Dear Ambassadors, Committee Chairs, Delegates, TUAC and BIAC Members,
I am very pleased to be here to open the first steering group meeting of the horizontal housing project “Building an OECD Housing Strategy”.
This work is of key as we observe rises in housing prices in many countries, inequality of access to quality safe housing, rapid transformation of urban and rural landscapes, and widespread demographic changes as a result of migration.
As part of our mission to promote sustainable and inclusive growth, access to good-quality housing is fundamental to improving the well-being, health and opportunities of people around the world.
It is important to emphasise that sharply rising house prices are not inevitable. Indeed, real house prices rose only little in the 75 years to 1945, but they have trebled in the following 75 years.[MES1]
The OECD’s recent publication “Under Pressure: the Squeezed Middle Class” shows how housing has become increasingly unaffordable over time: In 1985, it took 6.8 years of annual income to buy a 60m2 flat for a middle class family.2 It now takes 10.2 years, which is a third more.
The middle class lifestyle is now facing increasing financial pressure partially as a result of the cost of housing rising well above inflation in many countries.
In sixteen OECD countries in 2016, more than 40% of low‐income owners with a mortgage spent over 40% of their disposable income on a mortgage. The same was true for low-income renters in private rentals in fourteen OECD countries. In Greece and the United States, low-income dwellers face a similar housing cost burden, regardless of tenure: in both countries, more than half of the low-income population spent over 40% of disposable income on rent or a mortgage in 2016.
Innovations in transport mobility have meant that we have easier access to faster forms of transport and we are able to move quickly and easily between urban, suburban and rural areas.
But gains in mobility have faded and many cities suffer from urban sprawl, heavy congestion, pollution. At the same time, land use regulations have become less and less friendly to building new homes, pushing up house prices.
If business stays as usual, paying for rent or paying back a mortgage will eat up an ever larger share of income, limiting opportunities to save and stifling social mobility.
Rising house prices also expose people to financial risks. As we learned ten years ago, elevated house prices have a tendency to crash. Some countries are still suffering from the ramifications of the latest crash ten years ago. We cannot afford another one.
There is also the question of unequal access to quality housing. Today, about 15% of people in the OECD live in overcrowded housing. This contributes to deepen inequalities, passing disadvantage from one generation to the next, as children are particularly affected.
On average, more than one-in-five children aged 0-17 live in an overcrowded household in European OECD countries. In Hungary, Latvia, Poland, and the Slovak Republic, over half of all children live in overcrowded households. Such housing conditions have been shown to inhibit learning capacity at school, as overcrowded dwellings may bring higher levels of stress that hinder learning.
Countries are stepping up the plate to address these challenges. Across OECD countries, we see governments increasingly engaged in improving the quality and affordability of housing. For example, Berlin and New York have both enacted stricter rent control regulations recently. Seeing this growing appetite for promoting affordable, quality housing, it is time for the OECD, as the house of best practices and evidence-based policy recommendations to step in in support of our members.
This horizontal housing project does not start from scratch, building on years of work across several directorates.
ECO took on a very successful housing project 10 year ago. ELS launched the third wave of the Questionnaire on Affordable Housing (QuASH) in May. CFE has already done a considerable amount of work on land use governance and has recently launched work on smart cities, which is critical for both the inclusive and sustainability agendas.
Housing has also been an important area for the OECD’s Inclusive Growth Initiative, including the Framework for Policy Action on Inclusive Growth.
These are just a few examples. But, as it stands, this work is often piecemeal and stands to gain from increased coordination and horizontality.
This is why the horizontal housing project will dig into the impact of housing on well-being and inclusive growth in a more holistic way.
The project leverages the unique capacity of the OECD to bring together insights that the different OECD directorates have developed on housing to enhance policy coherence across the many objectives and dimensions of housing-related challenges.
Ultimately, the housing project will deliver a blueprint for achieving an inclusive housing strategy.
This framework will evaluate policy measures and objectives across multiple policy dimensions in a coherent way rather than evaluating measures within separate silos.
The indicators identified as most meaningful will enrich the OECD’s toolkit for measuring well-being along the housing dimension.
I look forward to a stimulating discussion and to hearing about your experiences, challenges and policy solutions. You will be guiding, providing advice to, and shaping the important work the OECD will do on designing policies for efficient, affordable, inclusive and sustainable housing. We count on you to help us advance in this domain and we look forward to working with you all to ensure everyone has access to a quality, affordable home for them and their children.
. Katharina Knoll, Moritz Schularick, and Thomas Steger. No price like home: global house prices, 1870-2012. The American Economic Review, 107(2):331-353, 2017.
2. Middle class family refers to a median income couple with two children.
[MES1]Maybe not necessary?