31 August, 2011
The Importance of Housing
1. Housing is a basic human need, probably the most important aspect of life after food, sustenance and basic security, and essential to the quality of life, the wider environment, the health and well-being of people and the efficient functioning of the economy. The social and economic effects that follow from the impact of migration on housing are therefore potentially very wide ranging as can be appreciated from the following data:
International Migration into England in the Past Decade
2. Between 2000 and 2009 net long term international migration into England averaged about 175,000 each year, or 1.7 million in total. The pie chart below illustrates that three quarters of migrants settled in four of the nine English regions – London , which took over 40%, followed by Yorkshire and the Humber (14%), and the South East and East of England (both 10 %).
Figure 1: Immigration by Region in England
3. Data on housing supply, household formation rates, estimates of the contribution of migrants to the latter, and the overall balance between the net growth of the housing stock and household numbers is set out in Table 1 and Figure 2, covering the period 2001 to 2008. The key points to note are:
Table 1: Increase in Households and Housing Stock By Region in England: 2001 – 2008 (‘000s)
Source: ONS, DCLG
Note: all numbers are rounded
Figure 2: Housing Supply and Demand in England
Source: ONS, DCLG
Figure 3 illustrates the relationship between housing shortages and migration in the English regions.
Figure 3: Immigration and Housing Shortages in England
Source: ONS, DCLG
4. Net migration at current projected levels (180,000 a year) accounts for over two thirds of projected population growth and 36 per cent of projected household formation.
5. The Government in its latest twenty-five year projection of household numbers in England forecast that households in England will increase by 232,000 each year to 2033, an increase of 5.8 million households compared with 2008, with the biggest increases occurring in South East England, followed by London and North West England. The smallest increase in household numbers is projected to be in North East England.
6. Using the ‘Zero Net Migration’ variant projection it is possible to estimate the impact of immigration on household formation over the period from 2008 to 2033. Without any net migration at all, the Government projects that household formation each year should decline to 149,000 which implies that net immigration over this period will lead to 83,000 additional households each year, or slightly over 2 million (2,075,000) over the twenty five year projection period. These projections imply that to satisfy demand for housing caused by immigration we will need to build over 200 extra homes every day over the next 25 years.
7. The ability of the house building industry in the UK to satisfy in full this consequent increase in demand for homes is problematical. The 2008 – 09 recession resulted in a particularly steep decline in the house building industry. UK housing starts fell 41.2 per cent in 2008, the biggest annual fall in at least three decades with another fall on top of this of 14 per cent in 2009. After the severe construction industry recession of the early 1990s the house building industry took many years to recover. Figure 4 shows the trend in completions of new houses in England over the past two decades.
Figure 4: Housebuilding in England
8. For the sake of analysis, we consider three house building scenarios:
(1) ’business as usual’ - under which houses continue to be built at the current rate of around 160,000 a year
(2) ‘substantial but realistic increase’ – under which there is a long –term increase of one quarter in homes provided, equivalent to an average of 200,000 additional homes a year
(3) ‘homes for the future’ – under which homes are built in line with the assumption of the previous Government’s housing policy (set out in ‘Homes for the Future’) that 240,000 new homes could be provided each year
Table 2: Housing Supply and Household Demand: 2008 – 2033 (‘000s)
9. The most likely scenario is the second one. Using this, a shortfall of some 800,000 homes is projected over the next 25 years. In fact, the actual shortfall will be much bigger – over one million – if account is taken of second homes, properties that are allowed to be left empty, demand from ‘hidden’ households, unsatisfactory accommodation and other factors affecting supply and demand for dwellings, to which must be added the current estimate of households in need of net additions to the housing stock (150,000).
10. Migrant household numbers in the period 2001 – 2008 are estimated by assuming that on average a household is formed for every three migrants – an assumption that households of newly arrived migrants are significantly bigger (30 per cent) than for the indigenous population of the UK where average household size is 2.3 persons.
International Migration by Region: 2 Series (LTIM Calendar Year) – Table 2.06 Areas of Destination or Origin within the UK – available at: http://www.statistics.gov.uk/statbase/Product.asp?vlnk=15053
Housing Supply: Housing Statistics DCLG. Go to ‘Live Tables’, then Table 118 – Annual Net Additional Dwellings, England and the Regions: 2000/01 – 2009/10 – available at: http://www.communities.gov.uk/housing/housingresearch/housingstatistics/
Household Projections: Table 403 Household projections by Region, England 1971 – 2033; Table 416 Variant Household Projections – available at: http://www.communities.gov.uk/publications/corporate/statistics/2033household1110