Figure 1: House building - permanent dwellings started and completed (United Kingdom)
- In their election manifesto of 2019, the Conservative party proclaimed the UK would build one million new homes over the course of their parliamentary term, with the next election expected in 2024. While that number may seem ambitious, it serves us well to consider that figure in a historical context (see Figure 1).
- Emerging from the slump in housebuilding activity following the global financial crisis of 2008-09, we see the five-year rolling number touching one million – not quite reaching the government’s supposed target, but not miles away either. The rate of building one million new homes every five years is where we have been since the early 1990s. Before that point, however, we were building significantly more.
- In July, Michael Gove, Minister for Intergovernmental Relations, announced plans to relax planning laws in England in an effort to create more residential homes1. This would entail converting takeaway and betting shops, often found in city centres, into homes – however, a quick google search returns some sobering numbers. There are 48,209 takeaway and fast-food restaurants as of 20232, and 6,219 betting shops as of 20223. These numbers hardly seem the sort that will revolutionise the supply side of new homes.
- Therefore, it seems likely there will remain a structural shortage in the UK housing market for the foreseeable future, unless conditions change (if, for example, migration trends reverse). It is clear there is greater demand for homes than supply. It will require more ambitious revisions to planning laws and how we live to really cut into this structural imbalance – reducing planning bureaucracy, changing land zoning laws (especially the definition and permitted uses of ‘green belts’4), and rethinking our housing needs (for example, buying high-rise flats as opposed to houses with gardens).
- While the structural shortage of homes may not bode well for those looking to get a foot on the housing ladder, much of this country’s wealth is tied up in housing, with individuals long the space. The lack of sufficient supply should prevent disastrous house price declines, even in the face of higher borrowing costs. Nevertheless, it will be a tough period for housing in this country as mortgage borrowers adjust to non-zero mortgage rates and some of the froth of the pandemic years is taken out of the system, although we believe longer-term trends should ultimately prevail.