Too few houses? Blame the immigrants?

Monimbo

Theresa May has pledged to restrict immigration, saying it has fuelled demand for new housing.  In her speech to the Tory conference she said: ‘Uncontrolled, mass immigration undermines social cohesion, and in some places it overburdens our infrastructure and public services.  It is behind more than a third of the demand for all new housing in the UK.’ She might have said it, but is it true?

Well one bit that is true is that migration is ‘behind’ one-third of housing demand.  In fact, the current household projections for England, still based on 2008 figures, show that migration accounts for a bit under two-fifths of the expected growth in households. New household formation requires us to build at least 232,000 new homes per year – and the projections take no account of the needs backlog (most recently assessed in a report published by DCLG).

However, we are of course now building far fewer houses than this: only around 100,000 per year.  So even if migration stopped tomorrow, total output would only meet two-thirds of the needs arising from natural population growth.  Government efforts to stimulate supply are failing, so ministers blame the problem on excess demand.

Let’s concede though that Mrs May has a point: it would be easier to meet total needs if the part generated by migration were reduced. But is this fairly described as a consequence of ‘uncontrolled, mass immigration’? Well perhaps we shouldn’t expect measured language in a party conference speech, but even by these standards the term is excessive.  There has been one major piece of legislation per year on average for the past twelve years, each one further tightening the controls.

Not surprisingly, the speech was also a very unsophisticated take on migrants’ impact on the housing market. From the most recent evidence, this is summarised by the Migration Observatory in the chart below.  It shows that the initial impact of migration is largely on the private rented sector, where of course it is bound to affect rents (especially in neighbourhoods where migrants are concentrated).  However, although migrants eventually tend to assume the same housing profile as UK-born people, this takes some time.  The impact of changes in immigration rules will take years to work through to the social and owner-occupied sectors.  In social housing, for example, latest CORE data show that just six per cent of lettings are to foreign nationals, and the proportion is not increasing.

The most important criticism of the speech however is that it implies that mass immigration can be controlled and its impact on housing need reduced.  For example, recent efforts to reduce numbers have focussed on family migration and on students.  Family migrants are almost entirely those who join people living here permanently, for example as spouses.  While this can be slowed down by raising the hurdles that people have to cross and lengthening timescales, it is difficult to reduce it significantly without affecting human rights.  Student numbers can be reduced and this has some impact on parts of the private rented sector, but at an unknown economic cost which is bound itself to affect people’s earnings and indirectly their ability to pay for housing.

The Tories’ latest suggestion, to challenge the EU freedom of movement rules, would undoubtedly have some impact on housing demand but would have other unknown consequences.  Two that come immediately to mind are the effects on the building industry of the loss of EU labour, and the impact on housing supply of more Britons being forced to remain in the UK and keeping their existing homes, if they lose their entitlement to move to countries like Spain.  Let’s remember the importance of the roughly 300,000 Brits who leave the country every year, and the consequences if many of them couldn’t do so.

In other words, there is no straightforward way in which tightening immigration controls will have a beneficial impact on the mismatch between the supply of and demand for housing.  Insufficient housing production is a problem that should be blamed on a range of factors, including government policy over the last few decades.  Migration has played a role, but heaping the responsibility for our housing problems on migrants is not only unfair and passing the buck, it distracts attention from the many other reasons why governments have failed.  It suggests that Mrs May’s proposals are the key to solving our housing problems, which might be a nice delusion that plays well to Daily Mail readers but is very far from the truth.

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4 Responses to Too few houses? Blame the immigrants?

  1. Pingback: Coalition housing policy – blame immigrants instead of building more homes? | Red Brick

  2. Dear Steve,
    What you say is of course true,but the real trouble re increasing housing supply is expecting the private sector to deliver it .Private house builders as has often been remarked will only build houses that they can sell at a profit. Making mortgages easier to obtain and deposits lower would help but only to a limited degree. New build for the Private Rented sector appears in general to deliver inadequate returns for the Private sector other than in some specialist areas like student housing usually with some outside assistance. So if we are ever going to close the gap between supply and demand it has to come from the public sector with support from the taxpayer via Housing Associations, Local Authorities or some other route, This of course is the area where supply is reducing so the outlook is dire.
    Graham Facks-Martin

  3. bernard crofton says:

    The effect of “controlling movement” within the EU, or of restricting entitlements of people from EU countries, might have an opposite effect on net migration or welfare costs (being a case in point!).

  4. Its disgusting that the MP’s can get away with fuelling fires that are simply not true – all for their own political agenda’s.
    http://s0ciallyh0used.wordpress.com/2012/09/20/13/

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