New book: Home Truths: UK's chronic housing shortage - how it happened, why it matters and how to solve it

Tony Gosling tony at cultureshop.org.uk
Thu Nov 28 14:25:40 GMT 2019 


Home truths – Part I: The UK housing crisis in six graphs
New book: Home Truths: The UK's chronic housing 
shortage - how it happened, why it matters and 
the way to solve 
it 
https://www.amazon.co.uk/Home-Truths-chronic-shortage-happened/dp/1785904698


Part one of “Home Truths”, Liam Halligan's 
in-depth investigation of the UK housing 
crisis.  “The housing shortage isn’t a looming 
crisis, a distant threat that will become a problem if


https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/

BY <https://unherd.com/author/liam-halligan/>LIAM 
HALLIGAN  <http://twitter.com/LiamHalligan>LiamHalligan

Liam Halligan writes his multiple-award winning 
weekly “Economics Agenda” for The Sunday 
Telegraph. A panellist on CNN Talk, he has 
previously worked for The Economist, Financial Times and Channel 4 News.
<https://unherd.com/theme/capitalism/>Capitalism 
<https://unherd.com/tag/home-truths/>Home Truths 
<https://unherd.com/tag/housing/>Housing

Cover home truths


Part one of 
“<https://unherd.com/tag/home-truths/>Home 
Truths”, Liam Halligan’s in-depth investigation of the UK housing crisis.

“The housing shortage isn’t a looming crisis, a 
distant threat that will become a problem if we 
fail to act. We’re already living in 
it”.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-1>1

Housing is increasingly unaffordable in many 
parts of the UK, with prices and rents rising 
much faster than earnings because far too few 
homes have been built. Since the 2008 financial 
crisis, the homes shortage has become more acute 
– sending affordability to the top of the political agenda.

The rate of house building has long lagged the 
UK’s natural population growth and net 
immigration. Since the mid-1980s, an estimated 
2.3 million too few homes have been 
built.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-2>2 
The seminal Barker Review of 2004 presented 
“considerable evidence” of a homes shortage, 
suggesting 245,000 new homes were needed each 
year to match household 
formation.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-3>3 
For decades, building has fallen way short – as shown in Graph 1.
[]
Source: ONS

 From 1979 to 1990, under Thatcher, 220,404 new 
homes on average were constructed each year by 
private builders, housing associations and local 
authorities.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-4>4 
That fell to 194,310 under Major, as fewer 
council houses were built, before rising 
gradually under Blair, then plummeting under 
Brown – as small and medium sized builders (SMEs) 
were wiped out during the credit crunch. During 
the Cameron years, 2010 to 2016, an average of 
only 141,132 homes were built annually.

New household formation is now estimated at 
around 270,000 per year, 25,000 higher than when 
the Barker report was published. Yet just 178,450 
homes were completed in 2016-17 – still 50% 
adrift of annual demand, to say nothing of the 
shortfall generated over recent 
decades.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-5>5
[]
Source: ONS and NIESR

 From World War Two until the mid-1990s, rapidly 
rising wages and steady building made house 
prices manageable for most aspiring homeowners. 
Between 1997 and 2016, though, amid slow building 
and much faster population growth, the average 
house price rose 267%, while average incomes grew 
just 68% – as shown in Graph 2.

Since 1997, while house prices have soared, 
equities have been broadly flat (volatile, but 
ending up roughly where they were). This has 
attracted speculative investment flows to 
housing, bidding prices up further. Similarly, 
since 2009, ultra-low interest rates related to 
quantitative easing – resulting in negative real 
returns on government bonds – have pushed yet 
more speculative money into property.
[]
Source: DHCLG

The UK-wide median house price is now 7.7 times 
median annual earnings – an all-time high and up 
from 3.5 times in 1998. But the extent of the 
homes shortage varies across the country. 
Official regional data on housing demand and 
supply in Graph 3 suggests a cumulative building 
shortfall since 2000 of 343,000 homes in London 
and 96,000 across the South East outside the 
capital.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-6>6

This “under-build” has also been significant 
across the Midlands, the East and the North West 
– other areas where prices have markedly risen. 
In Northern Ireland, the North East and Scotland, 
in contrast, a small excess of supply has been 
built, helping explain weaker price growth in 
those parts of the 
UK.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-7>7

Where the demand-supply mismatch is greatest – 
London and the South East – house prices are 12.2 
times and 9.1 times earnings respectively, as 
shown in Graph 4. With banks rarely lending over 
five times salary, a couple who both work full 
time will still struggle to buy, even outside the 
capital. And that’s before childcare costs.
[]
Source: Nationwide and ONS

But crushing affordability multiples now extend 
way beyond the South East – reaching 7.6 times in 
the South West and 6.5 times across the Midlands. 
Across the entire UK, in fact, affordability 
multiples are well beyond the long-term UK average of 3 to 4 times.

