How many new houses does the UK actually need?

Ritchie Clapson CEng MIStructE, co-founder of propertyCEO, looks at government housing targets, where they get 300'000 from, and how many homes we are actually building.

Related topics:  Property,  government,  Housing targets
Ritchie Clapson CEng MIStructE | propertyCEO
7th February 2024
Question 901
"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"
- Ritchie Clapson - propertyCEO

The UK's housing needs are not being met. The figure 300,000 looms large when the politicians speak about targets for building new homes annually, however, the source and accuracy of this target raise intriguing questions. If you check the Commons Library online, you’ll see the 300,000 number referred to as an ambition.

Even the House of Commons Committee of Public Accounts struggled to get hold of clear calculations; the best answer they received was that the 300,000 was based on a number of studies (at least one dating back to 2004).

So, it seems that 300,000 new homes annually is much like the Pirates Code in Pirates of the Caribbean – more of what you would call a guideline. But is it even a useful guide?

Pinning down the number

There are several ways in which we could measure the demand for new homes, and they all return a different number. Strategic Land Group issued a report in 2023 which considered several different data points. One often-cited source is the Office of National Statistics, whose most recent survey projected that 160,000 new households would form annually until 2028.

Does this mean we only need to build 160,000 new homes each year? Unfortunately, not. The ONS’s figure is based on the actual availability of new homes. If we built more new homes, the ONS’s projection would be higher, so using their number as a basis for the new homes requirement doesn’t work because it’s a circular argument.

Another reference point comes from Centre for Cities, which produced a report in early 2023 which calculated that the UK had a residential housing shortfall of 4.3m homes. Interestingly, they maintain that the decline in housebuilding can be traced back to 1947.

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. They report that we would need to build at a rate of 654,000 new homes per year to make up the deficit within the next decade.

What is driving demand?

It may help if we knew how many people want to rent or own their own home, but can’t. According to the government’s English Housing Survey of 2018/9, the numbers are significant. Over 540,000 households reported having someone living with them who would otherwise be homeless, and 1.6m households reported having a concealed household (i.e. an adult who wants to buy or rent on their own but who can’t afford to do so).

The planning consultancy Lichfields made some further projections to determine how many new homes would need to be built each year to house both concealed households and new organically formed households, and they arrived at 389,000, significantly higher than the government’s target. The housing charity Crisis conducted a similar study and estimated that we needed to build 340,000 new homes yearly to make good a 4 million home shortfall within 15 years.

Context

Even if we just accept 300,000 as being accurate (or as good a place as any to start), we don’t necessarily have a clear idea of what that means. To give you a way to imagine how big an ask building that many homes each year is, Wales has around 1.3 million households, so over four years, we would be adding another Wales every time an Olympics Games comes round. The city of Leeds has about 350,000 households, so we would be building (pretty much) a

new Leeds every year. Given that Leeds is the UK’s seventh most populous city, you can see that delivering 300,000 new homes a year is no small feat. It’s like adding a small county’s worth of homes annually.

How many houses have we been building?

Over the last twenty years, we’ve averaged less than 190,000 new homes per year, and the largest number we managed was 243,000 in 2019/20. So even a step up to 300,000 would mean building over 20% more than in our best recent year’s production. Interestingly, Lichfields decided to tot up the number of new homes included in every council’s Local Plan across the country, which turned out to be 216,000.

Shockingly, we would need to up production by 40% to get from the number of new homes that local councils think should be built to where the government wants us to be – a telling gap.

Not just about bricks and mortar

Plenty of scale home builders would be delighted to build new housing estates and towns up and down the country. But most people don’t want any new houses built anywhere close to where they live. According to Statista, England’s population density is a whopping 434 people per square kilometre.

There simply aren’t any large tracts of land going spare in England where you could build a new county or two without anyone noticing. We will need to build next to where there are already many people living, which will be massively unpopular.

It would be handy for the government if the general public accepted that new houses just have to be built but remember that when the government lost the Chesham and Amersham safe seat in a 2021 by-election, proposed planning reforms were cited as a key reason for the defeat. NIMBYism persists.

Some hope

There is one area where the government has found a way to push things forward: the conversion or redevelopment of unused commercial buildings (a.k.a. brownfield land). Countryside charity CPRE’s State of Brownfield 2022 report suggests that brownfield land for up to 1.2m new homes is currently lying dormant in England.

They also cited research that suggests that housing developments on brownfield sites are completed six months more quickly than those on greenfield land.

The significant advantage of these projects is that they will be connected to existing infrastructure. And from a political perspective, brownfield development isn’t a vote loser like greenfield is. As the economy has evolved, so have our requirements for retail and business premises.

We no longer need much of our current commercial space, and the number of unused brownfield sites increased by 30% between 2018 and 2022. And recycling empty buildings is usually a vote-winner – after all, who wants a derelict factory on their doorstep, or a dead high street filled with empty shops?

But if you thought brownfield redevelopment was a slam dunk that automatically gets us four years of new housing, think again. Because most brownfield land is in the form of relatively small buildings and plots that don’t appeal to the larger home builders.

The likes of Persimmon and co build lots of new houses on large empty fields using existing designs. A one-off, smaller conversion project simply isn’t in their repertoire. Instead, it falls to the smaller SME developers to take on these projects, and luckily, small-scale property development is currently enjoying something of a resurgence, with many first-time developers entering the market.

Many are existing landlords who have woken up to the fact that the buy-to-let market is a shadow of its former self and that even doing something as simple as putting flats above a shop can unlock six-figure profits.

The government has helped by creating increased permitted development rights that make it easier than ever to convert these buildings. But SME developers still only account for just 12% of the country’s housebuilding, down from 30% in their heyday.

In conclusion, the government's target of 300,000 new homes per year appears insufficient in the face of various projections and challenges. The complexity of the issue calls for a nuanced approach that involves not only meeting targets but also addressing public sentiment and leveraging alternative solutions, such as brownfield redevelopment.

Local and national governments now need to do even more to ensure that first-time property developers can take advantage of the opportunities that brownfield represents.

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