1. New estimates of housing requirements in England, 2012 to 2037 Neil McDonald and Christine Whitehead

2. Alan Holman’s Legacy  Alan first made estimates of housing demand and need in 1970 - to inform central government of housing supply requirements necessary to achieve given housing standards together with the need for subsidy;  Major development of the model for the Housing Policy Review in 1977;  Alan continued to provide these estimates whenever new household projections were made available - both in government and from independent organisations, including the TCPA;  Alan’s last estimates of housing demand and need were based on the 2011 household projections. These, although recognised as less strongly based than usual, were important and well used, particularly by local authorities to support their local plans;  Alan was looking forward to being involved in these latest projections;  These are more strongly based in the latest evidence - but until now can only deal in detail with requirements, not with issues of affordability. 2

3. The Headline Story  The 2012 based projections suggest that, if past trends continue, we will need to build an extra 222,000 homes each year from 2011 – 2031;  This is less than earlier projections BUT ONLY because household growth has been restricted by lack of supply and problems of affordability - at least for the last decade and for younger households for a quarter of a century;  So far since 2011 we have built only 54% of the homes required – so if we were to try to catch up by 2021 we would need to build over 300,000 each year;  This compares with 138,000 starts and 125,000 completions in England in 2014/15. 3

4. The 2012-based household projection  Household projections based on:  ONS population projections: 2012-based  DCLG’s household formation rate projections. 4

5. How the population projections have changed  2011 census found more people than previously expected  2012-based projections therefore start from higher base population in 2012 than assumed in last pre- recession set of household projection – the 2008- based projections  But rate of population growth not dissimilar from 2008-based projections 5

6. How the household formation rate projections have changed  2011 census found fewer households than expected: 2008-based projection had over-estimated household formation rates  In break from past trends aggregate household formation rates were virtually flat between 2001 and 2011  2012-based projections envisage return to increasing household formation rates – but not for everyone 6

7. Winners and losers 7  Projections envisage that there will be more than enough extra households formed to allow all groups to have greater chance of setting up a separate household, but that is almost certainly not what will happen;  Some groups – particularly, singles over 30 will be ‘winners’ and couples in their 20s and 30s will be ‘losers’.

8. Couples in 20s and 30s are the big losers 8  Falling household formation rates since 1991  Household formation rates continued to fall in ‘boom years’ to 2007  Whilst recession may have exacerbated decline, clearly other factors in play  Projections suggest continuing decline, but at a slower rate

9. Structural change or temporary blip? 9  20% of the change arises from a higher proportion of couples than previously expected  Unlikely to be result of economic pressures and therefore unlikely to be significantly reversed

10. Structural change or long but temporary blip? 10  Some falling household formation rates date back to 1991 e.g. couples (see earlier slide) and London aggregate rates (above)  Range of factors unrelated to recession e.g. affordability; student debt; changing employment patterns. Some yet to bite fully  Change of direction in household formation rates in 2011 looks optimistic

11. Stage 2 Results 11  Stage 2 results provide insight into changes in household types – a similar picture looked at from a different angle  Stage 2 headship rates show proportions of age group who will head households of different types  25-34 chart reflects similar picture to that shown by Stage 1 results: declining couple headship rates due to falling proportion of couples in the population and falling household representative rates in this age group

12. Stage 2 Results 12  Stage 2 results for 75- 84 year olds show small reduction in overall headship rates i.e. average household size in this age group rises  Note dramatic change in proportions of single women and couples: due to men living longer so that couples survive as a couple for longer

13. Regional variations 13  North-South divide: little departure from earlier HRR trends in north; falling HRRs in London  Also significant differences in population increase projections  NE households to increase by 11% 2011-31; London by 33%  55% of homes required need to be in London, East and South East

14. Using the projections (1)  Projections are not forecasts: they tell us what will happen if past trends and constraints continue;  2012-based household formation rates are probably the best we can achieve for land use planning purposes ;  But there are reservations about population projections on which the household numbers are based:  Net international flows may be too small;  Flows within UK are based on 2007-12 – a period which was affected by the recession;  Need to take account of local factors. 14

15. Using the projections (2)  Households will only form if there are homes for them to live in;  To date (2011-15) only about half the homes needed have been built; household formation rates are therefore almost certain to be below those projected;  To catch up by 2020 would require an average of 312,000 homes a year for the next 5 years;  Practical constraints: e.g. London almost certainly cannot accommodate 33% more households over 20 years ;  Projections can only be starting point for planning. 15

16. Conclusions  The household projections reveal longer term downward trends for some groups from at least the early 1990s reflecting changing economic and social conditions;  Even so they suggest that most household groups will be better housed in 2031 than in 2011;  But this can only happen if we build at least 222,000 new homes a year to meet new household projections to 2031 – starting in 2011;  Over a half of these need to be for London and wider south east;  We are already way behind – we need strategies at local and national level to generate a step change in housing investment. 16