Our booming population faces a crippling shortage of homes

Allister Heath

ANOTHER day, another report providing yet more evidence that Britain’s housing crisis is getting worse. Countrywide estimates that England will face a shortfall of 1m homes by 2021, half of which will be in London and the South East. The problem, of course, is that our planning rules have throttled house-building in the UK, guaranteeing very low levels of housebuilding at a time when the population is growing very quickly.

In other countries, and in other industries, when there is lots of demand, and when prices are rising, supply increases – but not in the UK housing market. The result is that prices and rents have shot up, compared with average wages: despite earning £3,804 more per year than the average person nationally, the typical Londoner is actually £4,027 worse off after they’ve paid for somewhere to live, according to the PricedOut pressure group.

The shortage of property mirrors shifting population movements: as the London economy continues to outperform that of the rest of the UK, more people are moving here – both from the rest of the UK and from overseas. Of course, plenty of Londoners continue to move out, as they always have, but on balance London (defined as the 32 boroughs and the City) is growing and could soon break its historic 1939 population peak of 8.6m. The capital’s population had collapsed to around 6.8m in the 1980s, after decades of urban decay, economic decline and general malaise in the pre-Big Bang era but has since shot back up to at least 8.3m in 2012 (according to official estimates). It was still just 7.2m as recently as in 2001.

Between 2004 and 2013, Countrywide calculates that the proportion of population growth in London and the South East has increased sharply from 25 per cent to 45 per cent. House builders have partly followed employment and population growth but insufficiently so: 36 per cent of all new build properties are now either located in London or the South East, up from 26 per cent in 2000. While housebuilding in the capital remains below the levels it reached prior to the recession – a situation which remains hugely problematic – at least the decline has been less bad than elsewhere.

In London, the number of new build developments is now at 68 per cent of peak 2005 levels and 81 per cent of 2008 pre-crash levels. While that sounds shockingly low to me, it is much worse elsewhere: in the South West of England, housebuilding is at a pathetic 57 per cent of peak levels and in the South East 55 per cent of peak levels. It gets worse: new starts in the East Midlands are at 36 per cent of peak levels, while Yorkshire and the Humber’s new starts are at 39 per cent of peak levels.

It is good news that the Labour party, for one, now agrees that the UK has built too few homes over the past 30 years. The present government has taken some action, though not enough; housebuilding is on the rise again, albeit not by enough. The worry is that Labour’s solution will be focused primarily on social housing – yet the real answer is to tap the private sector to engineer a 1930s-style housebuilding boom, reducing prices, allowing hundreds of thousands of families to buy their own homes for the first time and making it cheaper to rent.

The government must make sure enough land is granted planning permission, it must cut taxes and levies on new projects to make more housing projects profitable, and it must encourage self-build, making it easier for families to arrange for their own homes to be built on their own plots of land and giving big developers a run for their money, as is the case on the continent. Britain urgently needs more, larger homes of the right kind in and around London, including in new towns – unless the right reforms are put into place, millions of younger people will eventually pay a very dear price for the short-termism of our political classes.

Follow me on Twitter: @allisterheath