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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What Citymapper’s business plan tells us about the future of Smart Cities

Some buses. Image: David Howard/Wikimedia Commons.

In late September, transport planning app Citymapper announced that it had accumulated £22m in losses, nearly doubling its total loss since the start of 2019. 

Like Uber and Lyft, Citymapper survives on investment funding rounds, hoping to stay around long enough to secure a monopoly. Since the start of 2019, the firm’s main tool for establishing that monopoly has been the “Citymapper Pass”, an attempt to undercut Transport for London’s Oyster Card. 

The Pass was teased early in the year and then rolled out in the spring, promising unlimited travel in zones 1-2 for £31 a week – cheaper than the TfL rate of £35.10. In effect, that means Citymapper itself is paying the difference for users to ride in zones 1-2. The firm is basically subsidising its customers’ travel on TfL in the hopes of getting people hooked on its app. 

So what's the company’s gameplan? After a painful, two-year long attempt at a joint minibus and taxi service – known variously as Smartbus, SmartRide, and Ride – Citymapper killed off its plans at a bus fleet in July. Instead of brick and mortar, it’s taken a gamble on their mobile mapping service with Pass. It operates as a subscription-based prepaid mobile wallet, which is used in the app (or as a contactless card) and operates as a financial service through MasterCard. Crucially, the service offers fully integrated, unlimited travel, which gives the company vital information about how people are actually moving and travelling in the city.

“What Citymapper is doing is offering a door-to-door view of commuter journeys,” says King’s College London lecturer Jonathan Reades, who researches smart cities and the Oyster card. 

TfL can only glean so much data from your taps in and out, a fact which has been frustrating for smart city researchers studying transit data, as well as companies trying to make use of that data. “Neither Uber nor TfL know what you do once you leave their system. But Citymapper does, because it’s not tied to any one system and – because of geolocation and your search – it knows your real origin and destination.” 

In other words, linking ticketing directly with a mapping service means the company can get data not only about where riders hop on and off the tube, but also how they're planning their route, whether they follow that plan, and what their final destination is. The app is paying to discount users’ fares in order to gain more data.

Door-to-door destinations gives a lot more detailed information about a rider’s profile as well: “Citymapper can see that you’re also looking at high-profile restaurant as destinations, live in an address on a swanky street in Hammersmith, and regularly travel to the City.” Citymapper can gain insights into what kind of people are travelling, where they hang out, and how they cluster in transit systems. 

And on top of finding out data about how users move in a city, Citymapper is also gaining financial data about users through ticketing, which reflects a wider trend of tech companies entering into the financial services market – like Apple’s recent foray into the credit card business with Apple Card. Citymapper is willing to take a massive hit because the data related to how people actually travel, and how they spend their money, can do a lot more for them than help the company run a minibus service: by financialising its mapping service, it’s getting actual ticketing data that Google Maps doesn’t have, while simultaneously helping to build a routing platform that users never really have to leave


The integrated transit app, complete with ticket data, lets Citymapper get a sense of flows and transit corridors. As the Guardian points out, this gives Citymapper a lot of leverage to negotiate with smaller transit providers – scooter services, for example – who want to partner with it down the line. 

“You can start to look at ‘up-sell’ and ‘cross-sell’ opportunities,” explain Reades. “If they see that a particular journey or modal mix is attractive then they are in a position to act on that with their various mobility offerings or to sell that knowledge to others. 

“They might sell locational insights to retailers or network operators,” he goes on. “If you put a scooter bay here then we think that will be well-used since our data indicates X; or if you put a store here then you’ll be capturing more of that desirable scooter demographic.” With the rise of electric rideables, Citymapper can position itself as a platform operator that holds the key to user data – acting a lot like TfL, but for startup scooter companies and car-sharing companies.

The app’s origins tell us a lot about the direction of its monetisation strategy. Originally conceived as “Busmapper”, the app used publicly available transit data as the base for its own datasets, privileging transit data over Google Maps’ focus on walking and driving.  From there it was able to hone in on user data and extract that information to build a more efficient picture of the transit system. By collecting more data, it has better grounds for selling that for urban planning purposes, whether to government or elsewhere.

This kind of data-centred planning is what makes smart cities possible. It’s only become appealing to civic governments, Reades explains, since civic government has become more constrained by funding. “The reason its gaining traction with policy-makers is because the constraints of austerity mean that they’re trying to do more with less. They use data to measure more efficient services.”  

The question now is whether Citymapper’s plan to lure riders away from the Oyster card will be successful in the long term. Consolidated routing and ticketing data is likely only the first step. It may be too early to tell how it will affect public agencies like TfL – but right now Citymapper is establishing itself as a ticketing service - gaining valuable urban data, financialising its app, and running up those losses in the process.

When approached for comment, Citymapper claimed that Pass is not losing money but that it is a “growth startup which is developing its revenue streams”. The company stated that they have never sold data, but “regularly engage with transport authorities around the world to help improve open data and their systems”

Josh Gabert-Doyon tweets as @JoshGD.