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A housing development under construction in Braintree, Essex, in March. Photographer: Chris Ratcliffe/Bloomberg UK's Housing Crisis Needs a London-Sized City to Fix It Developers and local authorities have failed to keep up with population growth and the pace of building across Europe. By Eamon Farhat, Tom Rees, Olivia Konotey-Ahulu and Kyle Kim June 25, 2024, 2:00 AM UTC Share this article * * * * * Britain's housing crisis has become so acute that the next government will need to build the equivalent of another city the size of London to make up for five decades of below-target construction, analysis of official data shows. Ahead of a general election in which property has become a key issue, a Bloomberg analysis of new-home completions shows that in some parts of the UK just one place was built for every 10 extra people in the population from 2011 to 2021. That shortfall is the main factor driving the country's worst housing crisis since World War II. For almost five decades, developers and local authorities have failed to deliver homes at the pace of other wealthy nations in Europe -- or even at the rate Britain did through the 1960s. Younger voters in particular are angry that the pandemic and 14 years of Conservative government have only worsened the problem. Britain's House Building Falls Behind European Neighbors Cumulative difference between UK and Western Europe new home construction Chart Source: Centre for Cities Britain Could Have Had Millions More Houses Additional homes for the UK if the nation built at the pace of selected European peers from 1955 to 2015. Chart Source: Centre for Cities Both Prime Minister Rishi Sunak's Conservatives and Keir Starmer's Labour opposition promise building at a pace not seen since the 1970s. But even work at that rate would require 14 years to clear the shortage and massive changes to rules on planning and land use. "The number of homes we haven't built is now so large it would be enough to build another London, and this gets worse year on year," said Paul Swinney, director of policy and research at Centre for Cities, a non-partisan research group. Figures from official data on home completions and from the Centre for Cities show that the UK's housing stock would be about a fifth bigger, with an additional 4.3 million homes, if construction kept up with trends through 1977. The number of missing homes is even greater than the 3.8 million dwellings already in the capital, underlining the enormous scale of the task at hand for the next government. Average house prices across the UK have soared almost 70% since the Conservatives took office in 2010. That has priced many younger Britons out of the market and made housing a top-four issue for adults, according to the polling company YouGov. It's also ignited anger on the far-right of British politics, with Nigel Farage's Reform Party pointing out the link between rising immigration and the housing shortage. But bottlenecks in the planning system along with resistance by existing homeowners have left many people pessimistic that much will change. "Whoever wins the election, it will be very hard to turn this around," said Kate Barker, a former Bank of England rate-setter who led a review into housing for Tony Blair's government. "We need to catch up." The crisis is only intensifying, with population growth out-pacing housing completions at the steepest pace since the 1940s. It is being felt more acutely in parts of the UK where migration is high and planning is poor -- places like London and Leicester. Among the worst hit are commuter-belt and sea-side towns, like Luton and Eastbourne, which have drawn an influx of internal migrants. Leicester, a former industrial city in central England, saw its population soar 11.7% in the decade up to 2021, much of that driven by people coming from abroad. Almost a century ago, Leicester was the second richest city in Europe off the wealth of its textiles industry. Now, its council has said it expects to go effectively bankrupt within 18 months, with spiraling rents and a lack of homes for people on lower incomes feeding into a city-wide housing crunch and rising homelessness. The local council, which has said previous government cuts have forced them to halve spending on some services, has been unable to provide housing for all those who qualify. It declared a crisis two years ago when the waiting list for public housing stretched past 6,000 families. [640x-1]Residential housing in the North Evington area of Leicester. Leicester, a hub for textile manufacturing in Britain since the sixteenth century, has declared a public housing crisis. Photographer: Darren Staples/Bloomberg "It just seems to be getting progressively worse," said Salma Ravat, the chief executive officer of the homeless charity One Roof Leicester. "You feel for the next generation because they're just going to have so many challenges." UK Migrants Live Where Housing is Short Local authority by share of external migrants and number of people for each new home construction. London and Leicester have some of the UK's greatest housing demands. Chart Source: UK Office for National Statistics; Department for Levelling Up, Housing & Communities Both the main parties have their fingerprints on the crisis. In the years after World War II, Britian led European nations in delivering new homes. That's because the government sponsored construction of social housing, known as council houses because they're managed by local authorities. But the supply of new social housing has tapered to a trickle, starting in 1976 when the Labour government sought an International Monetary Fund bailout to fix its budget crisis. Conservative Prime Minister Margaret Thatcher accelerated the shift away from state-provided housing in the 1980s, draining money from the program and granting social housing residents the "Right to