'Brexit means we have to build fewer houses' ... or does it?
Ahead of the launch of the UK Housing Review we will be running a series of blogs trailing its content. In the first of these John Perry, our senior policy advisor, looks at whether some of the claims made about the likely impact of Brexit on housing demand stack up.
It’s a claim already made by some newspapers opposed to building in the countryside: if we’re leaving the EU, there’ll be fewer migrants, and so we can build fewer new houses. In the latest edition of the UK Housing Review, out in March, we’ve looked at whether such a claim really stacks up.
Demand for housing depends mainly on household growth. The latest projections (for England) were made before last June’s referendum. They suggest we need to build 227,000 homes per year up to 2024 and a lower target beyond that.
Of the total, 37% - or 84,000 per year - results from migration. The projections assume net migration falls to only 170,500 per year from 2020/21, but recent levels have been much higher. EU net migration alone was 189,000 in the past year and non-EU was 196,000.
Will EU migration really disappear by 2021 to make these projections reality?
So far we don’t know what political choice will be made between a ‘soft’ and ‘hard’ Brexit, although the government seems to favour the latter. Under the soft version, some form of ‘free movement’ between Britain and EU countries is likely to be maintained. On the face of it a hard Brexit should lead to a bigger reduction in EU migration, but will it?
The government already seems to accept that there will be continued access for professional workers, including doctors and nurses, although these account for fewer than one in five EU migrants. At the other extreme, there is likely to be some sort of programme for seasonal farm workers. But in the middle is a broad range of skilled and semi-skilled jobs that still have to be filled – not least the 9% of building workers from the EU, for example.
A work permit scheme could be created, but for sectors which depend on people moving between jobs it will be very difficult to put in place. Just think about care workers – 75,000 are from the EU, but there are already something like 70,000 job vacancies in the sector. So there are difficult decisions to be made about the numbers needed in each sector, how to admit them and under what conditions.
Nevertheless, the lobby group Migration Watch thinks a hard Brexit could cut net EU migration by 100,000 per year. But a more rounded estimate by think tank Global Futures suggests the fall might only be 52,000. Even with the Migration Watch figure, however, if figures for both non-EU migration and Brits moving abroad stayed the same, net migration would still be about 235,000 annually, well ahead of what’s assumed in the household projections.
This will be a complex issue to factor into the next round of projections, but even if they are revised downwards, there is every reason to continue building. One is that we’re not close to meeting the 227,000 target anyway: in 2015/16 we only built 190,000 houses in what was an above-average year.
Another is that the household figures take no account of vacancies and second homes, which taken together account for 1.8 million units. There is a particularly acute need to build in London, which already has a shortfall of 70,000 dwellings without taking empty homes into account.
Migrants are overwhelmingly concentrated in the private rented sector, so the impact of any fall in people coming from the EU will be far greater on this sector than on social housing. This is partly because EU nationals are slightly less likely to have social lettings than British citizens – a factor which is changing only slowly as they account for only 4% of new lettings in a typical year.
It’s also because the expectation is that EU nationals already living here will be allowed to stay, so they will continue to become eligible to apply for social housing. Any effect on the sector will be greatest where they form a higher proportion of the local population, such as in some London Boroughs and parts of the East of England.
But it’s in the private rented sector where the biggest effects could occur. Of the 9.8 million private tenants in the UK in 2011, some 3.8 million held non-UK passports and almost one-third of these were from the EU. Therefore there might be a big effect on smaller local housing markets in places where the proportion of migrants has grown fastest. The biggest percentage changes in the foreign-born population between the last two censuses in England were in Boston (467 per cent change), South Holland (225 per cent), Hull (195 per cent) and Corby (187 per cent), all largely as a result of EU migration. In Northern Ireland, where 76 per cent of EU passport-holders are private tenants, new houses intended for homebuyers have been bought by private landlords specifically for letting to EU migrants. A particular example is Dungannon, which saw an extraordinary growth of 1,139 per cent in its non-UK/non-Irish population between the 2001 and 2011 censuses.
But even in these cases, the demand for workers in farming or food-processing will still be there post-Brexit. If labour doesn’t come from Europe, either it will come from somewhere else or food production will move abroad.
Brexit doesn’t mean Britain can avoid hard choices, any more than it means that we can stop building new homes.
John Perry is senior policy advisor at the Chartered Institute of Housing.
The UK Housing Review is the UK's biggest annual compilation of housing data, featuring exclusive analysis. It will be available on our bookshop from March 7. To reserve your copy email our team with your details.