Housing is an area where the dangers of climate change and the opportunities for action are huge.
Janine Aron and John Muellbauer attended an OECD workshop on policies for more sustainable housing, on 24thFebruary, where John contributed in a Panel Discussion on Green Finance, especially of mortgages. See here for details of the event.
Green mortgages are just beginning to take off in a big way in Europe and are an area where central banks could play an important enabling role. Green finance instruments can promote energy efficiency while enhancing access to credit for borrowers and reducing credit risks for the banking sector. There is evidence of lower default rates of mortgages on more energy efficient buildings. In the future, as temperatures rise and costs of carbon affect household cash flows, the differentials in default rates should become even more pronounced.
The OECD has become increasingly aware of the way in which housing interacts with many aspects of the economy. It has implications for social exclusion and poverty, for inequality of living standards and of wealth, and of the widening inequality between regions, for better functioning of labour markets, and for financial stability and sustainable growth. Important for the last of these is addressing climate change.
John Muellbauer gave the Keynote Address entitled: “Key Policy Challenges in Housing Markets”, at the Steering Group meeting of the OECD Horizontal Housing Project, on 25th February. This ambitious project began in late 2018 across six Directorates of the OECD and builds on many years of earlier research by several OECD Directorates. Its purpose is to develop a coherent whole-of-government approach in a new OECD housing policy strategy. The Secretary General of the OECD, introducing the meeting, said that “this is the first time that a holistic policy approach to the functioning of housing markets is being formulated”.
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