How demographics and the economic downturn are affecting the way we live LSE Seminar: 1 July 2013 Neil McDonald: Visiting Fellow CCHPR

Real change or noise? England household growth 10% slower in 2011 projections LA household growth ranges from 320% faster to 165% slower. Large variation in small areas e.g. Surrey:+48% to -29% Why such large variations? Can we trust these apparently random results? 2

Population projections for England 2008 and 2010- based projections for 2011 similar 2011-census based estimate 450k larger 2010-based population growth 13% faster than 2008 2011-based population growth 5% faster than 2010 3

Reasons for changes in population projections 2008 to 2010-based projections – 13% faster 28k a year growth in natural change: bigger increase in births rather than deaths Net migration up from 160k to 182k 2010 to 2011-based projections – 5% faster No change in international migration 85% of increase due to more births; 15% due to fewer deaths

Limitations of 2011-based projections 2011-based population projections are interim: they applied 2010-based trends 2010-based fertility rate is too high Census found 245,000 more women of child bearing age than expected: implies actual fertility rates were lower than previously thought Too high a fertility rate, implies too many births Similar problems with deaths and internal migration

Regional population projections Much greater variation in growth rates London projected to grow 77% faster in 2011-based projections than in 2008-based (c.f. England 19% faster) 6

London compared with England Census population 4.3% higher than 2008-based projection (c.f. England 1.0%) 2011-based projected growth 77% faster than 2008-based (c.f. England 19%) 7

LA level population estimates for 2011 Much bigger variation c.f. London and England Census estimate for Newham 30% higher than 2008-based projection (c.f. England 1%) 8

LA level population growth projections Most boroughs projected to grow much faster in 2011- based projections than in 2008- based WHY? 9

LA population growth: natural change Natural change projection has grown from one projection to the next for most boroughs Some variation but not the cause of big population growth variations 10

LA population growth: internal migration Much greater variation than for natural change Variation between projections appears almost random… 11

LA population growth: internal migration Chart plots differences in net internal migration – making the changes easier to see. 12

Internal migration: sample London borough Flow in up: 2% Flow out down: 3% Net (outward) flow down 51% 2-3% changes in gross flows could be due to use of 2010- based migration rates 13

LA population growth: international migration Large variation Big changes are between 2008-based and 2010- based projections… 14

LA population growth: international migration 2008 to 2010 changes due to Increased England net migration Migration Statistics Improvement Programme Smaller changes 2010 to 2011 15

Migration Statistics Improvement Programme Allocating migrants to LAs is difficult Shouldn’t assume 2008-based data was “right”! Old method used IPS to distribute to regions and to smaller geographies; modelling for final step to LAs New method uses administrative data to distribute direct from national totals to LAs, e.g.: National insurance data used to distribute workers Higher Education Statistics Agency data to distribute students Evidence that new method is better predictor of 2011 census results

LA population growth: causes of variability Internal and international migration more significant than natural change Some of the variation in internal migration will be due to use of 2010-based migration rates International migration changes big – but probably due to errors in 2008-based projections 17

Changing household formation patterns Changes compared with previous trends vary from region to region 18

Changing household formation patterns Bigger changes in London for 25-34s Older age groups have seen growth in household formation rates and census figure above 2008- based projections 19

Regional variations: headship rates: 25-34s 1991 headship rates similar SW: rate grows 1991 to 2001 London: fall 1991 to 2001. Census figure closer to 2008- based projection 20

Changing household formation patterns ½ million more adults aged 20- 34 living with parents in 2011 than 2001. Note increase appears to have started before credit crunch/recession 21

London headship rates compared All boroughs had headship rates lower than expected… ..but the shortfall varied considerably 22

London household growth projections compared Range for 63% less than 2008- based projections to 320% faster 23

How the household projections compare ‘Partial return to trend’ option shows what might happen if and when the economy returns to growth and housing supply improves Household growth over 20% higher in ‘partial return to trend’ this example 24

Conclusions: Population projections Projected growth rates increased – by very different amounts Increased net international migration assumed between 2008 and 2010-based population projections Migration Statistic Improvement Programme: re-distributed net flows between regions and local authorities causes significant part of changes between 2008 and 2010 probably gives better estimates Use of internal migration rates from 2010 in 2011 interim projections may have distorted net internal migration flows – a large factor in household growth Case for investigating internal migration flows in detail where 2011- based projections suggest big changes

Conclusions: Headship rates Changing household formation patterns Impact varies with age: biggest on younger adults Impact varies: region to region and LA to LA Probably not just due to economic downturn; deteriorating affordability likely to be another factor Return to trend likely to require economic recovery and improvements in both access to mortgage funding and improved affordability

Conclusions Faster projection population growth damped by lower headship rates which rise more slowly, leading to slower household growth nationally – not in London Are the lower headship rates derived from the census a prudent basis for planning? They assume younger adults will find it increasingly difficult to set up home on their own Planning for lower headship rates: a self-fulfilling prophecy? If there is a return towards previous trends household growth will be substantially greater Plans should be robust to recovery – and closely monitored

Neil McDonald is a Visiting Fellow at the Cambridge Centre for Housing and Planning Research. He was Chief Executive of the National Housing and Planning Advice Unit up to its closure in July 2010. He also held various Director-level posts at the DCLG in the housing and planning fields. Since leaving the civil service in 2011 he has developed an expertise in the application of research and analysis to assist planning practitioners plan for housing. He has advised local authorities and others on planning for housing and is the author of “What Households Where?” an analytical tool produced for the Local Housing Requirement Assessment Working Group and available through their website, http://www.howmanyhomes.org/. Email: neilkmcdonald@gmail.com