Chapter 1 Meeting Britain’s housing needs: fixing a broken market Britain’s failure to invest in housing is damaging lives and damaging the economy. For decades Britain, a nation often described as obsessed with home ownership, has failed to invest enough in new homes for its rising population.
A recent report by the McKinsey Global Institute pointed out the UK was only investing some 3.5% of GDP in new housing before the financial crisis broke, compared with 6% in Germany and France.1 As a result, some two million British families are on housing waiting lists,2 and Housing Benefit now costs over £20 billion a year — some £800 for every household. The average age of firsttime home buyers is 29 for those with financial support and 33 for those without.3
This failure to invest seriously undermines economic growth. If Britain invested as much in housing as France and Germany it would add £35 billion to UK construction output. Every £1 of construction output generates £2.84 of demand in the wider economy,4 so under investing in housing could be taking £99 billion out of the economy, or 6.9% of UK GDP — the difference between recession and healthy growth in national output and jobs. The basic facts about Britain’s housing needs are well known. Around 230,000 new households are being formed every year,5 and there is a backlog of some two million homes arising from past under investment. So if there is to be any progress in clearing the housing backlog, the number of new homes built every year will need to increase at least threefold to between 300,000 and 330,000.