Demand Is The Key To Britain's Housing Crisis

Politicians on all sides have ignored the most critical factor in the housing challenges we face
Stefan Wermuth / Reuters

Housing was the cornerstone of last month’s Budget and the issue Theresa May has decided to dedicate her premiership to.

Over the course of my lifetime, I’ve seen housing policy has changed over successive governments. While the policies have evolved, many people would argue that the problem is worse than ever. Over that time, we’ve witnessed a decline in the availability of council houses, the growth of the rental market and a steep decline in homeownership.

Not only have housing stocks declined, the quality of the houses built has declined with it.

These deep-rooted issues are clearest in inner cities, particularly London and the surrounding areas. Space is at a premium in the inner zones, forcing developers to build up, thus increasing population density. Today, to own a house in inner city London, you have to be a millionaire - or at least nearly one. The housing market itself, incomparable to the rest of the country, has been distorted for some time, with the increase in foreign ownership of new builds.

So, what’s the problem? Most of our politicians ignore the correlation between our housing crisis and the increase in demand for housing from net migration. It’s not a surprise that the emergence of the housing crisis has gone hand in hand with growth, driven primarily by record high net migration.

So why do so many talk about supply, without talking about demand?

Supply is undoubtedly an issue. Last year, our government built 5,380 new council or association homes. This number is scandalous and scarily low, when compared to the 39,000 built six years ago. I grew up in a council house in Moss Side. Council houses provide certainty and comfort to the lowest paid in our society, knowing they are not at the mercy of a private landlord. These homes are where many of our next generation are being raised.

But, to keep building more and more homes, whilst ignoring increasing demand is naive and irresponsible. It’s a sticking plaster to a long term problem. In fact, current levels of homes being built are not even enough to sustain current levels of immigration.

A research report from the House of Lords found that net migration of 190,000 a year increased housing costs by 13% over 20 years. Recent research from Migration Watch found that in the last decade nearly 90% of additional households in England are “headed by someone born abroad”.

The government needs to look at reducing demand to prevent a squeeze from both ends. Population forecasts show no signs of slowing down, partly because of an ageing population, but the biggest driver is immigration levels.

And, to make for a gloomier forecast, I believe our high population figures are based on conservative estimates. Our current population number doesn’t take into account the thousands of undocumented illegal immigrants and future forecasts are based on a particularly low annual immigration number.

It’s the quality of housing that is a critical factor for many, when judging overall quality of life. Simply building thousands of more homes is not enough. The government, along with local government need to ensure that the houses already being built are fit for use and sustainable.

There needs to be greater awareness of density levels too. We need to ensure new homes are built after serious consideration for local amenities, public services and infrastructure. The South East has seen plenty of new housing developments over recent years, due to the connectivity into London, but it is now the most densely populated region in England. This, in turn, puts additional pressure on hospitals, schools and other public services. In particular, it increases traffic congestion as investment into roads and motorways have not kept up with new housing developments. This has a knock-on effect on productivity and fuel emissions.

Debates around policy ideas are meant to reach successful solutions, but frontbench politicians on all sides have ignored the most critical factor in the housing challenges we face: demand.

Unless there is an honest debate about the impact of demand on the housing market, we are failing millions who have to live with our decisions - good, bad or ugly.


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