Here’s why counting houses is hard

We literally have no idea how many houses could be in there. Image: Getty.

We may be getting better at building more houses but unfortunately we’re not very good at counting them.

In August, the housing minister was citing the latest DCLG New Build statistics as proof that the country is building again. Completions across England had apparently reached 153,000 in the year to June 2017“the highest level since 2008”. On this basis, the minister may be pleasantly surprised and slightly confused when he reads the DCLG’s Net Supply release in November and finds out that housebuilding completions had already reached 155,000 in 2014-15, and are actually much higher.

The housing minister can perhaps be forgiven some excitement over the first release of housebuilding statistics during his tenure. Based on the average tenure of previous housing ministers, he’s probably only got another three or four to look forward to. However, despite some allowance for over-excitement, it is irresponsible for the housing minister to be quoting the New Build statistics as absolute measures of housebuilding as they under-count the number of new homes actually being built.

It is particularly irresponsible because DCLG are well aware that there are issues with the New Build statistics. In the introduction to their New Build statistical release they suggest the New Build figures should only be “regarded as a leading indicator of overall housing supply”, and instead the Net Supply release “is the primary and most comprehensive measure of housing supply”.

The scale of the under-count is apparent when comparing the New Build data to the more comprehensive Net Supply release. While the Net Supply release includes conversions, changes of use, and demolitions to calculate the net change in dwellings, it also includes a more comprehensive measure of housebuilding.

The latest available Net Supply data for 2015-16 recorded 164,000 housebuilding completions across England compared to only 140,000 completions recorded in the New Build data. That suggests the New Build release is currently missing around 15 per cent of the housebuilding market.

Beyond the widespread confusion created by the publication of different housebuilding numbers, this issue has important consequences for policy makers. Our failure to accurately measure housebuilding and our limited understanding of who is doing the building make it very difficult to accurately assess the success or failure of existing policies and identify new ones that could increase new supply.

The exact reasons for the under-count are not confirmed but it appears to be linked to the falling market share of the largest provider of warranties on new homes. The National Home Building Council (NHBC) provides a substantial share of the data used to create the New Build statistics, and it’s been widely assumed that they have a market share of around 80 per cent. Based on an assumed market share, the NHBC data is grossed up to provide a measure for the whole market alongside other sources of building control inspection data.

However, recent years have seen a broader range of groups delivering new homes. Volume housebuilders still deliver the majority of new homes but there has been an increase in activity by SME housebuilders, high-density luxury developers, build-to-rent investors, and housing associations. For some of the firms and organisations in these groups, an NHBC warranty may be too expensive or not attractive compared to the alternatives. NHBC’s market share has probably fallen over this period.

A fall in NHBC’s market share is apparently confirmed by the request for a review of its market undertakings from the Competition & Markets Authority (CMA). Although most of the market share data published by the NHBC and the CMA in the review is confidential, there is an interesting finding in the CMA’s provisional decision (paragraph 4.32). Using new home data from nine warranty providers including NHBC, the CMA estimated the NHBC market share at around 70 per cent.

If, instead of grossing up the NHBC data by 80 per cent market share, we use 70 per cent then we would expect the DCLG New Supply data to be around 14 per cent higher (0.8/0.7). That difference would account for nearly all of the shortfall in the New Build completions when compared to the Net Supply housebuilding data. While there may be other factors causing the under-count, it would appear that this market share issue is the most significant factor.


It would be great if we had an accurate and regularly updated measure of housebuilding, but it turns out that counting houses is actually quite difficult. The Net Supply data is far from perfect, and it’s only released once a year with a substantial delay but it’s the best we currently have.

Meanwhile, in Ireland they’ve had the opposite problem, with an over-count of new homes. Official completions data uses electricity connections – but it turned out that the actual number of new build completions between 2011 and 2015 was 42 per cent lower than the official figures due to a large number of re-connections.

Until we see a substantial re-working of the DCLG’s New Build statistics, it appears the best option is to assess the full range of available indicators that cover both housebuilding and total supply. However, perhaps the biggest frustration is that DCLG are aware of the issues with the New Build statistics yet we still see quarterly political point scoring based on these flawed data. Given the complexities of the housing market, it is only once we move past this short-term politicking that we have any hope of solving the crisis.

Neal Hudson is an independent housing analyst, who tweets as @resi_analyst. This article originally appeared on his blog.

