‘The country is facing up to a house building crisis. A decade ago, the Barker Review of Housing Supply noted that about 250,000 homes needed to be built every year to prevent spiralling house prices and a shortage of affordable homes.’ Guardian
At Orms we have undertaken a relatively small amount of residential design over the past 5 years and avoided the temptation to enter the ‘prime and super prime’ residential markets and continue to be intrigued by the apparent shortage of homes that are affordable for purchase or rental. After attending the AJ120 event last week where ‘The 20-strong protestors used a loudspeaker to attack the ¬practices for their role in the ‘eviction, demolition and gentrification’ of the late 1960s estate in Southwark and threw scores of paper airplanes made from flyers outlining their complaints’ I wanted to understand if our elected government and house builders are correct in their belief that building more housing and quickly is the answer? Or is it more productive to fully understand the contributing factors of the shortage in housing and rising costs so a new proposition can be formed? And what role can architects play in resolving the ‘house building crisis’?
I do not wear black clothing nor claim to be an expert in residential development so my first port of call was to undertake desktop research into some key facts which can be found on local authority, government and charity websites. I have set out below my findings but what is fascinating is that the facts and figures vary enormously across sources but the raw facts are:
UK Population: – 64,100,100 (up 3.7M over the past 10 years and 63,200,000 in 2011 census)
Number of households: – 26,767,000 (26,400,000; 2011 census plus 367,000 built since 2011)
Average household: – 2.33 persons (in 2011 census albeit stated 2.36 in projections by ONS) with 2.48 in London (again 2011).
Last year: – 141,000 new homes built across UK in 2014.
London: – projected to grow by 1M over next 10 years
If we accept that the total number of households (as provided by the 2011 census and new homes constructed to end of 2014) across the UK is correct and the average household occupancy of 2.33 persons is applied then in theory we have housing capacity for a population of 62,367,100 (equivalent to a shortage of 744,000 homes). But to give an indication of the nuances of the figures this would change to 63,170,120 (equivalent to a shortage of 394,000 homes if 2.36 person occupancy was applied). If my basic mathematics is correct then over a 5 year period (without any increase in population) we would need to build 78,800 – 148,800 new homes per year which is well within our current capabilities on the basis we are delivering the required housing stock that is affordable. So where does the perceived need for 250,000 new homes a year come from?
A number of experts will talk convincingly about the need to ‘oversupply the housing market’ as the only way to resolve the shortage and bring prices down. In economic theory, the law of supply and demand is considered one of the fundamental principles governing an economy. It is the state where as supply increases the price will tend to drop and as demand increases the price will tend to increase. This is a principle that most people intuitively grasp and the 2004 Barker report concluded that we had to inject an oversupply into the market to keep house prices down, it suggested:
– That the UK had experienced a long term upward trend of 2.4% in real house prices over the past
– In order to reduce this rate of increase to 1.8% an additional 70,000 houses in England each
year may be required.
– In order to reduce this rate to the EU average of 1.1% an additional 120,000 houses each year
may be required
So the Barker report should work however we have a very different market where ‘demand’ is not just from a local market but a global market where housing is now seen as a commercial transaction. In London alone of the 40,000 new homes built in 2014, 73% were in ‘demand’ from overseas investors which removes supply from the market and by default further inflates cost because more people are bidding for even fewer properties that are way above a ‘fair price’. And what would this mean if London continued to grow?
It is projected that the London population is to grow by 1M over 10 years so hypothetically (if the current 2.48 persons per household average is applied) we need a further 40,320 new homes per year however if only 27% of this is going towards the genuine housing shortage then this figure would need to be nearer 150,000 per year to meet the projected growth (i.e. 1,500,000) which is unsustainable and unrealistic but it keeps demand high. Great if you are a large house builder.
When this is considered in conjunction with the decline in housing delivered by local authorities, see attached graph of 1969 – 2009, and the mirrored increase in the cost: income ratio as the housing associations and private developers have maintained their number of units per year; is it any wonder that we have a shortage of homes that are affordable. Is this reduction in Supply and the spike in Demand mere coincidence or are house builders now controlling prices and the market? And how do we return demand and supply to a state of equilibrium (which in turn could reduce house prices) when there is no incentive for large house builders to do so.
It is clear that the challenge of providing housing that is affordable cannot be resolved by one single gesture (be it commercial or architectural), such as over supplying the market or creating garden cities, but requires a considered plan of action that is not led by large house builders. The first step is to identify a consistent set of facts on the current housing stock which can then be used to assess our current and future needs. Architects can help by debating and challenging the issues of supply and demand objectively and propose clear initiatives that inform a plan of action that should be led and coordinated by the government and local authorities, so here are my initial thoughts:
– Enable local authorities to borrow and build again (this will have a direct and meaningful impact)
– Dramatically increase the number of small house builders (currently only 3,000 across UK) by a further
9,000 (at 1980s levels) and on the basis that they can deliver a modest 10 households per year we can
add a further 90,000 households into the system. This could keep cost down, place homes in the correct
location and with Councils providing help with land or buildings.
– Increase the average number of persons per household. A modest increase from 2.33 to 2.48 across the
UK would have a significant impact.
– 30% of all building stock is held by people in retirement so could Councils provide specific housing
for them in order to release housing stock back into the system
– Ensure all vacant buildings (currently 600,000 – 700,000) are compulsory purchased and brought back
into the market.
– Incentivise Universities to building housing for rent, not just for students, to young people
– Supermarket giants build housing for local workers on ‘land banked’ sites which sit vacant for 12 months
– Defuse demand from the global market and get back to a local market
– Cap second home ownership unless it is guaranteed to be rented.
– Move commerce to where housing is available or more easily built. London is not the only place in the UK.
– Make rental as attractive as buying.
– Provide suitable accommodation for an ageing population; release family homes back into the stock.
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