After the 2008 collapse, lenders restricted 
mortgage availability. Home loans for first-time 
buyers (FTBs) dropped particularly sharply, from 
around 100,000 to 40,000 per quarter. That number 
has recovered to 85,000, but remains well below 
the 1985-2000 average of 
125,000.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-8>8 
In October 2017, the average income multiple 
granted on a FTB mortgage was 3.6-times – the 
highest on record. But even the UK-wide price 
multiple faced by FTBs was 5.2-times – a significant affordability gap.

With price growth outstripping earnings, low 
savings interest and limited mortgage 
availability, FTBs now find it far harder than 
previous generations to get that fabled “foot on 
the ladder”. Saving a tenth of their gross 
income, FTBs now need ten years on average to 
amass the necessary deposit, compared to just two 
years up until the 
mid-1990s.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-9>9
[]
Source: English Housing Survey

After a century of growth, UK-wide home ownership 
peaked at 70% in 2005 and has since declined to 
63%. This is now lower than in Canada (68%), the 
Netherlands (67%) and the US (65%). But this 
steady fall in owner-occupancy, to levels still 
comparable with similar countries, masks a 
dramatic ownership decline among young adults – as shown in Graph 5.

While over a third of 16-24 year-olds owned their 
home in 1991, it’s now a tenth. The share of 25- 
to 34-year-old owner-occupiers has meanwhile 
collapsed from 67% to just 38% – with well over 
half a generation locked out of the property 
market at this crucial family-forming age. Moving 
into middle age, 78% of 35-44 year-olds were 
homeowners in the early-1990s, falling to 56% 
now. The share of pensioners owning a home, in 
contrast, has soared – from roughly 60% to 80%.

Only 40% of those born in the mid-1980s were 
owner-occupiers by the age of 30. This compares 
with 55% of the 1940s and 1970s cohorts and over 
60% of the 1950s and 1960s 
cohorts.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-10>10 
Today’s young adults have less chance of owning than any post-War generation.

Four out of every ten 30-year olds now live in 
private rented accommodation, compared to one in 
ten during the 1960s. And overall housing costs 
for today’s young adults are higher than any 
generation for a century – with unfortunate 
renters driving that trend, not lucky homeowners.
[]
Source: Institute for Fiscal Studies

When those born in the 1940s were aged 26 to 30, 
they spent 10% of their income on housing costs, 
whether they rented or bought – as shown in Graph 
6. By the time those born in the 1950s were in 
the same age range, their housing costs were 15% 
of income, with high interest rates meaning 
mortgage-holders paid slightly more. The cohort 
born in the 1960s spent 20% of their income on 
housing in their late-twenties, as did those born in the 1970s.

Those born in the 1980s – today’s young adults – 
spend 22% of their incomes on housing, not much 
more than their predecessors. But this average 
figure masks a large and growing discrepancy 
between renters and those who have bought. 
Owner-occupiers aged 26 to 30 now spend 15% of 
their income on housing. If you can get the large 
deposit needed to buy, mortgage service costs are 
relatively 
low.<https://unherd.com/2018/04/home-truths-part-i-uk-housing-crisis-six-graphs/#en-13425-11>11

But young renters are spending almost 30% of 
their income – much more in London and other 
hotspots. And that makes it even harder for them 
to save for a deposit, compounding their disadvantage.

The UK’s long-standing homes shortage, more acute 
in recent years, has seen house prices spiral – 
sparking a near-nationwide affordability crisis. 
Today’s generation of young adults are spending 
more on housing, and are less likely to be 
owner-occupiers, than any cohort since the 1930s. 
Some say home ownership no longer matters. But 
that isn’t the view of “generation rent” – those 
priced-out of the UK’s dysfunctional property market.

The next part of the Home Truths series  – 
‘<https://unherd.com/2018/04/home-truths-part-ii-place/>A 
place of our own‘ – examines the impact of the 
housing crisis, while 
<https://unherd.com/2018/04/home-truths-part-iii-nine-drivers-broken-market/>part 
three diagnoses  the nine crony capitalist 
characteristics that have driven the crisis.

Part four, examining the government’s response to 
the crisis, will be published tomorrow and the 
fifth and final part will present Liam’s manifesto for radical reform.


