Why the UK Needs to Build Far More Homes — and What Is Stopping It

The supply problem

The UK built approximately 200,000 new homes per year in the 1960s and early 1970s. Since the late 1970s, housebuilding has averaged around 140,000-160,000 homes per year, significantly below the estimated requirement of 250,000-300,000 per year (a figure most housing economists and official reviews have settled on). The cumulative shortfall over 50 years is estimated at over one million homes.

The planning system

The UK's discretionary planning system, established in the 1947 Town and Country Planning Act, requires developers to seek permission for most forms of development on a case-by-case basis. Compared to rule-based systems (where development is permitted if it meets prescribed criteria), discretionary planning gives more power to objectors and local councillors. The planning system is the primary constraint on supply in high-demand areas, particularly London and the South East.

The political economy

Why does the UK persistently build too few homes? The answer is political. Homeowners — who make up a majority of the voting population — have a direct financial interest in planning restrictions that limit supply and thereby support property values. The beneficiaries of more house building are typically younger, lower-income renters who vote at lower rates. Local councils face strong constituency pressure from existing residents against new development. The costs of the housing crisis are diffuse; the costs of any individual development are concentrated and local.

What could change

Various reform proposals have been put forward: setting binding local housing targets (rather than advisory ones), making development rights clearer and less discretionary, reforming the land value capture system so more of the planning gain accrues to the public rather than landowners, and reforming the green belt to allow development in low-quality parts while protecting genuinely high-value green land. Political will to implement such reforms has historically been limited.