UK housing market 'will never meet need'
The nature of the UK housing market means it is unlikely to ever produce enough homes to meet demand, according to a report commissioned by homelessness charity Shelter.
FTI Consulting’s report recognises the importance of housing in the economy and that it should be a ‘central element’ of any investment in infrastructure in the UK.
But it notes the fixed supply of land and planning requirements leads to long lead times of development, making house building a ‘risky industry’.
Underestimating supply constraints in the housing market questions whether the market will ever be able to supply an ‘economically (or socially) efficient level of housing’.
‘It is questionable whether the conditions under which the market delivers an efficient outcome apply in the housing market – where regulation restricts the supply of a key factor of production and distorts the strategies of firms,’ the report says.
The report suggests planning and building regulations lead house builders to focus more on land management and action to improve their financial position rather than innovation and production. This is likely to have been exacerbated by the recession, it says.
FTI Consulting concludes planning reforms may improve the supply of housing but can ‘only ever limit rather than remove the costs and constraints imposed on the availability of land’.
Economist Vicky Pryce said: ‘This report found that for decades the supply of housing has fallen short of the level needed to meet demand.
‘[It] concludes that there are fundamental issues about the nature of the house building industry and the housing market that raise questions about the appropriate role of the state in facilitating an economically and socially optimal level of supply.’
Shelter’s chief executive Campbell Robb said: ‘Britain’s housing shortage has pushed up house prices to the point where an entire generation is struggling to afford a home of their own.
‘With house building at record lows, all political parties need to tackle this issue head on and set out a long-term strategy that not only boosts supply now but ensures future generations have the homes they need.’
The report was launched at a round table event hosted by Shelter in Westminster today where housing policy and industry experts discussed the issues.