Author: Cyril Richert
I was delighted to read last month another article demonstrating the misleading use of “housing shortage/crisis” (the dominant view) to justify the current policies promoting massive developer schemes, especially in London.
The article published in the Spectator (10 February 2018) summarises everything right in the 3 sentences making the first paragraph:
“Britain does not have a housing shortage. We have a problem with the cost not the availability of homes. This can’t be solved by building more houses, because it is not caused by an insufficiency of houses.”
And the conclusion of the article is quite clear about the fact that only a strong State driven policy may solve the housing issue that is currently spreading in the country:
“a distorted pricing structure that skews the housing market to the needs of investors, turns homes into savings vehicles and excludes millions from aspiration and security… does anyone know a free-market answer to that? I don’t.”
One of the solution advocated by politicians for many years (including Wandsworth Council, as highlighted in a conversation during the local plan review in 2015, see here) is to allow developers to build as massive as they want, hoping that they will provide a small percentage of affordable units (“better than nothing” commented an officer).
Let the free housing market fix it is a bit like saying let the bank regulate the world financial system (and we know what happened in 2007!). The consequence is now in front of everyone eyes: prices higher than ever and more and more people excluded from ever thinking acquiring a home.
Housing target based on outdated figures
Ian Mulheirn, director of consulting at Oxford Economics and a former Treasury economist, explains:
The best data we have shows that:
- the UK does have enough housing; [The best available evidence shows that there appears to be a growing surplus of dwellings over households in the UK]
- housing costs are not high by the standards of the last 25 years, and have in fact fallen over the past decade; [The cost of housing appears to be significantly lower than it was a decade ago, in real terms]
- and additional supply, while welcome, will not have much impact on house prices or housing costs. [Building many more houses that people want to live in is a dangerous route to go down, as Spain and Ireland can attest]
Spectator’s article is quoting his research saying:
“The smaller the households, the more dwellings required, and households have been getting smaller over decades. But Whitehall has projected forward this reduction without adjusting for more recent levelling off. Ministers have relied, too, on old estimates for population growth, which have recently been revised downwards, yielding a million fewer people than projected by 2031. Current projections take no account of that.
All told, Mulheirn estimated last week that we’ll need 170,000 new homes per annum in the years ahead, not the 300,000 the Chancellor estimates — and fewer, not more, than we’re building at the moment.”
I will encourage everyone to read his series of articles:
- Part 1: Is there *really* a housing shortage?
- Part 2: Are housing costs high?
- Part 3: Why are prices so high and will building more bring them down?
You might also want to read a similar article from Ann Pettifor in the Guardian: Why building more homes will not solve Britain’s housing crisis. She said:
“The key to making housing more affordable in this country is not to build more, but to stop the flow of cash flooding into expensive areas. Build more without doing this, and prices won’t fall: the market will simply absorb more cash.”
In particular, the Mayor of London, Sadiq Khan, would be well advised to read carefully those studies and articles before to impose his forecast on housing supply for London.
In the draft London Plan 2017, which consultation ended a few days ago, it says:
“The Mayor has carried out a London-wide Strategic Housing Market Assessment (SHMA) and Strategic Housing Land Availability Assessment (SHLAA). The SHMA has identified need for 66,000 additional homes per year.”
Therefore it published its 10 year targets for net housing completions (2019/20-2028/29): 649,350 new units [with a total of 23,100 for Wandsworth, in the top 10 of the 36 London borough and areas listed].
However, you can later read in the proposed London plan draft that:
“To achieve these housing targets the overall average rate of housing delivery on both large and small sites will need to approximately double compared to current average completion rates. […]
The SHLAA shows that there is capacity across London for approximately 40,000 new homes a year on large sites. Modelling in the SHLAA also shows that there is capacity for development on small sites for 24,500 new homes a year.”
Even at full steam, approving any scheme that is put forward, with the bigger the better, they acknowledge that they will not be able to meet their target of 66,000 a year, forecasting about 64,500. To put that in perspective, it equates to about 40% of the total UK households growth per year since 2008, for London only.
Not only it is demonstrated that those target are largely over-estimated, but also that London will never be able to even get close. Therefore, we may legitimately wonder what is the hidden political agenda behind…
Another interesting article published at the end of January in the Guardian from Ruper Neat is titled: Ghost towers: half of new-build luxury London flats fail to sell
“More than half of the 1,900 ultra-luxury apartments built in London last year failed to sell, raising fears that the capital will be left with dozens of “posh ghost towers”. […] The total number of unsold luxury new-build homes, which are rarely advertised at less than £1m, has now hit a record high of 3,000 units, as the rich overseas investors they were built for turn their backs on the UK due to Brexit uncertainty and the hike in stamp duty on second homes.” […]
“Some developers have delayed construction of projects, while others have taken properties off the market. All 10 of the apartments at the top of the Shard – priced at up to £50m each – remain unsold more than five years after the Duke of York and the former prime minister of Qatar officially opened “Europe’s first vertical city”.” […]
“Steven Herd, founder and chief executive of MyLondonHome, an agency that specialises in new-build homes for investment, says his firm is struggling under the weight of overseas investors who bought in the last couple of years and are desperate to sell.” […]
“Herd says the Nine Elms development, near the new US embassy in south London, was one of the best redevelopment schemes in Europe but consisted of “the wrong properties that Londoners don’t need”.”
It will sound familiar to Clapham Junction’s residents (although not as the same scale) who saw the construction of the controversial new Peabody site to stop due to their inability to achieve the sales they projected along with construction costs.