Mismatch in the Housing Market

Abstract

An economic model is presented of the rise of mortgage arrears and possessions. This indicates that the normal level of possessions is around 30 000 dwellings per year, but that between 1990 and 1996 an additional 300 000 households will exit the owner-occupied housing market. This short-term but substantial outflow from the owner-occupied housing market is producing a mismatch between empty dwellings remaining unsold and growing queues for accommodation from local authorities and housing associations. It is argued that this mismatch is economically inefficient and that it can be addressed through an increase in government expenditure to facilitate the transfer of dwellings out of the owner-occupied housing market.