FOOTNOTES

    * 
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/590464/Fixing_our_broken_housing_market_-_print_ready_version.pdf>Fixing 
Our Broken Housing Market, Ministry for Housing, 
Communities and Local Government (MHCLG), February 2017, Cm 9352.
    *  Professor Paul Cheshire of the London 
School of Economics, quoted by Liam Halligan, 
‘<https://www.spectator.co.uk/2016/11/britains-lack-of-house-building-has-come-home-to-roost/>Home 
to Roost‘ The Spectator, 5 November 2016.
    *  Kate Barker, Review of 
‘<http://webarchive.nationalarchives.gov.uk/20120704150618/http:/www.hm-treasury.gov.uk/d/barker_review_execsum_91.pdf>House 
Supply – Delivering Stability: Securing our 
Future Housing Needs’ HM Treasury, 2004. Since 
Barker, two other “independent reviews” – have 
come to broadly similar conclusions regarding the 
UK’s shortage of homes. See John Callcutt, 
‘<http://webarchive.nationalarchives.gov.uk/20101208170101/http:/www.callcuttreview.co.uk/downloads/callcuttreview_221107.pdf>The 
Callcutt Review of House-building Delivery’, 
Department for Communities and Local Government, 
2007. And Michael Lyons, 
‘<https://www.policyforum.labour.org.uk/uploads/editor/files/The_Lyons_Housing_Review_2.pdf>The 
Lyons Review: Mobilizing across the nation to 
build the homes our children need’, 2014
    *  Housing Associations are private, 
non-profit organizations that provide low-cost 
“social housing” for those in need. They often 
receive public subsidy and some borrow or issue 
bonds, reinvesting any surpluses.
    *  House building; new build dwellings, 
England: 
<https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/692680/House_Building_Release_Dec_Qtr_2017.pdf>December 
Quarter 2017, Ministry for Housing, Communities 
and Local Government. For UK-wide numbers see 
also 
<https://www.gov.uk/government/statistical-data-sets/live-tables-on-house-building>MCHLG 
live table 209
    *  Figures cited in Chris Philp, 
‘<http://www.cps.org.uk/files/reports/original/171212092648-HomesforEveryoneChrisPhilpMP.pdf>Homes 
for everybody’, Centre for Policy Studies, December 2017.
    *  House prices in Northern Ireland are still below their 2007 peak.
    *  See 
<https://www.ukfinance.org.uk/remortgaging-boost-continued-in-october/>data 
from UK Finance, formerly the Council of Mortgage Lenders.
    * 
‘<http://www.resolutionfoundation.org/app/uploads/2017/09/Home-Affront.pdf>Home 
Affront’, Resolution Foundation, September 2017
    * 
‘<https://www.ifs.org.uk/uploads/publications/bns/bn187.pdf>The 
Economic Circumstances of Different Generations: 
The Latest Picture’ Institute for Fiscal Studies, IFS Briefing Note BN187
    *  This calculation includes only the cost of 
mortgage interest payments by homeowners, with 
capital repayment considered a form of saving. 
According to the property consultant Savills, 
renters paid private landlords £54 billion during 
the twelve months to the end of June 2017, more 
than double total mortgage interest paid by 
home-owners, as rising prices pushed more and 
more people into the rental sector. The interest 
paid by owner-occupier borrowers fell by £6.4 
billion to £26.5 billion between 2012 and 2016, 
Savills calculate, while the amount paid to 
landlords rose £14bn over the same five-year 
period. 
‘<https://www.ft.com/content/58bb3090-a53d-11e7-9e4f-7f5e6a7c98a2>Renters 
pay £54bn to private landlords’, Financial Times, 1 October 2017


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Combining analysis with reportage, Home Truths 
draws on extensive interviews with cabinet 
ministers, civil servants, planning officials, 
leading property executives and priced-out homebuyers from across the country.

Informed by deep economic research and political 
access at the highest level, the book is a 
no-holds-barred critique of the UK’s chronic 
housing shortage, concluding with eye-catching 
policy proposals of direct relevance to both 
Parliament and regional and national government.

----------


REVIEWS

“Liam Halligan is a one-off – a card-carrying 
economist, with high-level political access, who 
can explain complex issues in readable, vivid 
prose. Home Truths nails the how and why of 
fixing Britain’s broken housing market – the most 
pressing domestic issue of our time. A must-read 
across Westminster, Whitehall and beyond.”
Andrew Neil

“Many people claim to speak truth to power but 
very few actually do. Liam Halligan is one of the 
few – a great and fearless truth-teller. Here he 
takes on that prime driver of inequality in the 
UK – our warped and unfair housing market. 
Property monopolists and their tame political 
allies should be afraid, very afraid, of this book.”
Bryan Appleyard, Sunday Times

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And it came to pass, as he sat at meat with them, he took bread, and 
blessed it, and brake, and gave to them. 
<http://biblehub.com/luke/24-31.htm>31 And their eyes were opened, 
and they knew him; and he vanished out of their 
sight.  http://biblehub.com/kjv/luke/24.htm

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