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.”