The shortage of housing in England is set to become more acute due to the decision to leave the European Union with current levels 30% below those recorded before the economic downturn in 2008.
Indeed, recommendations put forward by the Barker Review of housing supply in 2004 that 270,000 new homes should be built every year have never been met, according to a new report from the Yorkshire Building Society.
It means that the country has missed its house building targets by a 1,199,180 since 2004. And despite the government pledging in 2015 to build a million homes by 2020 only 142,890 were built in 2015 as a whole, 29% less than the 200,000 homes which would need to be built per year to reach the one million target by 2020.
The Barker Review highlighted that England alone would need to increase its level of house building by 145,000 in order to reduce annual house price inflation to 1.1%, regarded as a more controlled level of growth. This figure was based on there being 125,000 completions in 2002/2003, meaning that the recommended number of homes needed per year to reduce house price growth to 1.1% was 270,000.
Given that this recommended level of house building has never been reached in the years since and that the recommendations in the Review only relate to England alone, the number of properties needed in the UK each year to reduce house price inflation to 1.1% is now likely to be significantly higher than the 270,000 figure, the report points out.
The figures therefore show that the government’s target of building 200,000 homes per year is at least 70,000 properties a year short of what the country needs.
The UK came closest to the 270,000 figure in the years leading up to the 2007 financial crisis. In the years between the publication of the Barker Review in 2004 and the advent of the financial crisis in 2007, an average of 213,080 homes were built each year.
By comparison, the average number of homes built in the eight years since the financial crisis is 30% below the pre-crisis average, at 148,563 properties.
“The Brexit decision and the uncertainty it creates around the prospects for private sector house builders, not to mention the country’s economic outlook, is likely to heighten the housing crisis,” said Andrew McPhillips, chief economist at Yorkshire Building Society.
“Addressing the shortage of homes must remain high on the Government’s agenda regardless of the work required following the EU vote. We need a clear strategy to deliver the 1.2 million additional homes and options like giving local councils fuller control of existing housing funding, as well as freedom to develop surplus public land, should form a key part of that,” he explained.
“The longer we leave the supply crisis to worsen, the more difficult it will be to resolve. The UK has failed to build the number of homes needed to meet demand year after year, which has consequently inflated prices and made it even more difficult for those looking to buy. House building has remained stagnant ever since the financial crisis, and this lack of activity illustrates that the current system needs a serious overhaul if the country is to build enough homes,” he pointed out.
“Lack of housing supply has caused prices to rise well beyond wage growth, which has increased competition for properties and priced many people out of the market. This issue particularly affects first time buyers who do not have the ability to offset the rising cost of buying with the increase in the value of their own property. Those who already own a property also face similar obstacles due to the costs involved, as well as being faced with limited choice in the properties available to buy,” he added.