While growth in the number of houses in England has kept
pace with growth in the adult population since the mid-1990s,
there has been a mismatch between where homes are built and where
they are needed.
- Between 1996 and 2021, the adult population in England grew
by 20%, while total number of properties grew by 21%.
- However, in London, the adult population grew by 29% while
the number of properties grew by only 23%.
- Building homes in areas with growing economic prospects is
important for enabling individuals to take advantage of economic
opportunities and shortening commutes, and could ultimately boost
productivity.
New analysis by IFS researchers considers whether homes are built
in the right places by measuring the responsiveness of local
housing supply to changes in local demand and assesses why some
areas have more responsive housing supply than others. This comes
as the government announces new housing targets and an “overhaul”
of the planning system.
Key findings from the research include:
Between 1996 and 2021, local authorities that saw 10%
higher house price rises, compared to other areas, experienced
only a 1.4% additional boost to the supply of local
homes. In other words, the supply of homes in English
areas responds only slightly to differences in local demand.
- This makes local housing stocks in England less than half as
responsive to changes in demand as areas in the USA and France.
- This responsiveness is also lower than comparable estimates
in Germany.
Supply is especially unresponsive to demand in denser
urban areas like London.
- Lack of available land which it is permissible to build on is
the key determinant of this weak responsiveness of local supply
and hence higher prices.
-
Had supply responded even as much as it does in the
rest of England house prices in London would
have risen by £21,000 less between 1996 and 2021.
- Greater constraints on land-use also lead to smaller
properties, and fewer family homes, being built.
It is possible to boost supply even in areas where local
constraints may appear severe.
- Boroughs in the East of London (especially Tower Hamlets) saw
much greater housing supply growth than would be expected given
local demand changes and local constraints.
- This area saw substantial redevelopment of brownfield sites
over this period, particularly following the Olympics in 2012.
Elaine Drayton, a Research Economist at the IFS
said:
“England appears particularly bad at building homes where they
are needed compared to other countries such as France, Germany
and the USA. Constraints, particularly restrictions on land-use,
mean that in England local housing supply does not track changes
in local housing demand, even over long periods. This makes it
more difficult for workers to move to areas with growing economic
opportunities.”
ENDS
Notes to Editor
‘England has a poor record of building homes where they are
needed' is a comment by Elaine Drayton, Peter Levell, and
David Sturrock. It is embargoed to 0001 Thursday 1st
August.
The full comment can be read under embargo here.
