Followinjg the budget and the obsession with building 300,000 houses a year we thought the comments made by Ian Mulhearn on the housing ‘shortage’ would inject a dose of sanity into the (non) debate!
Is there *really* a housing shortage?
With a housing white paper due out soon, another battle is brewing between those who think we have a housing shortage that’s driving up prices and wealth inequality, and those who worry, baselessly, that the country is about to be concreted over. Amid the sturm und drang, what nobody appears to question is whether there actually is a housing shortage.
A recent FT leader neatly summed up the conventional wisdom on housing in the UK.
We don’t have enough housing. The UK has an ‘endemic shortage of housing’ as housebuilding has ‘lagged behind population growth’.
Housing costs are high as a result. These have ‘wiped out income gains made by the bottom half of households’ over the past 13 years.
Building more will solve the problem, especially for the less well-off. ‘The fundamental problem is one of supply’ it argues, and boosting it will substantially benefit those people who are ‘just about managing’.
This is a dominant view. In fact it appears to be the almost unanimous view, of commentators at least. I can’t recall reading a newspaper article on housing recently that didn’t refer to ‘solving the UK’s housing shortage’. It is the premise on which all subsequent debate about housing is based. But what if it isn’t true?
My reading of the evidence suggests it isn’t. The best data we have shows that: the UK does have enough housing; housing costs are not high by the standards of the last 25 years, and have in fact fallen over the past decade; and additional supply, while welcome, will not have much impact on house prices or housing costs.
Before getting into the evidence, I should point out that there ‘being enough housing’ does not mean we don’t have some serious housing policy challenges. These tend to be distributional: in particular homelessness, a shortage of social housing, and much tighter restrictions on Housing Benefit for people who struggle to afford market rents. But distributional problems are separate from the macro question about overall housing supply I’m going to focus on here.