Remarks by Angel Gurría
Tuesday, 25 February 2020 - Paris, France
(As prepared for delivery)
Dear Ambassadors, Committee Chairs, Delegates, TUAC and BIAC Members,
I am delighted to open today’s second steering group meeting of the Horizontal Housing Project “Building an OECD Housing Strategy”.
It’s great to see so much expertise gathered around the table. It is crucial to discuss how to design housing policies with stakeholders from Committees, Delegations and experts from OECD and academia. Your contributions and expertise are critical for shaping this project. The work we will achieve together will have ramifications, and, hopefully, impact at the highest political levels.
Why is this project so important? Let me tell you why we think housing is such a crucial policy area; why it is a fundamental issue for people’s well-being and a sustainable and inclusive economy.
The OECD’s report “Under Pressure: the Squeezed Middle Class” shows that housing has become increasingly unaffordable. In 1985, it took 6.8 years of annual income to buy a 60m2 flat for a middle class family on average across 18 OECD countries.2 Today, it takes 10.2 years. A third more.
In 2018, in twenty OECD countries, more than 30% of low‐income households spent over 40% of their disposable income on paying rent, up from fifteen countries in 2010. And this adds to unequal access to quality housing.
Today, in ten OECD countries, more than 15% of the population lives in overcrowded housing and in eight OECD countries more than 10% of low-income population lives in homes without a flushing toilet. Poor quality housing deepens inequalities. It means a damaging process of passing disadvantage from one generation to the next, as children are particularly affected.
One determinant of housing affordability is the responsiveness of housing supply to increases in prices. If higher house prices today do not lead to more housing built in the future, then housing affordability problems will become more acute. Poorly designed land-use and planning policies make it more difficult to expand housing in fast-growing areas.
In turn, high house prices restrict the ability of workers to move to locations where there are better job opportunities. This has adverse effects on individual well-being and productivity.
Rising house prices also expose people to financial risks. We paid the price of that lesson ten years ago: high house prices have a tendency to crash. Some countries are still suffering from the consequences of the crash a decade ago. We simply cannot afford another one. This is why we created the OECD’s Horizontal Housing Project.
The OECD Horizontal Housing Project started in late 2018 across six Directorates and involves the policy committees they serve.
It is a direct answer to the reality of developments in housing markets, and their considerable effect on economic performance and well-being.
From the outset, the aim was people-centred. The project strives for results that put people’s access to decent, affordable housing at the centre.
It pulls together and cross-fertilises contributions to provide whole-of-government, actionable policy advice that will lay out policy complementarities as well as policy trade-offs.
The Horizontal Housing Project does not start from scratch. It builds on years of work across several OECD Directorates.
However, this is the first time that a holistic policy approach to the functioning of housing markets is being formulated. And we are starting to see positive results!
First, we have increased our research on this crucial topic. The third wave of the OECD Questionnaire on Affordable and Social Housing (QuASH) was sent out to Member countries, and the answers were compiled. Additionally, key indicators on housing conditions, affordability and policies towards affordable housing are being published.
Additionally, the regular collection of regional house price data has started. These data are crucial to better understand the developments in housing markets and to provide evidence-based policy advice.
Second, we have produced new analysis to help improve housing policy. The OECD’s recent Policy Brief “Better Data and Policies to Fight Homelessness in the OECD” is one example.
It highlights how homelessness affects more than 1.9 million people and imposes a high cost on individuals. Reducing homelessness needs tailored policies to the varied needs of the homeless, including immediate, permanent housing.
Recent papers discussed at WP1, WP3 and the Economic Policy Committee have all highlighted how policies that shape the housing market - such as rules concerning macroprudential regulation, rental market regulation and taxation - can have a considerable impact on economic crisis’ risks and on the capacity to recover from a crisis.
Housing tends to equalise the distribution of wealth. This is because housing is the most important and most widely-owned asset in household balance sheets. It represents a much higher source of wealth among middle-class households than at the top.
Third, our work on sustainable housing also continues to advance on the housing situation in Auckland, New Zealand. A recent OECD report finds that if no policy actions are taken, total annual CO2 emissions from road transport are projected to increase by 7% in 2050, compared with the level of emissions in 2018.
Pathways to reduce emissions can be found by increasing the use of public transport while taxing private vehicles, as well as through the promotion of the use of electric vehicles.
Just yesterday we had a workshop on “Policies for more Sustainable Housing”. We discussed ways to improve the energy efficiency of buildings and the potential of green financing.
Despite all this progress, there is still much to do. We still have a lot of other work in the pipeline around the house, in committees and with countries. For instance, we are working with Latvia on an in-depth country review of the housing market, focusing on access to affordable housing.
You will be hearing a lot more about this work during the day from participants around the table. And we will also have the pleasure of hearing a keynote speech by the distinguished housing expert Professor John Muellbauer, from the University of Oxford, who will enlighten us on the key challenges in housing markets.
Ladies and Gentlemen:
I look forward to a stimulating discussion. We have a great responsibility and a wonderful opportunity.
In your exchanges, you will be guiding, providing advice to, and shaping the important work the OECD is doing 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 to ensure everyone has access to a quality, affordable home. Thank you.