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We’ll be short of houses - whatever happens to the economy

However you look at it, demand for homes is going to outstrip supply. And a 'people power' approach won't help, writes Linton Chiswick.

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by Linton Chiswick on Mar 16, 2011 at 10:51

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We’ll be short of houses - whatever happens to the economy

However you look at it, demand for homes is going to outstrip supply. And a 'people power' approach won't help, writes Linton Chiswick.

‘The Good, The Bad and The Ugly’ is the title of the latest think-tank study into the future of housing need in the UK. As is the tradition, it’s been given an extravagant title to convince the reader it’s going to be a page-turner. Less traditionally, this one is.

By the Institute for Public Policy Research, and subtitled ‘Housing Demand 2025’, it takes government figures and builds them into a working model, illustrating demand scenarios for various tenures in 14 years time. Because we all know that 14 years is a long time in economics, the report provides three distinct scenarios, defined by employment levels, income, interest rates and mortgage availability.

It's all a bit ugly

During a ‘good’ scenario (low unemployment, healthy wage growth) owner-occupation increases, and will increase particularly in London and the North East where it traditionally lags as a proportion. Demand for private renting may fall at first, but as domestic economic confidence rises and brings house prices with it, demand for renting will pick up again. Social renting as a proportion of all tenures, however, doesn’t fall. It remains steady.

A ‘bad’ scenario will include unemployment continuing at current levels, and the current split between owner-occupation and private renting remaining the same. Reliance on social housing will increase, and provision won’t be able to keep up. As a result, some tenants will be forced back into the private rented sector, there’ll be ‘hidden’ demand for social housing and homelessness will increase.

The ‘ugly’? Unemployment up; house prices down; both owner-occupation and demand for private lets falling, and huge pressure on social housing.

More families than homes

The most interesting part is that there isn’t a scenario in which demand for social housing falls. It’s going to become a problem. In 2010, somewhere between 6% and 12% of English households were on the waiting list for social housing. Household formation – as a result of immigration, longevity and a tendency toward single person households – is predicted to grow by between 3.3m and 4.5m by 2025. According to the IPPR, demand will outstrip supply by as much as 750,000 households, with the majority of the problem in the south east.

The current government’s promise to build 150,000 affordable homes in the next four years (not all of them for tenants) doesn’t sound very impressive. And the real problem is the context of confusion and fudge still surrounding planning policy.

Vince Cable began the month by slamming the ‘dysfunctional, distorted’ market in land and the ‘slow and prescriptive planning regime’, in a Mansion House speech. A planning revamp is said to be one of his key priorities, and among his ideas is a ‘land auction’ proposal, in which local landowners would be encouraged to offer ‘sealed bids’ nominating a figure for which they’d be prepared to sell their land to a council. The council would then pick a competitive bid, add planning permission and auction the package to a developer (pocketing a very tidy profit).

If the idea were to become policy, it would have to get past the immovable object that is Eric Pickles, the communities secretary who’s said to be unimpressed. Nor does it sit comfortably with the government’s ‘people power’ commitments to let local communities decide who doesn’t build, where.

The government’s Localism Bill, as published in December, isn’t much clearer. The old house-building targets are gone; but try finding somebody who can explain exactly how the ‘people power’ replacing them will express itself in any coherent way; who will ensure that objectors won’t shout with the loudest voices (when did you last see a man with a placard demonstrating in favour of a development?); how the New Homes Bonus (a reward scheme for housebuilding councils) will encourage the right councils to build homes where they’re needed.

The government is promising a local solution. But if the IPPR report demonstrates anything, it’s that the homes shortage is a national problem. To be tackled, it needs the tools provided by a proper overview, where the bigger picture – not just economic but social trends too – can send resources where modelling shows they’re going to be most needed, rather than where it happens to be politically expedient in the short term.

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17 comments so far. Why not have your say?

Restricting immigration from Eastern Europe & beyond would be certainly help solve our problem.

The other option, would be to cover the country with concrete, and build as many high density, low quality homes that mass immigration would require.

I hope the British make the correct choice whilst there is still time.

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The "British" people were given little choice in the matter but their leaders past and present should be deeply ashamed to have allowed this to happen to a once proud, law abiding and a reasonably happy country.

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yes we dont have a housing problem, we have a immigration problem. sorry we have a goverment past and present who care more about other countrys than ours.whats wrong with shrinking the population. fault gone

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Last year we buily fewer homes than any year since the 1920's.

The new Localism Bill proposes local neighbourhoods decide if they want any development intheir area but proposes an incenive payment goes to the District Council not the neighbourhoods - a formula for zero planning approvals.

The previous planning system with mandatory building targets for regions of the country, with professional planners in District Councils finding appropriate sites was a rational way to get houses built. Lets return to that system ASAP.

