The UK’s chronic housing shortage is one of the biggest challenges the country faces. The Government is aiming to build 300,000 new homes every year to match demand and keep housing costs affordable, but less than 250,000 were built last year, the highest rate in a decade. But contrary to popular belief, there is not one single national housing crisis. In many parts of the country housing is relatively affordable, and supply keeps up with the demand for new homes.

Instead, Britain has many localised housing crises focussed on its most economically successful cities and towns where employment opportunities draw in large numbers of people. These housing crises are caused by how our planning system disconnects the local supply of housing from local demand.

Where has the worst housing shortages?

Cities with the biggest housing shortages are primarily concentrated in the Greater South East of England such as London and Brighton. But some other prosperous cities like Edinburgh, Bristol, and York that have lots of high-paying jobs are also affected.

Many expensive cities, such as Oxford and Brighton, often build far less housing than cities with cheaper housing and lower demand, such as Wakefield and Telford. This is because the supply of houses has little connection to prices and therefore the cities with the most unaffordable housing.

There is huge variation around where in large cities and towns new homes are being built. The vast majority of development happens either in city centres or on the very edges of cities. Meanwhile, half of all suburban neighbourhoods build less than one home each year.

What are the effects of housing shortages?

The scarcity of new homes in Britain’s most economically successful cities has created huge inequalities in housing wealth.

Urban homeowners in the South East made on average £80,000 more in housing equity than those elsewhere in England and Wales from 2013 to 2018.

This wealth inequality exacerbates existing social problems, and may have been one underlying factor in many areas’ strong Leave vote in the 2016 EU referendum.

The housing crisis also creates huge cost for the rest of society. The money spent on housing benefit, the difficulties that the NHS, police, and schools have in staffing roles in expensive cities, and homelessness are all linked to the unaffordability of housing in certain places. Fixing their housing shortages will reduce pressure on the rest of the welfare state.

Why do we have a housing shortage?

The planning systems of the UK cause this shortage of homes by making it difficult to build. They do so in two ways. First, they ban new homes in large parts of the country, especially near cities, with policies like the green belt. Second, the unpredictable, case-by-case design of the planning process also makes it risky to propose building even in places where new homes are not banned.

What is planning reform and why do we need it?

Planning reform is a package of proposed changes that have the aim of increasing certainty for people applying for planning permission to build new homes and commercial buildings.

Government has been pursuing a number of these reforms to the planning system since the Barker Review in 2006. Most recently, the Levelling Up White Paper follows the Planning White Paper from 2020 in identifying problems with affordability and homelessness that are deepest in London and the South East of England and urban areas more broadly.

Planning reform in the Levelling Up White Paper aims to achieve simpler and shorter local plans for England that are easier for local authorities to adopt, a greater role for design codes, and more digital planning to make the process more map-based, all of which (among other changes) will improve the certainty of the planning process.

Centre for Cities has previously set out a proposal for planning reform that would replace the current discretionary planning system with a new flexible zoning system. For more details see the Planning Reform FAQ.

How can we build more homes?

The UK must concentrate homebuilding primarily in economically successful cities where demand is highest. The current planning system will not deliver homes at this scale or in the right places. Only a wholescale reform of housing policy will deliver the development needed.

We propose:

• Increase housing supply where new homes are needed. More homes are built in Wakefield than Oxford. Building in places with fewer jobs won’t fix prosperous cities’ housing crises.
• Planning reform to introduce a new flexible zoning system that would allow builders to build if they follow the rules, while maintaining special protections for National Parks, Conservation Areas etc.
• Zoning of land in walkable distances around train stations in the green belt for suburban living and with protected green space, which would provide 1.8 to 2.1 million homes.
• Increase the use of permitted development rights to cut the red tape that makes it hard to build upward extensions or infill developments.
• Stop subsidising home ownership. Despite Right to Buy, home ownership as a share of private housing has fallen in every city since 1981. The Government should stop subsidising ownership, tax housing wealth increases by abolishing the Capital Gains Tax exemption for primary residences and treat owning and renting equally.

What’s the relationship between planning reform and levelling up?

Planning reform will not directly affect levelling up. Although the largest cities with the greatest potential for levelling up, such as Leeds and Manchester, do have housing pressures, they are not yet as acute as those in London and other parts of the South East. If they do ‘level up’ and become more prosperous, this will change and their need for new homes will increase.

Nevertheless, planning reform will indirectly help advance ‘levelling up’ by increasing disposable incomes everywhere. If average housing costs of the least affordable places fall, then as their local consumption increases, ‘exports’  and production from cities with cheaper housing costs will rise to satisfy this new demand, creating new jobs and increasing wages in places in need of levelling up.