Yes, supply is the cause of the housing crisis – and we do need to build more homes in successful cities

How much? Image: Getty.

It was interesting to see the economics commentator Simon Wren-Lewis pick up on a theory pushed recently by Ian Mulheirn of Oxford Economics: that the issue of unaffordable housing in the UK results not from a lack of housing supply, but the availability of cheap credit. While there is undoubtedly some truth in this theory, it doesn’t tell the whole story.

Yes, lower interest rates make borrowing more affordable. And just like most other goods and services, if you lower the price of something, people will be prepared to pay for it. In the housing market, cheaper borrowing means people have got a bit more money to play with, allowing them to bid a bit more for a house, and so pushing up its price (assuming the supply of houses doesn’t increase). This likely explains why house prices have more than doubled in every English and Welsh city in the last 20 years.

Yet if this was the only driver of house price growth, then we’d expect to have seen similar house price growth across the country – but we haven’t. The map below shows changes in house prices across UK cities since 2009, when the Bank of England base rate was cut to the historic low of 0.5 per cent. 

It shows that there is a very clear geography to house price changes – despite a much more uncertain housing market and pretty shocking income growth after the financial crisis, cities in the Greater South East have seen very large increases. However, further north, rises have been much more modest.

Cambridge leads the list of rising house prices, which were 76 per cent higher in 2017 than eight years earlier. Meanwhile Burnley is at the other end of the scale, with an increase of just 2 per cent. In real terms this means that houses in the city are cheaper today than in 2009, despite historically low interest rates. (This data is for whole dwellings. If it was sale price per square metre, the divergences would likely have been even wider.)

Click to expand. Source: HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0.

In theory, this geographical divergence could result from the fact that housing in some cities are seen as a better investment than in others. In London, for example, the prestige of owning in the capital may be a bigger draw, with property there seen as a luxury good. This would mean that we would expect to see lots of empty homes in the city, as investors buy them purely as an asset.

But again the available data does not back this up. The map below shows the share of properties that are empty across the country. There are fewer empty properties (defined as being empty for six months or longer, identified through council tax records) in our least affordable cities. On this measure, there are not swathes of empty houses being used only to store wealth.

Click to expand. Source: Ministry of Housing, Communities & Local Government. Data available for England only.

A further argument put forward by Mulheirn is that the number of new houses being built has outstripped the number of new households formed in recent years.

But once more, the geography of these patterns is very important. In 2001 (the earliest data available), there was an average of 2.37 people living in a property in London, compared to an English average of 2.33. Fast forwarding to 2016 shows that, while the English average remained at 2.33, it had risen to 2.51 in the capital.

If more people are living in a single dwelling – for example through flat sharing – this again points to a shortage of houses in particular parts of the country.


Even if the number of people in per dwelling in London was to fall to the British average, an extra 360,000 homes would be needed in the capital. And that’s before any considerations of how high prices in the capital may have deterred people from elsewhere moving there.

All these factors point to the fact that there is no single national housing market – instead we have a series of separate housing markets in different places across the country. This makes comparisons of national house prices with national supply and almost meaningless: building more homes in Burnley, the most affordable city, does nothing for Bristol, one of the least affordable. Digging beneath the national level shows that housing markets across the country face very different challenges.

The greatest economic challenge facing our most successful cities such as Reading and London is unaffordable housing. Future interest rate rises may slow the pace of increase of house prices seen in these cities recent years. But they don’t address the underlying challenge of an undersupply of housing in them.

In any market, increases in demand without any increases in supply mean that prices increase. The same applies to housing. If we want our most successful cities to continue to prosper, then we need to build more homes in and around them.

Note: we use house prices here as data on rents, which removes the asset value wrapped up in house prices, is not availabe at a city level. The data that is available at a regional level shows a consistent story to house price data shown in this blog.

Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.

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The Tory manifesto promises to both increase AND decrease the rate of housebuilding

Housing secretary Robert Jenrick. Image: Getty.

In his 2014 Mansion House speech, the then-chancellor George Osborne expressed with uncharacteristic honesty the motives at the heart of how the Conservatives see British housing politics: “The British people want our homes to go up in value, but also remain affordable; and we want more homes built, just not next to us.”

Five years later these contradictions remain unreconciled and present in their manifesto, which contains two different and contradictory – but clearly extensively targeted and focus-grouped – sets of policies.

