Lime Legal

Striking a balance

Published 18 February 2024

The demand for more homes is increasing. But are we getting the tenure right? Christine Whitehead and Sarah Monk report.

In November Shelter published Homes for the future, which provides the latest evidence on how much additional housing will be required up to 2026. The research estimates overall requirements but concentrates on the need for social rented and affordable housing.

Critics argue that the current economic crisis makes attempts to forecast demand this far into the future pointless. Yet cyclical falls in the market do not affect the underlying structural changes fuelling the growth in demand. If these longer term trends are ignored, greater housing market volatility could follow when the economy improves – as has happened at least twice before.

So why is the requirement for more homes increasing? The estimates start from official household projections, which suggest that by 2026 there will be almost 26 million households in England, compared to 21.5 million in 2016. This is an increase of more than 20 per cent – a growth rate higher than at any time in the past and the result of people living longer, net migration and changes in household composition.

Seven out of 10 of the extra households are expected to be single people, most of whom will be middle aged or elderly. The number of married couple households will continue to fall, while those for cohabiting couples will rapidly increase. Lone parent and multi-adult households are expected to rise roughly in proportion to the overall total.

‘The most appropriate split for additional housing would be 60 per cent market, 12 per cent intermediate and 28 per cent social rented’

To accommodate the additional households would require some 240,000 additional dwellings each year. Some of these can come from the change of use of existing industrial and commercial buildings and from the reorganisation of existing housing stock. But the majority can only come from new building. This figure is roughly in line with the government’s current targets from 2016 – but far above estimates of what is likely to be provided in the next few years.

Tenure patterns

Assessing the most appropriate tenure mix – factors such as demand, supply and affordability – is complex. We start from current tenure patterns, but also take into account projected changes in age and household composition; the extent of demolition and other losses from the stock as well as the potential transfer of dwellings out of the social sector, and estimates of reasonable levels of household expenditure based on incomes, rents and house prices.

On this basis, the most appropriate split for additional housing would probably be 145,000 market homes, around 30,000 intermediate tenure including both low-cost rental and low-cost home ownership and 67,000 social rented each year. This equates to 60 per cent market, 12 per cent intermediate and 28 per cent social rented housing.

Needs must: Regional need and demand for new housing stock, 2016–26 per year

Intermediate sector Social rented sector Total (percentage of total)
North East 3,900 1,000 2,100 7,000 (3%)
North West 16,400 1,500 9,100 27,000 (11%)
Yorkshire and Humber 18,000 2,400 5,600 26,000 (11%)
East Midlands 15,000 2,700 5,300 23,000 (10%)
West Midlands 11,300 2,900 6,800 21,000 (8%)
East of England 22,400 3,600 6,000 32,000 (13%)
London 16,300 6,700 13,000 36,000 (15%)
South East 20,300 5,800 12,900 39,000 (16%)
South West 21,400 3,400 6,200 31,000 (13%)
England 145,000 30,000 67,000 242,000 (100%)

The identified market provision is close to the highest levels of new house building that England has achieved since the 1980s, so this is probably the limit even when the current recession has fully worked itself through. This suggests that at least some government subsidy would be necessary on around 97,000 a year – a very large commitment.

Greatest needs

The areas with greatest projected demand are concentrated in the South and East – with 57 per cent of the total in the four southern regions. There are however significant increases in requirements in most other regions. In particular, very different proportions of social rented and intermediate housing are necessary – with the requirement for subsidised housing particularly high in London and to a lesser extent the South East. This further increases the cost to government of ensuring that requirements are met (see table below left).

Many households are currently badly housed – and this means that even more investment will be needed. The backlog of unmet need is made up of those who require separate accommodation and those who are in inappropriate private accommodation.

Estimates based on the best available data from government and other surveys suggest that at a minimum 150,000 additional units would be required to house those who currently have no self-contained accommodation, but the backlog of those requiring social housing to achieve adequate standards is much higher at 500,000 (see above table for the breakdown). Not surprisingly more than 60 per cent of the backlog of social housing is located in the South – with more than a third of that in London.

Impossible targets?

The government is committed to providing two million additional dwellings by 2016 and three million by 2020. Were this to prove possible, it would fall short of the identified need even for the projected number of additional households by about half a million units by 2020.

Moreover, achieving these targets looks more and more unlikely as the recession bites into housing development. At present, the emphasis is on trying to maintain a new building pipeline, which could provide the springboard for expansion once the housing market starts to revive.

To get close to government targets would not only require the construction industry to recover quickly – which looks increasingly unlikely – but to expand capacity well above what existed before the downturn. Even if that were possible it would also require a long-term government commitment to subsidise nearly 100,000 dwellings a year, as compared to the 70,000 in current government plans. This looks like an impossible dream.

Most of the pressures for additional housing will not go away. Hopefully, the recession will not be so deep and long-lasting as to reduce life expectations and there seems little reason to expect the underlying trends in household structure will herald the return of larger households.

Join the queue: Estimate of the backlog of unmet need for social rented housing

Households and potential households without self-contained accommodation
Homeless households in bed and breakfasts, hostels and refuges 13,000
‘Concealed’ families wanting separate accommodation 54,000
Private sector tenants in non-self-contained accommodation 65,000
Single people in hostels 20,000
Subtotal 152,000
Owner-occupiers and private tenants in need of social rented housing
Private sector tenants in overcrowded accommodation 130,000
Owner-occupiers and private sector tenants with disabilities 120,000
Other owner-occupiers and private sector tenants on social housing waiting lists 85,000
Households accepted as homeless and accommodated in private sector temporary accommodation 59,000
Less: overlaps 41,000
Total 505,000

Net migration will undoubtedly fall in the short term, easing pressure on the market – but if and when the economy improves the underlying trends will re-emerge. Thus the main reasons why the numbers of households may not materialise in the longer term are lower incomes and increasing housing costs – both of which would mean lower standards of living and worsening housing conditions. These may not be avoidable in the short term, but it is hardly something we wish to plan for in the decades to come.

Christine Whitehead and Sarah Monk are director and deputy director of the Centre for Housing Planning Research, University of Cambridge. Shelter’s research report Homes for the future can be downloaded here.