 
 
 
 

Businesses need less office and retail space than ever. So what does this mean for cities?

Boarded up shops in Quebec City. Image: Getty.

As policymakers develop scenarios for Brexit, researchers speculate about its impact on knowledge-intensive business services. There is some suggestion that higher performing cities and regions will face significant structural changes.

Financial services in particular are expected to face up to £38bn in losses, putting over 65,000 jobs at risk. London is likely to see the back of large finance firms – or at least, sizable components of them – as they seek alternatives for their office functions. Indeed, Goldman Sachs has informed its employees of impending relocation, JP Morgan has purchased office space in Dublin’s docklands, and banks are considering geographical dispersion rather concentration at a specific location.

Depending on the type of business, some high-order service firms will behave differently. After all, depreciation of sterling against the euro can be an opportunity for firms seeking to take advantage of London’s relative affordability and its highly qualified labour. Still, it is difficult to predict how knowledge-intensive sectors will behave in aggregate.

Strategies other than relocation are feasible. Faced with economic uncertainty, knowledge-intensive businesses in the UK may accelerate the current trend of reducing office space, of encouraging employees to work from a variety of locations, and of employing them on short-term contracts or project-based work. Although this type of work arrangement has been steadily rising, it is only now beginning to affect the core workforce.

In Canada – also facing uncertainty as NAFTA is up-ended – companies are digitising work processes and virtualising workspace. The benefits are threefold: shifting to flexible workspaces can reduce real-estate costs; be attractive to millennial workers who balk at sitting in an office all day; and reduces tension between contractual and permanent staff, since the distinction cannot be read off their location in an office. While in Canada these shifts are usually portrayed as positive, a mark of keeping up with the times, the same changes can also reflect a grimmer reality.  

These changes have been made possible by the rise in mobile communication technologies. Whereas physical presence in an office has historically been key to communication, coordination and team monitoring, these ends can now be achieved without real-estate. Of course, offices – now places to meet rather than places to perform the substance of consulting, writing and analysing – remain necessary. But they can be down-sized, with workers performing many tasks at home, in cafés, in co-working spaces or on the move. This shifts the cost of workspace from employer to employee, without affecting the capacity to oversee, access information, communicate and coordinate.

What does this mean for UK cities? The extent to which such structural shifts could be beneficial or detrimental is dependent upon the ability of local governments to manage the situation.


This entails understanding the changes companies are making and thinking through their consequences: it is still assumed, by planners and in many urban bylaws and regulations, that buildings have specific uses, that economic activity occurs in specific neighbourhoods and clusters, and that this can be understood and regulated. But as increasing numbers of workers perform their economic activities across the city and along its transport networks, new concepts are needed to understand how the economy permeates cities, how ubiquitous economic activity can be coordinated with other city functions, such as housing, public space, transport, entertainment, and culture; and, crucially, how it can translate into revenue for local governments, who by-and-large rely on property taxes.

It’s worth noting that changes in the role of real-estate are also endemic in the retail sector, as shopping shifts on-line, and as many physical stores downsize or close. While top flight office and retail space may remain attractive as a symbolic façade, the ensuing surplus of Class B (older, less well located) facilities may kill off town-centres.

On the other hand, it could provide new settings within which artists and creators, evicted from their decaying nineteenth century industrial spaces (now transformed into expensive lofts), can engage in their imaginative and innovative pursuits. Other types of creative and knowledge work can also be encouraged to use this space collectively to counter isolation and precarity as they move from project to project.

Planners and policymakers should take stock of these changes – not merely reacting to them as they arise, but rethinking the assumptions that govern how they believe economic activity interacts with, and shapes, cities. Brexit and other fomenters of economic uncertainty exacerbate these trends, which reduce fixed costs for employers, but which also shift costs and uncertainty on to employees and cities.

But those who manage and study cities need to think through what these changes will mean for urban spaces. As the display, coordination and supervision functions enabled by real-estate – and, by extension, by city neighbourhoods – Increasingly transfer on-line, it’s worth asking: what roles do fixed locations now play in the knowledge economy?

Filipa Pajević is a PhD student at the School of Urban Planning, McGill University, researching the spatial underpinnings of mobile knowledge. She tweets as @filipouris. Richard Shearmur is currently director of the School, and has published extensively on the geography of innovation and on location in the urban economy.