The UK has a housing shortage. Decades of underbuilding have driven up the cost of homes, far-outstripping wages or inflation. This is especially the case in and around our most productive cities. London, for example, has failed to build more than 50,000 homes in a year since the 1930s despite having a housing target of 88,000. As a result, the capital has seen the average house price skyrocket from just £25,700 in 1980 (or £89,000 adjusting for inflation) to £530,000.
The size of the housing shortage and its effect on affordability are only getting worse. New Centre for Policy Studies research found that the UK is short 6.5 million homes compared to similar European countries. As of 2023, the latest year comprehensive numbers are available, there were 30.4 million homes in the UK to house 68.2 million people. That is 446 homes per 1,000 people, which is the second worst rate among other comparable European countries. Only Ireland has fewer homes per capita.
A weighted average of similar European countries results in 542 homes per 1,000. To get to that level of housing, the UK would need to build 6.5 million homes.
The housing shortage is worst in England, and specifically London. The capital has just 427 homes per 1,000 residents. Compared to the weighted average of European countries, London needs to build 1.1 million more homes. Yet even this is an underestimate because it does not include all the extra homes that would be needed given the pent-up demand that Britons have for living in London.
The elephant in the room for any housing discussion is immigration. Reform UK has argued that the real reason behind Britain’s housing crisis is mass immigration since 1997. While others, notably the Housing Secretary Angela Rayner, are uncomfortable reconciling the link between high levels of migration and its effect on the housing shortage.
In actuality, the UK’s housing shortage is primarily down to underbuilding, but immigration, especially the recent peaks, have worsened it. Over the past four decades, France has expanded its housing stock by 1.1% on average per year, while England has only managed 0.8% growth. Strikingly, there has never been a year that England has built as much as the French average or that France has built as few as the English.
The result of this relatively minor 0.3% difference compounds aggressively over the years. Had England matched France’s housebuilding rate since 1982, it would have built 2.9 million more homes, or the equivalent of an additional 50 homes per 1,000, roughly closing half of our housing gap.
As a result of France’s building, their homes per capita consistently rises. England’s lower building rates and higher migration has caused the housing gap to widen. In the years 2021-2023, the peak of the recent migration wave, the number of homes per capita actually fell in England, something that has not happened in France since at least 1982, the first year statistics are available. Despite England expanding its housing stock by 470,000 homes over those three years, record high migration actually lowered the number of homes per head.
But how much of an impact has migration had overall? If net migration had been kept to tens of thousands since 1997, and housebuilding remained at the same rate, England would have roughly 475 homes per 1,000. This is clearly an improvement over the current rate of 440, but only covers a third of the housing shortage. Even in this scenario, England is still the third worst major European country in terms of homes per capita.
The housing shortage matters because it drives up prices. Comparing similar European countries shows a clear trendline that more homes per capita makes house prices per sq m cheaper. Adding one home per 1,000 people lowers average house prices by £8 per m². Eliminating the UK’s housing shortage, would therefore leave average house prices in the UK about £75,000 lower, which would allow many more people to get on to the housing ladder and move to highly productive areas where they could get a raise.
Eliminating the housing shortage will require policies that boost supply further and decisions on immigration to make sure that net levels are more sustainable and do not outstrip new building, as happened in 2021-2023. If we fail to make any changes to the 255,000 net new homes a year that the UK averaged over the past decade and migration stays elevated, the housing gap won’t close until 2115.
Even slashing net migration to zero won’t solve the housing shortage, as we would still be 6.5 million homes short. To close the shortage by 2040, would still require 380,000 new homes a year if net migration is cut to zero or 565,000 new homes a year if migration follows Office for National Statistics predictions.
The 6.5 million missing homes should be a wake-up call to go further in enabling housebuilding in the UK. We need a step-change in our policies on planning, and sensible migration policies to eliminate the shortage.
