Two Reports have been published in the first week of November which bring into sharp focus the issues surrounding housing need. The TCPA’s Paper, ‘New estimates of housing requirements in England 2012-2037’, and the Official for National Statistics (ONS) ‘Families and Households, 2015’ Report, both emphasise a continual worsening of household formation brought about by a lack of housing supply.
The TCPA report findings provide a helpful summary of the 2012-based household projections and a sobering analysis of the significant extent that housing supply has fallen short of the Government’s official household growth projections. For instance they conclude that only 54% of the homes identified by the 2012-based household projections were built out across England as a whole and identifies that the shortfall in delivery over only a four year period (2011 – 2015) amounts to 400,000 homes. However given that these projections only represent what is termed the ‘starting point’ for fully objectively assessed needs, in all likelihood the shortfalls quoted will be far higher if compared against the full objectively assessed housing need of an area. Further adjustment may well be required to properly address net migration, market signals and job growth.
This difference in shortfall is further exacerbated by the fact that net international migration is far higher in reality than what is presumed in the 2012-based projections- a point which we have been flagging for some time and one that has now been confirmed in the latest 2014-based national population projections.
It’s also worth highlighting that this under delivery has occurred in every region and this is not an issue restricted to London and the South East as most will presume. This remains a national issue and shortfalls occur across all Regions - the North West, West Midlands, East and South East – all delivering less than 60% of housing compared to Government projections.
The TCPA Report also provides some insight into the reasons why household formation may be suppressed. As the report summarises, this is not a new problem, it has existed for some time, but that should not in any way undermine the need to address the issue.
Whilst some commentators might argue that the decline in household formation in younger age groups is a result of structural change (i.e. a want or desire to live with parents or in shared households, as opposed to an absolute need for reasons of affordability), the clear aim of Government is to afford everyone the opportunity to establish their own home.
In my opinion the industry must therefore plan on the basis that:
- Issues of backlog are properly dealt with
- The decline in the household formation rates of younger age groups should be corrected through an upward adjustment
- Further upward adjustment may also be required to address future local economic growth factors, as well as addressing localised market signals issues.
Meanwhile, the ONS Report provides further evidence of the significance of the issue, confirming that 40% of young adults live with their parents – some 6.6 million people, representing a 14% increase when compared to equivalent figures in 1996.
To do nothing will inevitably lead to a worsening of the current situation and a spiralling in the number of young adults forced into a position where they delay setting up a home of their own.
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Population Projections, Research, Household Projections, Development Economics