Transcript Measuring housing requirements in England to 2037

Measuring housing requirements in
England to 2037
Christine Whitehead
LSE
Future Housing Needs and How Best to
Meet Them?
TWRI Conference
November 4th 2016
The latest projections
• The latest 2014-based projections suggest that the number of households
will increase from 22.1 million in 2011 to 27.7 million in 2037.
• This implies that there will be roughly one additional household for every
four that existed in 2011.
• Within this total some 43% are projected to live in London and the South
East (as compared to 31% of all households in 2011) and some 65% in the
South (as compared to 52% of the total in 2011).
• These figures are very little different from the earlier 2012 based figures.
• Those projections imply a housing requirement of around 222,000 per
annum at the national level and around 55,000 per annum in London.
• This requirement is below earlier estimates, reflecting the fact that
household formation has been less than projected.
• The projections raise three important issues:
 What do these lower projections imply for households?
 What happens if the economy grows more rapidly than assumed in the
projections (or indeed that international migration declines)?
 Can we actually achieve even 222,000 per annum for more than a quarter of a
century?
Regional Implications
• Housing markets across England have behaved
very differently from one another – with some
regions hardly seeing any recovery from pre-2008
levels;
• Others, notably in London, South East and
Eastern regions, have seen increasing housing
pressure;
• In the projections, these regions are also the only
ones with requirements above 20% up to 2031
and above the national average national average
projected increases in the number of households.
Source: DCLG 2012-based projections
England
South West
South East
London
East
West Midlands
East Midlands
Y&H
North West
North East
Increase in households 2011-31
Projected increase in
households by region (2011 – 31)
35%
30%
25%
20%
15%
10%
5%
0%
Housing projections and the housing stock
• Until the turn of the century the housing stock increased more
rapidly than the number of households. However in this century
household numbers have grown faster than the number of
dwellings.
• Equally up to the 2006-based estimates, most updates showed
household projections to have underestimated actual household
numbers. But since then the numbers of households actually
forming have fallen well below the projected numbers.
• These two indicators are clearly related – reflecting economic, social
and policy change as well as demographic factors and housing
supply.
• The market has of course adjusted, not by producing more housing
but rather by increasing occupancy rates, generating higher house
prices and further harming economic competitiveness.
• These factors are reflected in the new projections because they
project past trends with varying emphasis on the immediate past..
Implications for households
• Housing conditions have been worsening for younger
couple households and indeed for younger single males
for over two decades.
• In 1991, 96% of 20-24 year old couples lived separately,
as did 98% of couples aged between 25 and 29. By 2011
around 13% of couple households in their twenties were
living in someone else’s household.
• Thus it was the economic crisis at the end of the 1980s,
not that of 2008, which was the start of the downward
trend in household formation among younger people –
and this was not reversed as the economy improved from
the mid-1990s.
Implications: looking to the future
• Overall, more households are expected to be able to live separately
in the 2030s – but the groups whose circumstances improve are
older working-age single people and retired households – not the
young .
• Indeed almost one-in-five couples aged between 25 and 29 are
expected to be living in someone else’s home in 2031 with the
problem extending up to those in their thirties.
• In London the situation is even more extreme – with young single
men living alone almost disappearing.
• We thus have a situation where the housing requirement is
PLANNED to lead to continuing declines in the capacity of younger
households to live separately.
• And where the affordability model suggests that to stabilise real
house prices would require output levels of well over 400,000 per
annum over many years.
Comparison of headship rates for young
couples
1.00
0.98
20-24 2012-based
0.96
0.94
0.90
25-29 2012-based
0.88
0.86
0.84
0.82
Source: DCLG
30-34 2012-based
2031
2026
2021
2016
2011
2006
2001
1996
0.80
1991
HRR
0.92
What happens if there is significant
economic growth?
• If the economy grows more rapidly, many of the households which
have not be able to form can be expected to try to find a home of
their own.
• Unless supply can adjust very quickly – not a likely scenario – the
effect will be that house prices will rise to choke off that demand.
• Thus, while growth would be good for the economy it would come
at the expense of an even more dysfunctional housing market.
• The only potential offset in demographic terms would be if net
international in-migration were to be significantly constrained (in
the projections it is anyway assumed at around 150,000 people per
annum, way below current levels).
• So at the present time the only answer to the affordable crisis
seems to be to have a lengthy recession – hardly what we should be
planning for.
Can we even meet the current housing
requirement?
• Since 2011 levels of housing output have been running
far below projected requirements.
• If we wanted to get back on track it would need
something over 300,000 per annum for the next five
years – including a tripling of output levels in London.
• Achieving that of course would ensure that the
government’s aspiration of 1 million units by the end of
2020 would be significantly exceeded.
• But is there any possibility that this can be achieved
year-by-year?
Built 2011-15/
Per year
Needed 2011-15/
Per year
% built of needed
Needed/year 2015-20
to catch up
Homes built and needed
North East
5000
6000
85%
8000
North West
11000
20000
53%
29000
Y&H
9000
16000
57%
23000
East Midlands
11000
16000
65%
22000
West Midlands
10000
18000
53%
27000
East
15000
26000
57%
38000
London
19000
55000
34%
87000
South East
20000
37000
56%
53000
South West
16000
21000
77%
26000
ENGLAND
116000
216000
54%
312000
Can output levels be increased?
• One core issue is the levels of actual demand – as opposed to
requirements without financial backing;
• Potential new entrants to owner-occupation have less secure
incomes than in the past and find it harder to meet credit
conditions;
• Established households face high transaction costs when moving so
the overall market is unhealthy;
• The buy-to-let market is being hit with additional tax burdens and
institutional investors are still only dipping their feet into the
market;
• Significant proportions of current output have only occurred
because of government support (Help-to-Buy equity loans; shared
ownership etc);
• It is not surprising therefore that risk-averse developers are not
prepared to expand rapidly.
Too many policies?
• The government has more than 150 initiatives currently in place –
and a white paper due with the Autumn Statement.
• But pepper-potting initiatives can be counter-productive and often
slows the pace of change;
• Britain has tried almost every possible policy but often in only a
small way; we need to identify a limited number of initiatives that
are having some success and plug away at them. Build-to-rent is the
best example of this sort of approach so far;
• Incentives can be more effective than regulation – eg LAs need less
incentive to identify a small number of large sites to meet their fiveyear land supply – and far more to bring forward medium sized sites
that can be built out more quickly by a wider range of builders;
• But there seems to be very little understanding of timescales for
interventions to work.
Finally, returning to household projections
• For all their faults, household projections are core to the current
system – which is a legally based on providing a 5 year land supply
for Objectively Assessed Need!
• The fact that projections depend on past trends rather than taking
account of economic reality means that they need to be used more
flexibly within the core strategy;
• Simply reducing land availability because of past trends lead to
lower household projections is not the answer.
• First, as part of the core strategy it could be required that not just
median scenarios but also upper and lower bounds are provided;
• Second there could, and should, be a requirement to monitor
progress and to maintain the five-year supply in the face of
increased demand within the period of the plan – including
identifying in the core strategy how the authority would respond;
• The objective is to give confidence to stakeholders that land will
always be available.