The UK doesn’t have a housing shortage

We don't have a housing shortage in the UK, we just don't have enough of the right houses in the right places, says Merryn somerset Webb.


There's no shortage of houses, just a shortage of the right houses in the right places

Do we have a housing supply problem in the UK? Your automatic answer to the question will probably be yes'. After all, if we didn't have a shortage of houses, house prices wouldn't be as high as they are.

But look closely at the numbers in the latest English Housing Survey and you will see that it isn't really so. (This is a fantastically detailed report if you are interested in housing in the UK it is really worth spending some time on.)

On page 28, the survey considers the extent of overcrowding in English houses. Its conclusion is that there is very little. Some 3% of households live in overcrowded conditions, but 37% had at least two spare rooms, and were classified as "underoccupying". Another 34% weren't classified as officially underoccupying, but still had one spare room.

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The upshot is that nearly 70% of households in the UK have at least one bedroom more than they need (or use). So we have less a shortage of floor space in the UK than a (presumably generational, and so short term) misallocation of the floor space we already have.

Capital Economics picked up the story in a note out earlier this week. It notes that from 2004 to 2014, the number of households in the UK rose by an average of 170,000 a year, but the number of dwellings in the UK increased by some 200,000 a year. That suggests a rise in the number of "apparently surplus homes" to around 1.3 million.

This is not to suggest for a second that all is well in the housing market it isn't. The problem is perhaps not so much a housing shortage, as a shortage of the right kind of houses in the right kind of places. It is also a shortage of the finance the young need to buy those houses because of the competition from buy to let investors, or the tougher mortgage environment since the financial crisis.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.