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Separating fact from fiction: We need more houses!

Is the trend toward ever smaller households putting extra pressure on housing demand?
By Damien Pooley

I was watching TV the other day and a housing market pundit said that one of the reasons house prices haven’t fallen substantially was because of a big rise in the amount of households being created (due to births, divorces and a growing acceptability of people living on their own), along with falling house building.

It’s not the first time I’ve heard this argument, but it got me thinking – are we building enough homes to cater for population increases?

So first off, I needed to get some data. I chose to use as a base point figures from the Communities and Local Government as they monitor both housing completions and total household numbers.

Yearly Housebuilding Completions compared against Household Growth (Source: CLG)

Taking a comparison of a yearly figure for each doesn’t really show anything tangible, so a three-year average is more meaningful.

Three-Year Average Housebuilding Completions compared against Household Growth (Source: CLG)

Apart from an increase in households in 2011, it actually looks like the number of homes built actually exceeds or matches the growth in households. But what about density of households – are more people living under the same distorting the figures?

Well, for this we’ll need data from the Office for National Statistics on UK population. By comparing population figures against the number of households, we should get a feel for average household sizes, which should prove that households are getting bigger.

Average household Size (Sources: ONS and CLG)

So, back to the original question: are we building enough homes to cater for increases in household numbers? It looks like the answer to this is yes, but the sudden surge in households in 2010 could be a problem. Either way, we have become accustomed to increasingly smaller households, which will lead to us needing to build evermore houses in the future.

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