The State of UK Housing: Why Building More Is Harder Than It Sounds

The supply problem

The UK is estimated to need around 300,000 new homes per year to meet housing demand. In practice, around 150,000-200,000 homes are built in most years. This persistent under-supply has driven house prices to multiples of household income that price younger generations out of homeownership in most of the country.

Why building more is difficult

Planning is frequently cited as the constraint, but this is not quite right. Planning permission is actually granted for far more homes than are built — the gap lies in construction rates, developer land banking and the economics of build-out rates. Housebuilders typically control the rate of release of new homes to market to maintain price levels.

The political economy

Existing homeowners benefit from restricted housing supply — it maintains the value of their asset. In a democracy where existing homeowners vote at higher rates than young renters, the political incentive for politicians to restrict development is real. Local authorities that approve unpopular large housing developments risk electoral backlash.