The housebuilding crisis: The UK’s 4 million missing homes

Britain has a severe housing crisis, especially in the most prosperous places in the Greater South East. Across England, the average house costs more than ten times the average salary, vacancy rates are below 1 per cent, and space per person for private renters has dropped substantially in recent decades.This report explores the root cause of the UK’s housing problem, how policy in this area has developed over the last 75 years, and what action policymakers need to take to deliver enough homes in the UK.The report finds that:

There is a backlog of millions of missing homes in the UK

Compared to the average European country, Britain today has a backlog of 4.3 million homes that are missing from the national housing market as they were never built.

This housing deficit would take at least half a century to fill even if the Government’s current target to build 300,000 homes a year is reached. Tackling the problem sooner would require 442,000 homes per year over the next 25 years or 654,000 per year over the next decade in England alone.

Britain’s housing supply issues began in 1947, not 1980

Using newly available data on housing that was collected after the Second World War by the United Nations, it is now possible to explore whether Britain’s housing supply issues began after 1980 with Right to Buy and a subsequent decline of council housebuilding, or whether it began shortly after the Town and Country Planning Act 1947 was introduced.

This report uses this new data and other sources to compare British housebuilding and outcomes to that in Ireland, France, Belgium, the Netherlands, (West) Germany, Austria, Switzerland, Denmark, Sweden, Norway, and Finland from 1955 to 2015. It finds that Britain’s housing shortage began at the beginning of the post-war period, not at its conclusion.

Housebuilding rates in England and Wales have dropped by more than a third after the introduction of the Town and Country Planning Act 1947, from 2 per cent growth per year between 1856 and 1939 to 1.2 per cent between 1947 and 2019.

This has been a key factor behind the UK’s long-standing housing crisis, which has led to inflated property prices and soaring rents in recent decades.

Planning reform is the key to ending the housing shortage

Solving a problem as big as the British housing crisis requires a big reform. Addressing the problems with the discretionary planning system, fundamentally untouched since 1947, is that big reform.

Specifically, this entails:

• Replacing the discretionary planning system with a new rules-based, flexible zoning system. Increasing the certainty of the planning process and the supply of land for development is essential for any major increase in housebuilding, whether by the private or public sectors. The principle of shifting away from uncertain, case-by-case decision-making to a system where development is lawful so long as it follows the rules should guide all new planning reform proposals.
• Increasing private sector housebuilding. More council and social housing can be a part of the solution, but given the scale of the backlog, significantly increasing the amount of private housebuilding will be crucial.

“This research shows that UK planning policy has held back the economy for nearly three quarters of a century, stifling growth and exacerbating a housing crisis that has blighted the country for decades.

“Big problems require big solutions and if the Government is to clear its backlog of unbuilt homes, it must first deliver planning reform. Failure to do this will only continue to limit England’s housebuilding potential and prevent millions from getting on the property ladder.”

– Andrew Carter, Chief Executive, Centre for Cities.