From View From The Top, 13 May 2026
The Broken Middle
Why Rate Cuts Won’t Fix What 1947 Built — And Who Actually Pays The Price
Last week I wrote about the 1947 Town and Country Planning Act. How it helped create the UK housing crisis. How it was sustained by political settlement. How seventy-eight years of constraint has produced a deficit of 6.5 million homes in a country of 68 million people. This week I want to talk about what’s making it worse.
Not a new policy failure. Not a new crisis.
Two things compounding the original problem — quietly, and largely without comment.
THE DEVELOPER IN THE VICE
Everyone talks about the squeezed middle buyer. We’ve been talking about it for the last two years. Here’s the profile:
The household earning £55,000 in London. Too much for social housing. Too little to buy. Renting indefinitely. No path forward. And nobody talks about the person trying to build for them.
The SME developer — the builder operating at 20, 50, 100 units per scheme in regional towns and cities — the people who have delivered UK’s housing stock for ages is caught in a vice right now that is unlike anything in recent memory.
On one side, planning constraints inherited from 1947. A discretionary system that defaults to no. Local councils with electoral incentives to limit supply. A planning process that takes longer, costs more, and delivers less certainty than any comparable system in Europe.
On the other side, a cost environment that has fundamentally changed the economics of delivery making viability untenable.
Build costs have risen 30 to 40% since 2020. Fact. Labour is scarce and expensive. Fact. Materials remain elevated and continue to push higher from events outside our control offshore. Finance costs — even with recent rate reductions — remain substantially higher than the environment in which most current development schemes were originally underwritten. The result is a scheme that pencilled at 3% base rate often doesn’t pencil at 5%.
Not because the demand has gone away. The demand is structural and permanent. Because the economics of delivery are broken at the margin.
Sites are sitting with planning consent but no capital to build them. Developers who can make the planning system work can’t make the numbers work. Homes that should be built aren’t being built.
And behind that: the funding market that used to support these developers hasn’t fully recovered from 2008. The clearing banks retreated from development finance after the financial crisis. What replaced them was more expensive, more restrictive, and less willing to engage with the complexity of smaller schemes.
The SME developer has been squeezed from every direction simultaneously.
Planning. Costs. Funding. Viability.
THE RATE CUT ILLUSION
Here is the argument you won’t hear from most commentators. Rate cuts are being celebrated as the solution to the UK housing crisis.
They are not. In a supply-constrained market — which the UK has been since 1947 — rate cuts don’t solve the affordability problem.
They reignite demand. Without adding supply.
When borrowing becomes cheaper, more people can afford to borrow more. Competition for a fixed — or slowly growing — supply of homes increases. Prices rise. The affordability gap widens again. This is what we have been seeing.
The “squeezed middle”, who couldn’t buy at higher rates, find that lower rates bring more competition, not more homes. The ladder moves up as they approach it.
This is the consistent historical pattern of the UK housing market since 1947.
Every time rates have fallen — through the 1990s, through the early 2000s, through the post-2008 decade of near-zero rates — the same thing has happened.
Demand has reignited. Supply has not responded at the same pace. Prices have risen. Affordability has worsened relative to incomes.
The 1947 settlement is the mechanism. It takes monetary stimulus — designed to stimulate economic activity — and converts it into asset price inflation. Because supply cannot respond freely to demand, the stimulus flows into prices rather than production.
Lower rates make it easier to borrow. They don’t make it easier to build.
And in a market where the binding constraint is supply — not demand, not access to credit, not buyer appetite — easier borrowing without more building produces one outcome.
Higher prices.
THE HISTORICAL PATTERN
The data is consistent across seven decades.
UK house prices have risen faster than incomes in almost every decade since 1947. The brief exceptions — the early 1990s recession, the post-2008 correction — were cyclical interruptions, not structural reversals.
In each case, when rates fell and conditions improved, prices resumed their upward trajectory. The structural constraint reasserted itself. The gap between earnings and ownership widened again.
The post-2008 decade is the most instructive. Base rate held near zero for over a decade. The explicit policy intent was to stimulate economic activity and support asset prices.
It worked — for asset prices.
UK house prices roughly doubled between 2009 and 2022. The homeownership rate fell. The private rented sector expanded. The squeezed middle grew larger.
Cheap money, in a supply-constrained market, produced exactly what the 1947 settlement was designed to produce.
Rising asset values for those who already owned.
WHO PAYS THE PRICE
The political economy of this is brutally simple.Existing homeowners — the dominant political constituency — benefit from rising prices. Their wealth increases. Their collateral value increases. Their retirement security increases. The squeezed middle buyer pays through higher prices, longer renting, and a receding ownership horizon.
The squeezed middle developer pays through broken viability, constrained funding, and schemes that can’t be delivered at the margin.
And here is the irony.
The rate cuts designed to help the buyer — by making mortgages cheaper — ultimately make the buyer’s position worse. Because in a supply-constrained market, cheaper mortgages mean more competition for the same limited supply. Which means higher prices. Which means the affordability improvement from lower rates is partially or fully offset by price appreciation.
The 1947 settlement absorbs every conventional economic remedy and converts it into asset inflation.
WHAT ACTUALLY MOVES THE NEEDLE
Not rate cuts. Not the National Housing Bank — which addresses a funding problem in a system that is fundamentally a permission problem. Not planning reform tinkering at the margins.
Three things would actually move the needle for the SME developer and the squeezed middle buyer simultaneously.
1. Viability reform.
Updating the planning system’s approach to viability assessment so that schemes which are genuinely deliverable at current costs can proceed, rather than being held to affordable housing requirements calibrated to a different cost environment.
2. Planning speed.
Reducing the time and uncertainty cost of the planning process for smaller schemes. A builder with a 50-unit scheme cannot absorb an 18-month planning process with an uncertain outcome. The carrying cost alone kills viability.
3. SME developer funding at the right cost.
Capital that moves at the speed the market requires, priced for the real risk of smaller schemes rather than the institutional risk frameworks designed for larger ones. This is where private credit, properly structured and operationally engaged, can genuinely make a difference.
None of these require dismantling the 1947 settlement. They require working within it more intelligently — reducing the friction for the builders who are trying to deliver despite the system rather than because of it.
They won’t close the 6.5 million home gap.
But they could start to slow the rate at which it widens.
HARD LANDING
The UK housing market is a closed loop. Constraints limit supply. Limited supply inflates prices. Inflated prices enrich the political constituency that votes to maintain the constraints. The constraints are maintained.
Monetary policy enters the loop and gets absorbed. Rate cuts stimulate demand. Supply doesn’t respond. Prices rise. The loop tightens. The SME developer and the squeezed middle buyer are caught inside a system that wasn’t designed for them and doesn’t adjust for them.
The political will to break the loop has not existed for seventy-eight years. It does not exist today.
What exists — for those who understand the loop — is the ability to operate within it. To find the schemes that work despite the friction. To provide the capital that moves at the speed the market requires. To back the developers who know how to navigate a system designed to stop them.
That’s not a solution.
But it’s the only honest answer to a problem that politics has consistently refused to solve.
