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Brexit means we need fewer houses - or does it?

Opinion

Published: 27 March 2017 | Author: John Perry, policy adviser, Chartered Institute of Housing

John Perry, production editor of the newly published 2017 UK Housing Review, examines the implications of Brexit on the demand for housing in the UK.

It is an obvious claim, already made by some newspapers opposed to building in the countryside: if we are leaving the EU, there will be fewer migrants, and so we can build fewer new houses. In the latest edition of the 2017 UK Housing Review – just published by the Chartered Institute of Housing – we have looked at whether such a claim stacks up.

Demand for housing depends mainly on household growth. The latest projections for England were made before last June’s referendum. They suggested that we need to build 227,000 homes a year up to 2024, with a lower target after that. Of the total, 37% – or 84,000 a year – results from migration.

Migration and housing demand

The projections assume that net migration falls to only 170,500 a year from 2020/21, but recent levels have been much higher. EU net migration alone totalled 165,000 in the past year, with net migration of 164,000 from outside the EU. Will EU migration really disappear by 2021 to make these projections a reality?

At this stage, we do not 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 continuing access for professional workers, including doctors and nurses, although these account for fewer than one in five EU migrants. There is also likely to be some sort of programme for seasonal farm workers. However, in the middle, there 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.

There could be a work permit scheme but, for sectors depending on people moving between jobs, it will be very difficult to put in place. Just think about care workers – 92,000 are from the EU, but there are already something like 70,000 job vacancies in the sector. So, there are difficult decisions about the numbers needed in each sector, how to admit them and under what conditions.

How many migrants?

The lobby group Migration Watch thinks a hard Brexit could cut net EU migration by 100,000 per year. Against that, the think tank Global Futures suggests the fall might only be 52,000. But, even with the Migration Watch number, if figures for both non-EU migration and UK nationals moving abroad stayed the same, net migration would still be about 173,000 annually, still slightly ahead of what is 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 are a number of reasons to continue building. One is that we are not close to meeting the annual target of 227,000 homes anyway: in 2015/16, we built 190,000 houses in what was an above-average year.

Another is that the household figures take no account of vacant properties 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.

The private rented sector

Union Jack and EU flag on bricksMigrants 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, although EU nationals may qualify for social housing, they account for only 4% of new lettings in a typical year.

It is also because it is expected 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 is 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 did not hold UK passports and almost one-third of these were from the EU. So, there might be a big effect on smaller local housing markets in places where the proportion of migrants has grown fastest.

Where might the biggest effects be?

The largest percentage changes in the foreign-born population between the last two censuses in England were in Boston (with a 467% change), South Holland (225%), Hull (195%) and Corby (187%), all largely as a result of EU migration. In Northern Ireland, where 76% of EU passport holders are private tenants, new houses intended for home-buyers 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% 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. And if labour does not come from Europe, either it will come from somewhere else or food production will move abroad. Brexit does not mean that Britain can avoid hard choices, any more than it means that we can stop building new homes.