Skip to main content

Housing is one of those rare policy issues that is able to produce political consensus. Three quarters of the public, along with two thirds of MPs, believe there is a housing crisis in Britain. Considering the backdrop of soaring house prices, a rising house price to earnings ratio and collapsing homeownership rates among the young, it is not difficult to see why talk of a housing ‘crisis’ is widespread.

The standard explanation is simple: there are too few homes, and too many people chasing them. To relieve this crisis, therefore, we must build more homes. This analysis is reflected in Government policy, which laments “years of under-supply” and commits to building 300,000 homes a year by the mid-2020s. In short, current thinking is that to defeat the housing crisis we must simply increase the supply of housing.

However, there may be more to the housing crisis than that. The Office for National Statistics (ONS) recently downgraded its projections for annual household formation from 210,000 to 159,000, while data from the Labour Force Survey suggests that the number of households has grown at an average rate of around 168,000 since 2000 – far below forecasts. This suggests that the need for housing is growing more slowly than previously assumed.

All very interesting, but what about housing supply? The economist Ian Mulheirn argues that once you take things like changes of use or conversions into account, the total stock of housing has risen by 197,000 a year since 2000, outpacing the growth in the number of households. The surplus of houses has roughly doubled from 660,000 in 1996 to 1.25 million in 2017. Although household formation is not a perfect indicator of demand for housing – there may be latent demand from members of existing households – the commonly advanced argument that we face a catastrophic shortage of places to live seems overstated.

It may be demand-side, rather than supply-side, problems that we should be really worried about. One major problem lies with the financialisation of housing: investors treating houses as a financial asset, creating speculative bubbles in property. An environment of low interest rates and falling mortgage rates has spurred investment into property; consider that over six years, £100 billion of investment was funnelled into London property. A consequence of this is that cheap credit has led to a situation where house prices may rise “regardless of the adequacy of the housing stock.”

In a similar vein, Professor Danny Dorling argues that the problem is not one of inadequate supply but of inefficient distribution. In the UK, the number of rooms per capita has been rising – it was the highest it’s ever been at the 2011 census – and is above the Organisation for Economic Co-operation and Development (OECD) average. On this reading, building more homes isn’t the priority; it’s clamping down on under-occupation and buy-to-let properties.

Critics have hit back by noting that when you look at residential floor space per household, the UK does poorly by Western European standards. This indicates that there is far less housing space to redistribute than the figures Dorling highlights initially suggest. But even those who argue that there is a crisis of undersupply in the UK acknowledge that there is a problem with spatial distribution: as Kristian Niemitz of the Institute for Economic Affairs notes, “there is an almost inverse relationship between house building levels and house price inflation.”

With so many competing explanations for the housing crisis it is hard to know what’s really going on. But it seems, in fact, that all of these narratives may be right – at least, in part. A report from Sky News identified five distinct housing crises: undersupply, affordability, under-occupation, lack of demand and quality.

Mapping these crises reveals that each has a distinctive geographic profile. In London, the “traditional” crisis of undersupply is prevalent, in combination with a crisis of affordability fuelled by large numbers of second homes and buy-to-let properties. But outside the capital, a different picture emerges. Rural areas such as Rutland, the Cotswolds or the Derbyshire Dales exhibit large degrees of under-occupation. In some areas, particularly in old mining towns, there is a ‘demand crisis’ where economic decline has left homes empty and derelict. Rather than building more homes, a more appropriate strategy for these areas is to revive their local economies. Finally, the report highlights a crisis in housing quality. This most affects old coastal towns such as Blackpool or Scarborough, where investment into old period housing has slumped.

We often fall into the habit of talking about the ‘housing crisis’ as though it is a monolithic phenomenon affecting various parts of the nation in more or less the same way. But this obscures the multifaceted and complex nature of the issue. Indeed, there seems to be no such thing as a ‘British’ housing crisis, but rather a number of regional crises with different drivers and different solutions. If we want to get serious about tackling the problem, we urgently need to enrich the currently one-dimensional policy debate around housing.

Sam Robinson is a Research Assistant at Bright Blue.