23/01/2013 18:22 GMT | Updated 25/03/2013 05:12 GMT

Britain Needs More Houses, But It Doesn't Need Them Everywhere

There has been much coverage of the need for new houses in recent weeks. But while the case for new homes is clear, there has been much less dialogue over where these new homes are required. And as our latest report, 'Cities Outlook 2013', sponsored by the LGA, shows, some cities need them more than others.

The UK needs more houses for two reasons. Firstly the average price of a home now stands at just under nine times the average yearly salary. Given that conservative estimates suggest that we are currently building around 90,000 fewer homes per year than required, the affordability issue around housing is likely only to get worse. Secondly, building houses would likely act as a pick-me-up for the national economy - the building of 100,000 homes is estimated to add an extra one per cent to GDP and support around 150,000 jobs.

These arguments have been rehearsed before. But much less attention has been given to where these houses should be built. The affordability issue is much more acute in some places in others. While the average house costs around five times more than the average yearly pay packet in Burnley, it costs almost 15 times as much in Oxford.

High house prices are bad for future economic growth of cities such as Oxford because they price people out of the job opportunities that are available within them. This is bad for the individual, bad for businesses in such cities and, as a result, is bad for the economy. A report published last week by the CBI found that businesses perceived high house prices to be one of London's biggest weaknesses.

Burnley's housing issues do not centre on the availability of housing as prices are relatively low and homes relatively affordable. Building more houses could simply push down prices further, hurting current home owners and doing little to contribute to the city's long term economic performance. Issues around the quality of its existing stock are pressing, however: at 7.5 per cent, it has the highest vacancy rate of any English city. And more than one in five houses are classed as 'Category 1', which are the most serious hazards within dwellings rated by the Housing Health and Safety Hazard Rating System.

In other words, the importance of housing to the local economy varies from place to place and national housing policy needs to be much more flexible if we are to make the most of housing's potential for an economic boost.

Any policy designed to kickstart house building, such as Get Britain Building, would get the fastest results if it targeted cities where housing is least affordable. For example, in the ten cities where housing is least affordable, such as Cambridge, Brighton and Bournemouth, there are more than 100,000 homes on developments that have stalled as a result of the downturn. Not only would unlocking these sites provide a boost to national economic growth, it would help to address issues of affordability in some of our most expensive cities.

Government should also empower more affordable cities to access funding to help deal with issues of housing quality. There are a number of funding pots already available from government to deal with empty homes; cities where problems of poor stock and empty homes are most acute could benefit significantly from this money, rather than chasing incentives to build new homes.

Houses are built in places. But there is huge variation in the housing challenges that different places face. For this reason place needs to be put back into housing policy, with places allowed to combine funding sources and adapt national policy to their particular needs. Only through doing this will we be able to effectively deal with the UK's housing problems.