The Mayor of London, Sadiq Khan, recently announced plans to release parts of London’s green belt for housing development. This announcement follows the release of the revised National Planning Policy Framework, which also aims to loosen planning restrictions to increase housing supply. In this article, IF researcher, Conor Nakkan, explains why these measures only address part of the overall problem. Policies that incentivise downsizing and improve how the existing housing stock is allocated are also essential.
The problem of housing inequality
Few issues illustrate the UK’s intergenerational divide more clearly than housing. Over the past two decades, homeownership rates have diverged sharply by age. Data from the English Housing Survey (EHS) suggests that between 2003–04 and 2022–23, the proportion of over-65s who own their homes rose from 71% to 78%. Meanwhile, homeownership rates among 25–34-year-olds fell from 59% to 45%. For 16–24-year-olds, homeownership rates collapsed from 24% to just 10%.
This generational housing divide has been partly driven by rising property prices. Between 2003 and 2024, the average UK house price more than doubled from £115,000 to £268,000. At the same time, housing affordability has also worsened. In 1997, the typical home in England cost around 3.5 times the average annual income. By 2023, that figure had risen to 8.4 in England and 11.8 in London.
Rising property prices, coupled with declining rates of homeownership among younger cohorts, have widened the generational wealth gap. Between 2010 and 2020, the median individual wealth gap between 16–24 and 65–74 year-olds increased by around 40%, reaching £323,000. As the Office for National Statistics (ONS) has explained, homeownership is the primary factor driving the growing wealth divide.
As access to home ownership has narrowed, younger people have also increasingly been locked into expensive rentals or forced to live with their parents for longer. Since 2015, average UK rents have risen by 46%, with around half of that increase occurring since 2021. In London, average monthly rents now exceed £2,200. Moreover, according to the Institute for Fiscal Studies (IFS), the percentage of 25–34 year-olds living with their parents increased from 13% in 2006 to 18% in 2024.
Boosting supply
In an effort to tackle the housing crisis, governments have increasingly focused on boosting supply. At the national level, the revised National Planning Policy Framework (NPPF) was released in December 2024. It aims to accelerate housing delivery by introducing mandatory housing targets for local authorities. It also introduced a new ‘grey belt’ category, which permits development on underutilised green belt land under certain conditions. These welcome policy changes reflect a growing consensus that restrictive planning policies contributed to the undersupply of affordable and well-located homes.
Increasing supply is a necessary and important component of any long-term response to the housing crisis. However, just boosting supply will not address the deeper structural inefficiencies in how the UK’s current housing stock is used. Put simply, there remains a significant mismatch between the size and location of homes and the needs of the households occupying them.
The growing prevalence of under-occupation provides some evidence for this mismatch. EHS data suggests that 53.4% of owner-occupied homes were under-occupied in the three years to 2022–23, up from 46.9% in 2008–09. Moreover, as previous research from the Intergenerational Foundation (IF) has shown, older households typically enjoy substantially more living space than their younger counterparts. As a result, many older owner-occupiers remain in large, well-located homes with multiple spare bedrooms, while younger workers and families are priced out of nearby areas or forced into expensive rental accommodation.
Barriers to downsizing
One way to address this mismatch, and to improve the allocation of existing housing stock, would be to increase the number of older individuals who choose to downsize to smaller properties. By freeing up larger homes, this could help address under-occupation and ease housing pressures for younger workers and families.
However, previous research by IF has shown that many older homeowners are reluctant to downsize, due to a mix of emotional, practical, and financial barriers. Deep attachment to the family home, which is often seen as a source of identity and long-term stability, makes the idea of leaving emotionally difficult. The logistics of moving, especially in later life, can also feel overwhelming. Many are discouraged by the cost of relocation, including legal fees, estate agent charges, and particularly stamp duty. Others are deterred by the perceived lack of suitable alternatives, such as well-designed, age-friendly housing in familiar neighbourhoods.
Age-based delayed housing wealth tax
Given the complex set of barriers that can discourage downsizing, what kinds of policies could incentivise older homeowners to move? One innovative approach, proposed by philosopher Daniel Halliday, is an age-based delayed housing wealth tax. This proposal aims to realign housing incentives in later life while addressing the problem of housing inequality.
How would this policy work in practice? The basic idea is to apply a modest tax to the post-retirement appreciation of housing wealth. From a set age – say 70 – homeowners would incur an annual tax liability based on the value of their home above a certain threshold. However, this tax liability would only be levied on the death of the surviving homeowner. This ensures that older homeowners would not face any additional tax burdens during their lifetime.
As Halliday points out, if the tax is not levied because homeowners choose to downsize to a property below the threshold, the policy could help to increase the supply of larger homes for younger families. If, however, the tax is levied because homeowners decide not to downsize, it generates additional tax revenue. This revenue could then be used to offset the costs of an ageing population, reduce stamp duty, or reinvest in services that benefit younger generations.
As with any tax reform, implementation details matter. Further consideration would need to be given to the appropriate tax rate, the threshold at which the tax applies, interactions with inheritance and capital gains taxes, how to reliably track changes in property values over time, and so on. Still, Halliday’s proposal could not only help to increase the incentives to downsize and improve the allocation of the UK’s existing housing stock. It could also improve intergenerational fairness by ensuring that the considerable housing wealth accumulated by older generations is appropriately included within the overall tax base.
Towards fairer housing policies
Boosting housing supply is necessary, but it is not sufficient. Addressing the UK’s housing crisis requires not only building more homes, but also using the ones we already have more effectively. An age-based delayed housing wealth tax could be a promising mechanism to encourage downsizing while also addressing one of the primary drivers of intergenerational inequality in the UK.