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Exit from the EU, repeal of the Human Rights & Racial Equality Acts and any other anti-British legislation, followed by mass expulsion of immigrants, would go a very long way to solving many of our present problems.

Is it likely to happen................. probably not!

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Strewth, some of the comments on here would make Hitler embarrassed!

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90 per cent of ALL the problems in this wonderfull country of ours

would be solved if we had half the population.

The difficulty is wich half ?

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I didn't realize this site was so full of half brained bigots. Makes me ashamed to be a member.

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So just to add to the fire,

By explling all the imigrants, would assit in the housing isue, but who would doall the jobs, that te lazy brits refuse to do, ie the cleaning, hospitality, nr the other jobs that pay poorly.

Housing plannig approvals needto be laxed, nd offer more brown field sitres to be build on.

Lets not solve oneissu, nd create anothr two problems.

sleep well.

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Unbelievable comments, especially from a site where you'd expect to see intelligence.

What is it with the British that just loves to put ourselves down? If you listened to the complaints and the doomsayers you'd think this country is some kind of hell, rather than one of the richest and most free in the world. Yes some things could be better, and let's make those things happen, but 95% of the world's population would gladly swap their standards of living to that of ours. If we can share some of that with them, whilst also benefiting ourselves too, then great. Let's learn to enjoy and appreciate what we have.

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Agree this looks like the Daily Mail comments page rather than a financial site where one might expect a slightly more intelligent and focused approach... I wonder whether these immigrants might have any role in balancing our demographics so that we can afford to pay out pensions - just a thought

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So sell your house in the UK and move to Spain - there are some real bargains to be had there right now.

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GAC comments

"but 95% of the world's population would gladly swap their standards of living to that of ours"..........unfortunately a significant % is succeeding, putting pressure on our housing stocks, the NHS & benefits generally.

They are economic migrants.

The argument that many carry out work that the indigenous population will not do, will continue until (hopefully now) the benefits system will make it more financially viable to get a job, if able, than rely on benefits.

A decrease in the number of economic migrants will ease the pressure on housing & hopefully market forces will bring house prices down or at least stabilise them allowing wages to catch up.

Council stocks are not being used efficiently where houses are removed from the market for long periods for 'renovation' or single occupants remain in 2, 3 or even 4 bed houses after children leave home.

I own my own house, so do my sons, but it is my grandsons that I fear for.

Unfortunately there are too many sides of industry & commerce that rely on an expanding market, house builders, supermarkets are just two that spring immediately to mind.

It would appear that the present government's policies are a step in the right direction...............but do they go far enough?

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It is something to see an article that actually recognises that we are short of housing, especially in parts of the country that generate more jobs and therefore where more people want to live. For that reason prices are unlikely to fall by anything like the amount that some analysts suggest, and policy needs to take this into account. I agree that the revised planning rules could very well accentuate the lack of housing supply, even if intended otherwise.

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I am seldom surprised at the massive support for some BNP views expressed by some readers of Citywire. However the think tank clearly have a shortage of combined grey matter. There are so many vested interests and such a vast amount of nonsense talked about housing that it is almost impossible to talk sensibly about it.

Firstly the only difference between renting a house and buying one is the method of payment.

The so called social sector [housing associations and local authorities rented housing] is massivly costly in terms of unecessary complicated administration, yet everyone seems keen on retaining what is left of the local authority housing stock [council houses] and housing associaton owned rented stock.

Housing associations were a splendid alternative until they too became as useless as local authority run housing is. The so called ugly option is a nonsense, cheaper house prices rented or owned would benifit all except those who are unable to accept a reduction in "value" does not suit them.

The best thing that could happen is to see the gradual increase of home ownership and a decline in public ownership from every point of view particulary reduction in cosat of housing. Pressure from immigrants on housing stock is a red herring. Mainly new immigrant populations tend towards renting fom either public or private sector. The huge fuss made about them stems in part from political retoric as that is how the gasbag sector try to get voted for.

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One day instead of thinking that the housing problem can be solved by increasing prices the government and councils will realise that the problem can only be solved by building more houses. So by 2025 there will be a shortage of 750,000 homes. As there are something like 25,000,000 households in the UK this represents a 3% shortage of housing. So does this mean that the bottom 3% earners who need a household will be left on the street or does it mean that children will have to live with their parents until they are 30?

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rich banker

Mar 20, 2011 at 19:04

We are keeping Ireland afloat with soft loans so the least they could do is take some of our homeless as I gather they have a massive surplus of spec built homes.

We should welcome all hard workers but ban those who seek asylum and then preach hatred of our culture and seem able to get massive LHA from soppy spendthrift councils.

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