crisis and a big jump in mortgage costs in the UK in the past two years, house prices are up by more than 25% in five years. They are expected to continue to rise this year.
In a tight market, rents have also been rising in the UK – by 9.1% in the year to November 2024, according to the Office for National Statistics. Average rent increases are expected to be less steep this year but are still expected to rise by as much as 4%.
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Nearly two-thirds of workers living in private rented housing in England struggle to pay their rent, according to a recent study.
Labour has promised to tackle the country’s housing crisis with a pledge to build 1.5m homes over the parliament, promising to liberalise the planning regime and make it easier to purchase land for building. However, experts say the plan could be challenging to realise.
