The six housing myths

Various groups, free market lobby groups in particular, trot out a variety of assertions about housing issues. In essence they want more houses built as they live in a mythical world where supply and demand are the only shows in town.

 

Lack of supply

The lack of supply theory of why there are housing problems falls apart when any analysis of the evidence is performed.  Its dominance reflects its simplicity ‘its supply and demand innit?’ and the pervasive influence of vociferous lobby groups, developers,  certain academics and commentators. Adherence to it for many is an act of faith accepted uncritically.  The alternative theory is more complex, taking account of the various factors which operate in the real world.  

 

Looking at the evidence indicates that contrary to the myth, there is not an under-supply of housing. The number of additional dwellings has risen year on year and in 2021 there were 1.5 million unoccupied dwellings in England.

 

The main elements of the multi-causal theory are deregulation of housing finance; the dual role of houses as assets and providing a service; increases in earnings; lower earnings for younger people; and a reduction in social support.   It is important to note that lack of supply is not the cause of housing problems.

 

Together these have resulted in higher house prices and rents and significant problems for those seeking suitable and affordable accommodation.

 

 

They build more houses in other countries

Some supporters of the ‘we must build more houses’ consider that England should emulate France in increasing the house building rate. Comparing UK house-building rates in terms of the gross % change in relation to total stock it is stated “The UK ranks towards the bottom of this list, seeing only 1.9 per cent growth in the number of homes every year, much less than France with 2.3 per cent annual growth in housing stock, and West Germany and the Netherlands on 3 per cent growth in housing stock every year.”  [Watling &  Breach, 2023.]

 

If we look at the data on households compared to dwellings, we find that the countries of the UK all have more dwellings than households and that the figure for France is higher. The most recent data suggests that whereas in England there are 6.4% more dwellings than households the figure for France is 8.6%. The Netherlands appears as an anomaly here, a high growth rate yet it appears not to have a surplus.

 

The number of homes currently vacant in France sits at around 3.1 million, reveals new data from French statistical body Insee. This equates to 8.2% of France’s total housing stock (of 37.6 million homes), and has increased by 60% since 1990, when less than 4% of properties were vacant.

 

Developers are hoarding sites

It is claimed that developers are hanging on to land rather than building houses and thereby limiting supply, thus contributing to the ‘housing crisis’. Evidence however, indicates that lack of supply is not the cause of the ‘housing crisis, with more dwellings than households. Developers land bank to ensure their own business viability and limit output to match demand. The land banking issue is a bit of a red herring!

 

Building more houses would reduce prices

“Multiple modelling exercises, for the UK and elsewhere, find that a 1% increase in the stock of houses tends to lead to a decline in rents and prices of between 1.5% and 2%, all else equal [*]. This implies that even building 300,000 houses per year in England would only cut house prices by something in the order of 10% over the course of 20 years. This is an order of magnitude smaller than the price rises of recent decades. If we are to create more affordable houses to buy and rent, the solutions lie elsewhere.” [Mulheirn, 2019].

 

There is a large waiting list

Firstly, the term ‘waiting list’ is out of date. The term now used is Home Choice Register.  It records the number of households who for various reasons would like a property.  To some extent it is the public sector equivalent of the number of households seeking to purchase a property.

 

There is a common perception that the Home choice register figures can be treated as the number of new dwellings required.  This is a simplistic approach. The majority of households on the register already live in a property, what they need is a different type of property.  Some may require a change due to health/disability issues; others need a larger home while for some a move to a smaller dwelling is appropriate. Some households will be on the register due to rent or mortgage payment problems or are under threat of eviction. 

 

So different solutions are required to resolve these issues and in the majority of cases the answer is not to build a new property.  Obviously in some cases people are in dire straits and accommodation needs to be found to alleviate these households.

 

Very little land is developed

Those who support extra development in England use data, which they suggest indicates that there is plenty of spare land, which could and should be developed.  A common figure quoted is the land used purely for residential purposes which is about 1.3%. But this excludes all land which has been developed. 

 

Core developed land includes residential, commercial, transport and miscellaneous developed areas.  Auxiliary developed land is that within the built up area such as recreation areas, gardens and other urban uses. All of this land is developed in the sense that it has been altered to a greater or lesser extent.  Together these areas cover 16.8% of the land surface with 83.2% being countryside either farmed, woodland or natural land. 

 

They assume that any undeveloped land is empty, unused and available for development ignoring the fact that the land is already being used either for food production, forestry, natural land, rough grassland and water. The UK already imports about half of its food and water is becoming a scarce commodity.

 

But other factors come in to play -  the impact of the deregulation of housing finance; the dual role of houses as assets and providing a service; increases in earnings, the leisure (2nd homes and holiday lets), sector.

 

Conclusion

 The problem with these myths is that they are asserted without critical assessment. Such assertions are treated as facts and not subjected to proper analysis. This is an indictment of politicians, commentators and the media.   

 

 

Sources

https://www.cornwallecon.com/post/the-housing-crisis-the-real-cause-the-multi-causal-theory

 

https://www.cornwallecon.com/post/france-tant-de-logements-vacants-france-so-many-vacant-dwellings

 

https://www.cornwallecon.com/post/land-banking-a-large-red-herring

 

Mulheirn, 2019 https://blogs.lse.ac.uk/politicsandpolicy/tackling-the-uk-housing-crisis/

 

https://www.cornwallecon.com/post/cornwallis-housing-crisis-not-what-it-seems

 

https://www.cornwallecon.com/post/housing-bringing-it-all-together-why-prices-are-high-and-access-to-housing-is-unequal

 

https://www.cornwallecon.com/post/land-use-in-england-there-is-more-developed-land-than-you-might-think

 

Watling, S, Breach, A, (February 2023),Centre for Cities, The house building crisis, The UK's 4 million missing homes.