Fact 1: Building Lots More Houses 

                                will not fix it. 

JR-C explains why.

Here’s what he says

“In UK policy circles, explanations of the affordability crisis have focused more

on supply-side explanations. Multiple reviews of the UK’s housing market have

concluded the reason for high prices is due to inadequate provision of new

homes relative to rising demand driven by rising incomes, increasing household

formation (people living in smaller households) and rising immigration. Government

interventions have also focused on supply-side reforms.

However, since the 1980s, successive governments have been unable to

materially increase the rate of housebuilding, which has averaged around 150,000

new units per year.2 The UK housing development sector is dominated by private

sector developers, who may lack incentives to build out at a rate that would reduce

house prices in local areas where they operate.3–5

Moreover, evidence suggests that expansion of the housing stock may have a

limited effect on housing affordability in aggregate. Estimates of the sensitivity

of UK house prices to increases in housing stock consistently show that

a

1% increase in housing stock delivers a 1.5–2% reduction in house prices.6,7

[that’s quite impressive? Elastic demand. A bit cheaper and we’d want(buy) lots more.]

 

Taking into account the growing surplus of housing stock relative to number

of households, this implies that, all else equal, expanding the housing stock by

20% (approximately 5 million homes) over the next 20 years roughly in line with

government projections might bring down prices by around 10%.7 This contrasts

with a 306% increase in mean nominal English house prices since January 2000

(from £75,219 to £305,370).8

 

[That’s what he says: Actual prices rose 306% over the last 20 years.

So even if we could have built 400,000 homes p.a., it only would have reduced prices by 10%!

TEN per cent drop on a total rise of THREE HUNDRED AND SIX per cent! ]

  

Furthermore, new build makes up just 1% of the total of new housing supply that

comes onto the market each year, with the vast majority coming from existing

properties being sold or rented out.9 To achieve more material increases in

affordability in the short to medium term, policy makers also need to consider how

to reduce types of demand – specifically investment demand – that might free up

existing stock for those in housing need, as well as ensuring the most efficient use

of any new supply.”

 

[The clowns who advocate ‘Build More’ as the fix for the Housing Price Crisis haven’t a clue.]

 

Based on

Ryan-Collins, R. (2024). The demand for housing as an investment: Drivers, outcomes and policy interventions to enhance housing affordability in the UK. UCL Institute for Innovation and Public Purpose, Policy Report 2024/13.                                                                  Available at: https://www.ucl.ac.uk/bartlett/public-purpose/policyreport-2024-13. Filed at HML/HousingMarket/Invest