Housing crisis is not caused by lack of supply – in fact we have a surplus, says new report

Lack of supply is not a factor in the UK’s housing crisis and building more homes will not solve it.

Although politicians and commentators constantly say that decades of under-supply of housing have caused problems, a new report says that this is simply not so.

It claims that there is in fact a surplus of housing.

It says house prices have soared because people have been able to borrow large amounts of money cheaply, which has put house prices up; that affordability is a huge issue for young people; and that there is too little social housing.

The report from the UK Collaborative Centre for Housing Evidence says claims of an under-supply of homes is a red herring.

Using official figures, it says that supply has actually outstripped the formation of new housing for years, leading to a surplus of housing over requirements.

The report, by Ian Mulheirn who is chief economist at the Tony Blair Institute for Global Change, says house prices have risen by over 160% in real terms since 1996.

However, during that time, English housing stock has grown by an average of 168,000 per year while growth in the number of household has risen by an average of 147,000 annually.

It says that by last year, there was a surplus of over 1.1m homes.

Even in London and the south-east, the number of houses has grown faster than households.

Building 300,000 new homes a year – the Government’s target – would not help, says the report. It would cut house prices by about 10% over the course over 20 years, but would not reverse the house price rises of recent years.

It would also create more empty homes, without boosting home ownership, it claims.

Mulheirn said: “Politicians of all stripes are unanimous in seeing an increase in supply as the solution to our housing crisis.

“The supply shortage story is a red herring. Building 300,000 houses per year will do very little to bring down house prices in Britain and next to nothing to raise home ownership.

“The real culprit for sky-high house prices is low global interest rates that have made it easy for home owners and investors to take on large amounts of mortgage debt and pay ever more for houses.”

The report calls for politicians to focus on reversing the erosion of social housing stock, end housing benefit cuts, and improve wage growth for young people.”

Tackling the UK housing crisis: is supply the answer?

 

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8 Comments

  1. Mark Connelly

    Political nonsense. Money may be cheap but if you can’t access it then it’s not a factor. Someone tell this guy the heady days of early 2000s are over. A surplus of houses. That must be as controversial a statement as he could have made. Probably the whole point of the report.

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  2. Ostrich17

    “Tony Blair Institute for Global Change”

    No further comment required !

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    1. Woodentop

      My thoughts to, anything with his name attached is dead.

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  3. DASH94

    If they’d incentivise landlords to buy more of that stock it’d help.

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  4. mrtickle

    What a load of nonsense. And deliberately missing the point.

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  5. Richard Copus

    Interesting correlation.  There’s no doubt that if you couldn’t borrow to buy houses prices would be a tenth of what they are now.  But borrowing keeps the capitalist system moving; it’s just how much you should be able to borrow which is the real question and it has been too easy and too cheap for too long.  Obviously an overt political statement from the TB Institute, but there is no doubt that there are thousands of empty properties out there which should be used for residential housing  –  think of all the empty flats above shops which were nearly all used for accommodation up until around 40 years ago.  There is far more supply out there than we like to think, but still an imbalance which only new build (and much more social housing new build) can supply.    

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    1. Woodentop

      Most town I would say have those empty flats above shops. Regulations prevent change of use or viable alterations, so are they really in the equation?  
       
      I do not see thousands of people living on park benches (regrettably there are more than one) so is this an idication of no real problem with housing shortage? Yet who doesn’t know of the large numbers squeezed into converted blocks of flats, hotels and guest houses being paid for by the tax payer. There is a major shortage of properties for rent. Government should be concentrating on building social housing, then PRS wouldn’t be flooded with the risks of rougue tenants and nonsense continualy attacking the industry and not steal a percenrtage of new homes from developers as a condition of planning approval.   
       
      Local authorities and central government need to stand up to the plate and provide their own social housing. Gross negligence!

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  6. pd@mastermandavies.co.uk

    Thank you for a really good article.  For decades, UK has had no coherent or properly informed regional, housing, social or economic policy. Symptoms incl: congestion in the SE, shrinking owner-occupn & compounding unaffordability to rent/buy while popns & housing stock remains +/- matched.
     
    20yrs of gearing with low int rates & QE CREDIT, COMPOUND asset inflation which attracts SPECULATORS & INVESTORS with tax breaks RAISING THE WHOLE HSG PRICE LEVEL.  Central bank then restrains non-hsg inflation compounding a gap with wages in the PRODUCTIVE economy.
     
    AFFORDABILITY now has little to do with hsg qty, SUPPLY or constr costs & just bldg more will not help.
    FINANCIALISATION drives a PONZI scheme transferring COMPOUNDING WEALTH to exstg owners expanding a POVERTY TRAP at the bottom, contraction of 1st time buyers & owner-occup’n, INDEBTEDNESS, unaffordability & INEQUALITY.

    SOCIAL DIVISION COMPOUNDS bet rich & poor, old & young, owners & renters, centres & regions, North & South expanding a subsistence & wage slave class who cannot afford to rent, buy or save.
     
    New units sell/rent at prices set by exstg stock, so those who can not afford today will be priced out tomorrow, while the better off & more creditworthy have an almost unltd capacity & incentive to CONSUME more: larger, vacant, 2nd, investment, holiday home etc units.
    The institutionalised disfunction in the hsg sector, & media & political focus on short term symptom treating (while mass house builders somehow consistently make vast super-normal profits), has appalling long term consequences for resource allocations & inequity in the whole socio-economy.

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