The Conservatives have two housing targets. The first is to make significant progress to hitting “our target of 300,000 houses built a year by the mid-2020s”. The second is their aim to build “at least a million new homes” during the next parliament, which implies a target of 200,000 homes a year. This is not only 100,000 lower than their initial target but also lower than the current rate of housebuilding: 213,660 new homes a year. They have therefore implied at separate points in the same manifesto that they intend to simultaneously increase and decrease the rate of housebuilding.  

There are similar conflicts in their approach to planning. They intend to make the “planning system simpler” while simultaneously aiming to introduce community-led design standards for development and planning obligations to provide infrastructure for the local community.

None of this is unsurprising, The Tories don’t seem to know if they want to build more houses or not – so of course they don’t know whether they wish to make it easier or harder to do so.  

Politicians like obfuscation on housing policy to placate NIMBY voters. Take for example prospective Conservative MP and ‘environmentalist’ Zac Goldsmith’s crusade to save treasured local car parks. The manifesto can equally be accused of pandering to NIMBY instincts, protecting their shire voters from all housing, including ones they might actually need or want, by promising to protect the greenbelt.  

Instead, Conservatives intend to foist development on Labour-leaning inner-city communities and prioritising brownfield development and “urban regeneration”. This requires massive, infeasible increases in proposed density on brownfield sites – and research by Shelter has shown there are simply not enough brownfield sites in cities like London. Consequently, it is not clear how such a policy can co-exist with giving these inner-city communities rights on local design. Perhaps they intend to square that circle through wholesale adoption of YIMBY proposals to let residents on each street opt to pick a design code and the right to turn their two-storey semi-detached suburban houses into a more walkable, prettier street of five-storey terraces or mansion blocks. If so, they have not spelt that out. 

Many complain of NIMBYism at a local level and its toxic effects on housing affordability. But NIMBYism at the national level – central government desire to restrict housebuilding to make house prices rise – is the unspoken elephant in the room. After all, 63 per cent of UK voters are homeowners and price rises caused by a housing shortage are hardly unpopular with them. 


There is anecdotal evidence that protecting or inflating the value of homeowners’ assets is central to Conservative strategy. When George Osborne was criticised for the inflation his help to buy policy caused within the housing market, he allegedly told the Cabinet: “Hopefully we will get a little housing boom, and everyone will be happy as property values go up”. More recently Luke Barratt of Inside Housing noted that most Conservatives he spoke to at the 2018 party conference were scared “they’d be punished by their traditional voters if the values of their homes were to fall”. He was told by a Conservative activist at the conference that, “If you build too many houses, you get a Labour government”.

But the senior figures in the Conservative Party are painfully aware that the continuing housing shortage presents major long-term problems for the Party. As the manifesto itself acknowledges: “For the UK to unleash its potential, young people need the security of knowing that homeownership is within their reach.” Perpetual increases in house prices are incompatible with this goal. The problem has greatly contributed to the Conservatives’ severe unpopularity with a younger generation priced out of decent accommodation. 

Equally, there is increasing evidence that ‘gains’ from rising house prices are disproportionately concentrated in the south of England.  The differences in housing costs between regions greatly reduce labour mobility, suppressing wage growth in the north and midlands, which in turn leads to greater regional inequality. The policy of coddling southern homeowners at the expense of the economic well-being of other regions is a major long-term stumbling block to Conservative desires to make inroads into the ‘red wall’ of Leave-voting labour seats outside the south.

Before dealing with the issue of where housing should go, you must decide whether you want to build enough housing to reduce the housing crisis. On this issue, the Conservative response is, “Perhaps”. In contrast, even though they may not know where to put the necessary housing, the Labour Party at least has a desire in the abstract to deal with the crisis, even if the will to fix it, in reality, remains to be seen. 

Ultimately the Conservative Party seems to want to pay lip service to the housing crisis without stopping the ever-upward march of prices, underpinned by a needless shortage. Osborne’s dilemma – that the will of much of his party’s voter base clashes with the need to provide adequate housing – remains at the heart of Conservative housing policy. The Conservatives continue to hesitate, which is of little comfort to those who suffer because of a needless and immoral housing shortage.

Sam Watling is the director of Brighton Yimby, a group which aims to solve Brighton’s housing crisis while maintaining the character of the Sussex countryside.