The UK is missing millions of unbuilt homes
Compared to the average European country, Britain today has a backlog of 4.3 million homes that are missing from the national housing market as they were never built. Addressing this backlog is the key to solving the housing crisis.
Solving a challenge of this scale – increasing the size of the UK’s housing stock by 15 per cent – requires policymakers and commentators to understand and resolve the root cause of such a large problem.
Britain’s housing supply issues began in 1947, not 1980
The origins of the crisis lie in one of the two dramatic changes to housing policy in the United Kingdom that occurred just after the Second World War. One was that council housing became much more important, accounting for roughly half of all new homes built in the post-war period. The other was the introduction of a new discretionary planning system in England with the Town and Country Planning Act 1947, which continues to form the basis for planning across the UK in the present day.
These two changes are at the centre of political debate on the housing crisis today, with both put forward as competing explanations of Britain’s severe housing shortage. One explanation is focused on the introduction of Right to Buy and the subsequent decline of council housebuilding in the 1980s. The other explanation emphasises that England’s discretionary planning system reduces the supply of new homes through its case-by-case decision-making process for granting planning permission.
These two explanations both contain an element of truth, but they imply different priorities for policy – encouraging a return to extensive council housebuilding or reforming the planning system – to build the missing 4.3 million homes.
Using newly available data on housing that was collected after the Second World War by the United Nations, it is now possible to explore whether Britain’s housing supply issues began after 1980 with Right to Buy and a subsequent decline of council housebuilding, or whether it began shortly after the Town and Country Planning Act 1947 was introduced.
This report uses this new data and other sources to compare British housebuilding and outcomes to that in Ireland, France, Belgium, the Netherlands, (West) Germany, Austria, Switzerland, Denmark, Sweden, Norway, and Finland from 1955 to 2015. It finds that Britain’s housing shortage began at the beginning of the post-war period, not at its conclusion. Specifically:
- England and Wales saw housebuilding rates drop by a third after the introduction of the Town and Country Planning Act 1947, from 1.9 per cent growth per year between 1856 and 1939 to 1.2 per cent between 1947 and 2019. Private housebuilding fell by more than half over the same period.
- Britain built far fewer homes than most other European countries from 1955-1979, even after adjusting for population growth, initial population, demolitions, and quality. This was because the UK had the lowest average private sector housebuilding rate of any similar European country in the post-war period. Other countries, such as Sweden and the Netherlands, show that Postwar Britain could have built both more council and private housing.
- Britain’s social housebuilding rate fell from 1.1 per cent growth a year in 1968 to 0.6 per cent in 1979. The decline of council housebuilding did contribute to the decline of total housebuilding, but it began a decade before Right to Buy in 1980 and occurred alongside a simultaneous decline in private housebuilding in the 1970s.
- In 1955, the UK had a ratio of dwellings per person that was 5.5 per cent above the European average, but by 1979 it was 1.8 per cent below it, and by 2015 it had fallen further to at least 7.8 per cent below the modern average. Although the UK began the post-war period with some of the best housing outcomes on the continent, since 1955 other European countries including Finland, Switzerland, and West Germany saw their housing outcomes overtake the UK as they built more.
The result of this underperformance is that England needs 442,000 new homes a year to close its housing backlog with the average European country over 25 years, or 654,000 to close it in ten years. England’s current housing target of 300,000 new homes a year will not clear the housing backlog for at least half a century. England’s recent housebuilding levels of 220,000 to 240,000 is the minimum at which housing outcomes remain stable compared to the average European country – any further decrease will see housing outcomes decline.
Planning reform is the key to ending the housing shortage
Solving a problem as big as the British housing crisis requires a big reform. Addressing the problems with the discretionary planning system, fundamentally untouched since 1947, is that big reform.
Specifically, this entails:
- Replacing the discretionary planning system with a new rules-based, flexible zoning system. Increasing the certainty of the planning process and the supply of land for development is essential for any major increase in housebuilding, whether by the private or public sectors. The principle of shifting away from uncertain, case-by-case decision-making to a system where development is lawful so long as it follows the rules should guide all new planning reform proposals.
- Increasing private sector housebuilding. More council and social housing can be a part of the solution, but given the scale of the backlog, significantly increasing the amount of private housebuilding will be crucial. No other European country has successfully maintained a high housebuilding rate either before or after the 1980s without more private housebuilding than we have today.