thenextwave

Housing report – built on arguable assumptions

Posted in economics, housing, trends by thenextwavefutures on 9 June, 2007

It was hard to miss the headlines following a report from the National Planning and Housing Advice Unit [NPHAU] which suggested that the  prices of thehouse prices in England would rise to ten times the salary levels of the poorest by 2026 – obviously pricing many out of ownership. (The current average ratio is seven times). But at least one of their underlying assumptions is arguable.

The NPHAU was set up by the Government in 2006 in the wake of the Barker Review on Housing Supply to provide “expert independent advice to Government and the regions on addressing long term market affordability and housing supply; and on the implications for the level and broad distribution of future house building.”

It’s chaired by an economist, Stephen Nickell, and to judge from news reports – the actual report is not obviously visible online – the report has taken an economist’s view of the problem. This is to say, it has leant heavily on the government projection that the number of households will expand by 223,000 a year by 2030, that only 168,000 homes were built in 2006-07, and therefore (QED) there is a supply problem. (Kate Barker, another economist, came to the same conclusion in her review).

But the projections for the required number of homes lean strongly on a set of assumptions which projects forwards the decline in number of people living in each household, and the increasing number of people living on their own.  This has been driven by increasing affluence, and increasing divorce rates, among other things.

But there are reasons to believe that this trend may change. People are more concerned than they were about well-being, which increases the desire for social exchange; the divorce/separation rates are now falling; even the very cost of housing encourages shared occupation instead of single person households (you’d have thought economists would spot this one). And if energy and resource costs rise, or if there’s any form of carbon restrictions, the cost of living alone would become disproportionately expensive. But there doesn’t seem to be any consideration in the current analysis of any trends from outside the housing market.

The wider system problem is the way in which the financial system creates money – but this is a more complex issue which requires a post of its own.

Single people and homes assumptions

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  1. […] high house prices and long hours I blogged last week about a report predicting ever higher UK house prices, and separately on UK workers being more likely to work long hours than those in any other affluent […]


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