02English and Welsh housing supply since the Second World War
Hypothesis 1: English and Welsh housebuilding declined after 1947, not 1980
Using data on housing supply in England and Wales that extends back to the early Victorian period, the beginning of Britain’s housing supply problems can be dated.
The total housebuilding rate of England and Wales fell after 1947, as although public housing became a much greater share of the supply of new homes in the post-war period, private housebuilding fell more than public housebuilding increased. This was followed by a second decline in both social and private housebuilding in the 1970s, followed by a third and more gradual decline in housebuilding after 1980 to their current low levels.
Housebuilding rates permanently fell after the Town and Country Planning Act 1947
Gross housebuilding rates, separated into building by private and public tenure, are shown in Figure 1 and indicate that housebuilding in England and Wales fell from an average of 1.9 per cent growth per year between 1856 and 1939 to 1.2 per cent between 1947 and 2019 – a fall of over a third.
Even though public sector housebuilding increased from 0.2 per cent a year before 1939 to 0.5 per cent after 1947, annual private housebuilding fell by more than half, from an average of 1.7 per cent before 1939 to 0.7 per cent after 1947. English and Welsh housebuilding never recovered to its pre-war levels.
Box 2 (after the chart in Figure 1) explains and justifies this report’s use of housebuilding rates instead of total changes in dwelling stock to make comparisons between periods and countries.
Figure 1: The English and Welsh housebuilding rate decreased after 1947 and before 1980
There are three further conclusions to draw from the decline of housebuilding set out in Figure 1.
First, the decline in housebuilding happens immediately after 1947. England and Wales reached its highest ever period of housebuilding in the interwar era between 1920 and 1939 with an average annual growth of 2.3 per cent, compared to an average annual rate of 1.8 per cent between 1947 and 1979. No peak year for housebuilding after 1947 exceeds the four peaks in the interwar or Victorian periods.
Second, as the chart displays England and Wales’s gross housebuilding rate, it overstates the net number of new dwellings added in the post-war period between 1947 and 1979 due to the high rate of demolitions in the 1960s.6 For example, the first post-war peak gross housebuilding rate of 2.3 per cent in 1954 translated into a 2.2 per cent net growth rate in the housing stock, but a decade later, the second peak building rate of 2.2 per cent in 1968 translated into net housing stock growth of 1.8 per cent. In contrast, as the interwar gross housebuilding rate was higher than in the post-war period, the net increase in the housing stock was higher – e.g. the peak gross housebuilding rate of 3.3 per cent in 1936 saw a 3 per cent net increase in stock.
Third, the English and Welsh housebuilding rate declines further during the 1970s. Annual housebuilding rates in England and Wales fell from 2.3 per cent in 1968 to 1.2 per cent in 1979, before 1980 and Right to Buy. The decline affects not just public (mostly council) housebuilding but also private housebuilding, which fell from 1.2 per cent to 0.7 per cent over the same time frame.
The overarching result is that the post-war period saw three distinct declines in the housebuilding rate of England and Wales. The first was immediately at the onset of the post-war period, and the second gradually over the course of the 1970s. A third, smaller decrease in housebuilding rates occurred after 1980, from where they have remained low until the present.
Box 2: What are housebuilding rates and why does this report use them?
Housing policy often discusses the total number of homes that are built. Although suitable for day-to-day debates in the present, in historical analysis this approach presents problems. A constant number of houses being built over many years implies a decreasing supply of new homes relative to the total stock of homes available that is increasing year-on-year, and the growing demand for housing from a rising average income and population.
As an example, the current Government’s aspiration of building 300,000 homes a year in England would result in a significantly lower housebuilding rate (1.3 per cent) today than the pledge at the 1950 Conservative Party Conference to build 300,000 homes a year (2.4 per cent) when the UK had far fewer houses, a target which was exceeded by Harold Macmillan during his tenure as Housing Minister.
To solve this, an annual rate of housebuilding can be calculated by dividing the overall amount of housing built that year by the total size of the housing stock in that year. The average mean of the annual housebuilding rate creates a consistent measure that allows us to see relative differences in housebuilding between separate periods and separate countries.
These decreases to supply occurred even though demand for housing was high. The post-war ‘baby boom’, the need to recover from war damage, historically high income growth, and the widespread adoption of the car that allowed households to affordably consume more land meant that the post-war period saw high demand for more and better housing.7
Britain’s housing supply problems began after the Second World War
In conclusion, the first hypothesis – that England’s supply of new homes declined from the beginning of the post-war period, rather than the 1980s and the introduction of Right to Buy – is true. There were already problems in the British housebuilding sector long before the housing crisis is conventionally considered to begin.
There are limits to what can be learned about British housing policy and outcomes by only considering British data. International evidence is required to compare British outcomes since 1947 to its peers and learn whether Britain’s approach and experience of housing was typical or unusually poor for its time, and to test the second hypothesis.