The best thing about this Government – perhaps the only good thing at all – is the ambition to build 1.5 million homes over the course of this Parliament. Keir Starmer, Rachel Reeves and Angela Rayner could and should increase this target, and lean on Sadiq Khan to get a lot more building in London, where output has been woefully short. But it is a worthy ambition nonetheless.
Unfortunately, relative boldness on planning reform is on a collision course with the distinct lack of élan on display on the immigration front. There were probably sighs of relief in Downing Street this morning when new Office for National Statistics (ONS) data showed that net migration fell by 50% to 431,000 in 2024 (mostly, it must be said, as a result of changes to the immigration rules in the dying days of the previous Conservative government).
Slight further falls in net migration might also be expected. Earlier this year, the ONS projected that net migration would settle at 340,000 per annum from the late 2020s; reading between the lines of the Government’s recent immigration White Paper, Labour seem to be aiming for a slightly lower figure, of between 200,000 and 300,000. But this is not nearly low enough, even if the policy underlying Labour’s rhetoric can deliver – which I doubt.
England – and especially London and the southeast – has a huge housing shortage, estimated a few years ago at around 4.3m homes. This is mostly due to decades of underbuilding – ‘net additional dwellings’ (new houses plus conversions minus demolitions) reached a nadir of just 130,610 homes in 2012/13. Belatedly, a target of just under 300,000 homes per annum in England was adopted by the Conservatives in December 2020 in order to at least keep the housing crisis from getting any worse.
As I set out in a Centre for Policy Studies briefing note, the target assumed around 225,000 homes would be needed to cope with endogenous population growth, family formation and changing occupation patterns. A further 72,250 would be needed to cover net migration of about 170,500 people per annum.
But of course, actual levels of net migration have not been at or below that level (outside of Covid in 2020) since 2008. In effect, higher levels of net migration than anticipated in the assessment of what needed to be built means that England’s already cavernous housing deficit had been and was growing at an alarming rate. This has of course been accelerated under the unprecedented levels of immigration we’ve seen post-2020.
Net migration from the introduction of the new immigration system until the end of 2024 totalled 2.65m, representing population growth of 3.9%. If historical patterns hold true, about 90% of those migrants will be living in England. That means – under the methodology for the 300,000 target – we needed to build 1,028,000 houses just to offset the impact of migration, not to mention 901,000 houses to keep pace with domestic pressures.
We don’t yet have net additional dwellings data for all of 2024, but for the four-year period to March 2024, we know that the housing stock in England increased by around 907,570 homes. That would have been enough to meet domestic pressures. But on top of that, migration generated demand for a further 930,000 units. So immigration accounted for the entirety of the increase in the housing deficit.
Similarly, if we look back over the last decade or so to 2013/14 (the point the data for the 300,000 target comes from), we can see that the housing deficit in England increased by just over 1.7m homes. Net migration accounted for 94% of this increase.
If migration does settle at around 340,000, then under Labour’s housebuilding plans, this deficit is not going to narrow. If anything, it will widen. With net migration to the UK at 340,000 per annum, we’d need to be building 356,000 homes a year just to stand still – 1.78m homes over the course of a five-year parliament, almost 20% higher than Labour’s target.
Building more houses is absolutely an imperative. But if the Government wants this to do anything to alleviate the pressures on house prices and rents – and hence living standards, especially in its urban strongholds – it also needs to go much further on moderating migration-driven population growth.
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