01/25/2021 | Press release | Distributed by Public on 01/25/2021 03:19
Time and again, we hear policymakers reiterate the need to increase housing delivery to make homes more affordable. Our analysis of housing delivery across England supports this ambition, showing that affordability has tightened most where housebuilding has failed to keep up with population growth. Without building more homes in these areas, we risk them becoming even less affordable or seeing them stagnate as those who are priced out choose to move elsewhere.
The number of homes in England grew 1,819,200 between 2010/11 and 2019/20, an increase of 8.0 per cent. Over that same period, England's population grew by 4,090,600. That means for every new home built, the population rose by 2.25.
That ratio varies across the country, however. In the North East, where population growth has been slower, there were just 1.3 new people for every new home built. In London, where housing delivery has long trailed short of need, the population rose by 3.4 for every new home.
This mismatch of housing supply and need has had drastic consequences for affordability. Rents increased 2.0 per cent per year in England on average over the last decade, according to data from Hometrack. Growth ranged from 2.4 per cent per year in London, where housing delivery was lowest relative to population growth. In the North East, by contrast, housebuilding all but kept pace with population growth and rents grew just 0.7 per cent per year.
The ratio of house prices to earnings, another basic measure of housing affordability, increased from 6.9 in 2010 to 7.8 in 2019 across England. In the North East, where we delivered almost as many homes as people, homes became more affordable. In London, where housing supply falls far short of need, the ratio of house prices to earnings has ballooned.
While falling mortgage rates have contributed to rising house prices, the cost of debt alone cannot explain the wide divergence between regions.
This analysis shows that homes would be more affordable for renters and homeowners alike if we could simply build more of them. If we are to reduce housing costs in the South of England and London where they are least affordable, we need to increase the supply of homes there.
Government is certainly right to encourage more housebuilding in regional cities to help support the 'levelling up' agenda. But doing so without also accelerating delivery in the South and East of England risks those areas becoming less affordable still.