Extract D
The UN Special Rapporteur on adequate housing has stated:
"Housing should be treated as a fundamental social good, not simply as a financial asset to accrue wealth. Ensuring access to affordable, secure accommodation is vital to reducing poverty, improving health, and fostering social cohesion."
In many high-income economies, the persistent rise in house prices relative to wages has exacerbated wealth inequality. Because most properties are purchased using leveraged mortgage debt, those with existing wealth find it easier to acquire additional property assets, creating a growing class of private landlords. By contrast, policies such as the UK's historical council house sales transferred public capital into private hands, but the failure to replenish this stock has left a severe shortage of affordable options. This has led to stark regional divides, where homeowners in prosperous cities can leverage paper gains to purchase multiple buy-to-let properties in lower-cost areas, further pricing out local buyers.
Historically low interest rates and quantitative easing since 2008 have fueled global property speculation. Governments have frequently relied on demand-side subsidies, such as first-time buyer tax exemptions, which critics argue merely inflate prices further. Consequently, many analysts suggest the UK should transition toward the Austrian model, where municipal councils and housing cooperatives own a vast percentage of the housing stock, keeping rents low and secure. Currently, the UK remains caught between a highly financialized private market and a chronic undersupply of social housing.
Source: Academic and policy review articles
'In future, the widening wealth gap means that most young people in the UK will be permanently locked out of homeownership, forcing them into a lifetime of insecure private renting. This shift has profound consequences for geographic labour mobility, regional productivity, and wealth concentration.' (Extract D, lines 18–21)
Should the government intervene directly in the UK housing market, for example by building social housing and implementing rent controls, or should it rely on free-market mechanisms and developer incentives to increase supply? Using the data and your knowledge of economics, justify your answer.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.