UK growing housing deficit stands at 1.2m properties
12 July 2016
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Yorkshire Building Society, the UK’s second largest building society, has today released figures highlighting the shortfall in housing supply in England. The research shows that the country has missed its house building targets by a huge 1,199,180 since 20041.
The research is being released in light of it being 70 years since the inception of the New Towns Act, which was announced in Parliament in 1946. The reform was introduced to tackle the housing supply shortage following the effects of World War Two. Seventy years on, the UK property market is still facing a lack of supply, and questions remain as to how the government proposes to tackle this crisis.
In 2015, the government set the UK house building target by pledging to build one million homes over its five year term2. However, 142,890 homes were built in 2015 as a whole, 29% less than the 200,000 homes which would need to be built per year to reach the one million target by 20203.
Prior to this, the seminal Barker Review of Housing Supply, commissioned in 2003 by the Deputy Prime Minister, John Prescott, and the Chancellor of the Exchequer, Gordon Brown, highlighted that England alone would need to ramp up its current level of house building by 145,000 in order to reduce annual house price inflation to 1.1% - a more controlled level of growth4. This figure was based on there being 125,000 completions in 2002-03, meaning that the recommended number of homes needed per year to reduce house price growth to 1.1% was 270,000.
Given that this recommended level of house building has never been reached in the years since the Barker Review was published in 2004, and that the recommendations in the Review only relate to England alone, the number of properties needed in the UK each year to reduce house price inflation to 1.1% is now likely to be significantly higher than the 270,000 figure. The figures therefore show that the government’s target of building 200,000 homes per year is at least 70,000 properties a year short of what the country needs.
The UK came closest to the 270,000 figure in the years leading up to the 2007 financial crisis. In the years between the publication of the Barker Review in 2004 and the advent of the financial crisis in 2007, an average of 213,080 homes were built each year. By comparison, the average number of homes built in the eight years since the financial crisis is 30% below the pre-crisis average, at 148,563 properties (see Table 1 below).
Yorkshire Building Society is releasing these figures following its recent First-Time Buyer Report, which found that young adults in Britain rank buying their own home as their number one life ambition5.
Andrew McPhillips, Chief Economist at Yorkshire Building Society, said:
“The Brexit decision and the uncertainty it creates around the prospects for private sector house builders, not to mention the country’s economic outlook, is likely to heighten the housing crisis.
“Addressing the shortage of homes must remain high on the Government’s agenda regardless of the work required following the EU vote. We need a clear strategy to deliver the 1.2m additional homes and options like giving local councils fuller control of existing housing funding, as well as freedom to develop surplus public land, should form a key part of that.
“The longer we leave the supply crisis to worsen, the more difficult it will be to resolve. The UK has failed to build the number of homes needed to meet demand year after year, which has consequently inflated prices and made it even more difficult for those looking to buy. House building has remained stagnant ever since the financial crisis, and this lack of activity illustrates that the current system needs a serious overhaul if the country is to build enough homes.
“Lack of housing supply has caused prices to rise well beyond wage-growth, which has increased competition for properties and priced many people out of the market. This issue particularly affects first-time buyers who do not have the ability to offset the rising cost of buying with the increase in the value of their own property. Those who already own a property also face similar obstacles due to the costs involved, as well as being faced with limited choice in the properties available to buy.
|Year||House building target set by Barker Review (England only)||UK house building completions||UK house building shortfall (minimum)|
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