Will Britain’s housing crisis only be solved via the supply side?
That’s certainly the opinion of Yimby thought leaders, who relentlessly – and rightly – mock the attempts of Conservative governments to try yet another demand-side reform to meet the 300,000 homes target (which it hasn’t met since taking office).
But the idea that the housing crisis can only be solved through supply-side reform is as ludicrous as thinking we are just one more demand-side subsidy away from paradise. Far from it being solely a party problem, housing is a political one, and a systemic one; no government has hit the 300,000 homes target since 1977.
And even this as-yet unmet target isn’t high enough, particularly given near-sequential years of all-time high immigration figures. The 300,000 homes target is based on a projected immigration figure of 170,500; yet immigration into the UK last year was 745,000 – 339% of the projected level.
A new briefing from the Centre for Policy Studies has revealed the scale at which immigration is fuelling housing demand; it projects we need 515,000 new homes each year – more than 73% higher than the official target, and nearly three times as many as the 177,810 dwellings that were actually completed last year. Over the past decade, 1.34m fewer homes have been built than are needed to keep up with population growth.
Given that immigrants tend to stay in areas where ‘the biggest housing shortages are primarily concentrated’ – London and the South East – and that demand from additional migration now outstrips the demand from the existing population by over four times, it is growing increasingly hard for the Yimby lobby to argue that the supply side is the only way to ease Britain’s housing crisis. Reducing demand is essential too.
There is a counter argument made by some Yimbys that cutting immigration is likely to make things worse, because immigrants bring new skills and can plug gaps in the construction industry. This is known as ‘the ASI tendency’: ‘the belief that open borders are necessary for a free market in labour.’ It’s a fine and perfectly logical argument, if you ignore the fact that after a quarter-century of mass immigration the skills shortage in the construction industry has reached ‘alarming proportions’ which will see labour costs rise by 8.3% this year. Plans to retrofit 19m houses with better insulation were cancelled on account of the fact the entire retrofit sector had just 55% of the capacity needed. The government has recently announced it will allow Channel migrants to work in the industry in an attempt to fill the chronic workforce shortage 25 years of mass migration has proved unable to fill.
Depending on foreign labour for the construction industry becomes a self-perpetuating cycle, both because the immigrants themselves create housing demand that they are unable to meet, and because of the coming generational shift in the industry:
The UK construction workforce is an aging one, with over 20% of our tradespeople being over fifty and 15% being in their sixties. The trouble is, as these plasterers, painters and plumbers retire, the same percentage of young people are not entering these professions.
This is reflective of a wider economic problem; the lowest cost and lowest friction policy decision is to draft in new workers from abroad. But this perpetuates an economic structure that relies on cheap labour rather than capital or human investment, acting as a break on productivity and on wage growth — particularly for the poorest — whilst further driving housing demand. This does not bode well for Britain’s growing helot class.
Yimbys don’t, as William Atkinson has noted, talk about immigration. But if they are serious in their veneration of housebuilding as a neoliberal golden bullet, then they will have to start. They would be right to point out that whether we reduce immigration or not, there will still be a housing crisis, but the fact is that in two years migration has increased the UK population by 1.2m people – equivalent to a city the size of Birmingham – and we have built just 352,960 homes.
It should not come as a shock to note that house prices have been rising consistently since mass migration began in the 1990s. Nor should it come as a shock that the last decade of unprecedented levels of immigration have coincided with average house prices rising by 52% in real terms. Britain clearly needs more homes, but it cannot hope to sustain the housebuilding levels generated by current migration levels. There is not only the questions of manpower, but space; even if we could build a city the size of Birmingham every year, Britain is already one of the most densely populated nations in Europe.
Not only would lowering migration help alleviate the housing crisis by reducing demand, it may also provide a tool to help defeat the entrenched Nimbyism that prevents further supply; as Andrew Orlowski has previously pointed out, ‘voters want to see demand addressed before talking about supply.’
However the housing crisis is solved, it will involve a combination of both supply and demand-side reforms. But after this CPS briefing, it is time to accept that reducing immigration will be a key ingredient in that mix.
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