Making Housing Affordable
Making new developments contain more low-cost or affordable homes does not lower prices It is net supply not the type of supply that matters. This is reflected in government housing data which clearly shows different parts of the housing market move together as one over time – they interrelate. Interactions between different parts of the housing market mean supplying cheap or expensive homes has the same overall effect on prices. The real reason the private housing sector is in difficulty is that there are too few new homes The last decade saw just 160,000 new homes being built a year – around 45% of the 360,000 new homes built a year in the 1960s. Each decade since the 1960s has seen fewer new homes built. New UK homes are small with around 50% being flats, making the shortage in supply even greater. This annual reduction in new homes since the 1960s is around 80% of the entire stock of second homes held in the UK, and around half of the long-term empty homes in the UK. The UK has been near the bottom of the EU15 in terms of new homes per person since the 1980s, indicating that under-supply has been an issue for decades now. This fits with Kate Barker’s work which pointed out the UK’s house price rises have been higher than the international average over the last few decades – this problem goes back decades. There is a need for new family sized homes for those in their 20s and 30s. There is now a generation of (mostly older) home-owners now living longer in large empty homes. 7.8 million, or roughly 35% of UK households are now ‘under-occupiers’, living in homes with at least two spare bedrooms. Under-occupiers are overwhelmingly home-owners, (e.g. 47% of owner-occupiers are under-occupiers versus 11% of social tenants, in a much smaller sector). Government studies have shown the current lack of new homes is pushing up prices. The Department for Communities and Local Government’s (DCLG) own research shows every reduction of 100,000 new homes per year would raise prices by 12-14% each and every decade. Kate Barker’s work showed the number of new completions changing by 240,000 would raise/lower house price rises by 2.4% a year. Thus if supply had run at 1960s levels since 1980, around 175,000 extra dwellings would have been built a year, and real terms house prices would have risen much less than they did – from £75-80,000 to just £105-110,000. This would have brought the UK more in line with other countries – where they did build more homes. The UK’s housing crisis and its consequences are entirely predictable as a consistent reduction in the supply of new homes will obviously have an impact on the UK’s housing market. This lack of new homes is caused by the UK’s planning system Since the high cost of housing has such a high cost to individuals and society, we need to examine what is causing the lack of supply that the UK suffers from.
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