I enjoy reading good journalism, whether it chimes with my political view or not. Sometimes, however, I wonder whether I am reading something which is deliberately misleading – “we send the EU £350 million a week – let’s fund our NHS instead” – or just plain ignorant. Like many others, I also worry about irrational government policy.
The housing crisis in England is characterised by rising house prices, unsatisfactory living conditions and, for many, the unattainable dream of owning a home. Policymakers have talked about a lack of new housing supply as the primary problem, setting a building target of 300,000 new affordable homes a year.
According to research by Shelter and Heriott Watt University, England and the UK respectively are suffering supply shortages of three million and four million homes. What has led to this shortage?
In The Spectator of 1 July 2023, Lionel Shriver (“We Need To Talk About Kevin”) voices the “unspeakable truth about housing,” suggesting that the UK housing shortage is explained by immigration. She looks at the period 1998-2023 and concludes that over this period the UK population grew by 9.5m, having grown by just 2.5m in the previous 25 years: “This demographic surge can only be down to immigration.”
Apart from net migration rather than immigration being the relevant variable, this piece is a distortion, primarily because it ignores ageing.
Recently, the Local Government Association suggested that: “Society is ageing and more people require housing that meets their needs as they age. Between 2014 and 2039, over 70% of projected household growth will be made up of households with someone aged 60 or older. The suitability of the housing stock is of critical importance to the health of individuals and impacts on public spending…the proportion of households where the oldest person is 85 or over will grow faster than for any other age group.”
According to Savills, in 2015, the UK’s 65+ population was set to rise by 2% per year – or 1,000,000, between 2015 and 2020 – requiring an additional 18,000 new homes a year just to maintain the status quo. The 75+ population was set to grow by 3.2% per year during the same period. By this measure, a total of 90,000 new homes would be needed to maintain current levels of provision for those aged over 65. If the provision of retirement housing were to rise from 4.8% of older people to 10% (still low by international standards), we would need an additional 500,000 new homes over the same period.
Over the 25 years to 2023, the average life expectancy of a UK resident rose by five years from 77 to 82. This has had a huge impact on housing demand. If the age of the UK population were evenly distributed (roughly true up to the age of 75) around 68 million divided by 77 – an extra 880,000 people – are remaining in their homes every year for an extra five years. Let’s say that’s 500,000 households, or 2.5 million households over five years, whose houses may not be coming onto the market. That’s enough to explain almost all of our estimated three million shortage of homes.
It could be more. The English Living Survey reported in addition that: “Older people are more likely to live alone. 45% of households led by someone aged 65 or over were single-person households, more than twice the rate in younger age groups. Over 3.1 million adults aged 65 and over lived alone in 2018-19.”
Ageing is not the only issue which Shriver fails to mention. In England, there are 640,000 empty homes. More than a quarter of a million of these have been empty for more than six months. Nearly 1 in 3 homes in the City of London are classified as empty.
Homeowners in the UK stay in their properties for just under 21 years on average, but some Londoners are staying put for more than 35 years, compared to 10 years in Australia and 13 years in the USA. Lengthy average holding periods increase the likelihood that the occupier of a dwelling is not the ideal occupier. How many aged couples and singles have mothballed the empty bedrooms in their family-size homes? What proportion of this group would be eager to find more suitable accommodation if the process was easier?
The under-occupation which results is partly explained by local property taxes; very high in parts of the USA, ridiculously low for bigger houses in the southeast of England where – despite the obvious applicability of annually-repeated automated valuation models – the last valuation for council tax was in 1991.
In addition, tourist areas have been hit by an increasing wealth divide, leading to more second homes and the success of Airbnb. Cornwall reports 18,000 empty homes and 16,000 on waiting lists for council homes, while 10,000 homes are registered for Airbnb use.
How has our government dealt with these issues? Recent Conservative governments have stimulated demand for owner occupation (help to buy, stamp duty holidays, and so on) while penalising the rental sector over a prolonged period, during which interest rates were unsustainably low. This is hardly economically rational. Not only that, but recent governments have been unwilling to take rational decisions, such as:
- Abolishing stamp duty to encourage “downsizing” – moving from under-occupied large houses to more suitable accommodation – at least, for sellers who are over a defined age.
- Using automated valuations to re-value houses annually for council tax in line with current market values.
- Encouraging the use of council tax multipliers for second homes.
- Developing a policy to support high quality housing for the older members of society.
The unspeakable truth about the housing crisis, apparently, is not about immigration. It’s the tragedy that governments are unprepared to face the facts and damage their supporter base in order to address it.
With many thanks to Professor Sarah Harper, Clore Professor of Gerontology at the University of Oxford, for her support in helping me to understanding these numbers, and to Luke Graham, Head of Research at Pi Labs for his helpful comments. Any remaining factual errors are my own.