Buy" their homes, which forced councils to sell properties without enough funds to replace them. Apprentice builders attending a theory lesson on site at an Ealing Council estate development in 1947.Apprentice builders attending a theory lesson on site at an Ealing Council estate development in 1947. Apprentice builders attending a theory lesson on site at an Ealing Council estate development in 1947. Source: Hulton-Deutsch Collection /Getty Images A council house sold under the right-to-buy scheme in Enfield in 1986.A council house sold under the right-to-buy scheme in Enfield in 1986. A council house sold under the right-to-buy scheme in Enfield in 1986. Photographer: Julian Brown/Daily Mirror/Mirrorpix/Getty Images Delia Cooper, 83, has been living in social housing in the London borough of Richmond-upon-Thames since the 1960s. She loves the village-feel of the area and would have been eligible to buy a council house years ago but didn't think the policy was fair. "You knew that whatever they said about rebuilding, that would never happen," she said. "When I finally move out of my house -- they might take me out in my coffin -- it will still go to a family, and that to me is important." Britain Is Building Fewer Homes New home completions as a share of total housing, by sector Chart Source: UK Parliament House of Commons Library Private developers are building at half the rate they were in the 1960s, failing to respond to soaring prices and demand. They haven't filled the vacuum the government left behind, and a turnaround in the short-term is unlikely since many developers paused projects after high interest rates jacked up costs for those who need a mortgage. Successive governments haven't followed through on what they promised. The Conservatives in 2019 vowed to get housebuilding up to 300,000 a year by the mid-2020s. But builders have never delivered more than 250,000 new dwellings a year. Both the Conservatives and Labour have left the housing problem to fester, leaving shortages at their worst since World War II. That's an especially poignant milestone, since the post-pandemic tax burden is now near a high last reached after the war. It's a major constraint on how much money any party can promise for housing -- or any of the other priorities like the National Health Service, defense or schools. Labour is trying to use the Conservatives' record to remind voters that their living costs have soared. Starmer plans to unlock housing with an overhaul of the costly and slow planning system and building on certain parts of the Green Belt -- heavily protected areas around cities to prevent urban sprawl. [640x-1]Starmer visits a residential construction site during a general election campaign event in London, on June 7. Starmer visits a residential construction site during a general election campaign event in London, on June 7. Photographer: Chris J. Ratcliffe/Bloomberg The center-left party has pledged to build 1.5 million homes over five years, roughly equal to the Tory 2019 target that has never been met. Conservatives promise 1.6 million homes over the next parliamentary term. "Tinkering around the edges isn't going to bring the change needed," said Swinney. "It requires moving away from a planning system laced with uncertainty to one with rules and clarity." Starmer is preparing to take action on planning reforms within weeks if his party wins power. He will act through a series of ministerial statements, statutory instruments and directives from officials to local planning authorities. Rachel Reeves, the shadow chancellor of the exchequer, called the planning system "the single greatest obstacle to our economic success." But the Conservatives' experience shows the political dangers of planning reform. Repeated attempts by former premiers Boris Johnson, Liz Truss and Sunak to make changes encountered opposition from Tory lawmakers and voters who opposed house-building in their own districts. For the UK economy, the housing shortage is more than just a tragedy for individuals. It's a major factor limiting the nation's growth potential and productivity. First-time buyers struggle to get a rung on the property ladder, and owners find it difficult to trade up or down as their circumstances change. Businesses are frustrated they can't find enough people with the right skills where they have jobs. "A failure to build around places that are really very successful -- like Cambridge -- a failure to get young people into the right places, and too many people living in homes that aren't really fit for them ... those things taken together must affect productivity," said Barker, whose 2004 review for Blair's government called for a boost to housebuilding. [640x-1]Terraced houses in Cambridge Terraced houses in Cambridge, a crucial part of the UK's goal to become a science and technology superpower by 2030. Chris Ratcliffe/ Bloomberg A bigger economic impact is unfolding more gradually -- but will be vital to the UK Treasury. Britons are getting married later, having children later and fewer of them. While part of that is down to more women joining the workforce and shifting social norms, high housing costs have also pushed back these milestones to later in adult life. That's worsening a demographics crunch unfolding across the developed world, with fewer young workers to shoulder the costs from an older population as the Baby Boomer generation retires. "If more young people are staying at home, they're not going to have children quite so rapidly," said Christine Whitehead, professor of housing economics at London School of Economics. "That matters significantly." With assistance from Jason Kao and Jody Megson Editing by Reed Landberg, Michael Ovaska and Alex Newman More On Bloomberg Terms of ServiceDo Not Sell or Share My Personal Information TrademarksPrivacy Policy CareersMade in NYCAdvertise Ad Choices Help(c)2024 Bloomberg L.P. All Rights Reserved.