Flexibility in the labour market has been identified by the Government as the key to achieving greater competitiveness, but home ownership is not always the best option for a workforce likely to experience fluctuating income and more frequent job moves, the report by the Joseph Rowntree Foundation said.
It called on the Government to place less emphasis on ownership and concentrate on action to increase the supply of homes for rent.
The foundation welcomed the proposed reduction in mortgage tax relief to 15 per cent from April 1995, as a step in the right direction.
But, with low house-price-to-income ratios and low mortgage rates, the reduction in Miras was unlikely to influence significantly choices about types of accommodation over the next few years.
Instead, the Government should boost rented housing by drawing up a revised strategy for subsidised 'social' housing. It should also introduce a capital grant to bridge the gap between the returns landlords can obtain for private renting and from investments elsewhere.
A rebalancing of policy in favour of the rented sector would also help to prevent a repeat of another damaging 1980s-style boom and bust in the housing market and in the economy as a whole, the report said.
'There is now firm evidence that the UK housing market fuelled the boom of the late 1980s, creating an illusory sense of prosperity and distorting savings and investment patterns,' it added.
'No economy can hope to sustain long-term economic progress when land and bricks and mortar are the best investments,' the report concludes.Reuse content