Can lending controls solve the problem of unaffordable housing?

HOUSE PRICESOECD in the rich world are growing at their fastest rate for 30 years. Those in America rose by a record 19.7% in the year to July, according to figures published on September 28th. House prices measured relative to incomes are above their long run averages in three-quarters of countries. Policymakers nearly everywhere are under increasing pressure to make housing more affordable.Higher interest rates would bring down house prices relative to incomes, by making mortgages more expensive to service and tempering housing demand. But raising interest rates to cool the property market now runs the risk of jeopardising the economic recovery from lockdowns. More promising, in some people’s eyes, could be to tighten the “macroprudential” tools available to central banks and financial regulators, which seek to limit risky mortgage lending.