In recent years, the number, size, and the type of new homes being built in the UK has been a huge topic of discussion for politicians and homeowners alike. We all know that the number of new homes being built has been dropping each decade with the latest figures showing that just over 1 million new homes were built in the 2010s – the lowest level of any decade since the war. The lack of new build properties coming onto the market over the past few decades has been a huge driver of soaring house prices.
However, some housing commentators believe that another factor impacting rising house prices is because developers are still building homes that are too large for an ever-decreasing average UK household size. Whilst this is partly true, in that the actual number of detached properties being built in the UK is increasing, evidence shows that newly built houses have steadily reduced in size since the 1970’s as developers try to navigate outdated planning laws as they try to fit more properties into their limited building plots.
According to Which? the typical home in the UK is now 20% smaller than the 1970s. A study by Cambridge University found that the size of new homes in the UK is now actually the smallest in Europe. At just over 76 square metres, new properties in the UK are almost half the size of new properties in Denmark at 137 square metres. Another study by The Royal Institute of British Architects (RIBA) suggested that more than half of the new homes being built in the UK are now too small to meet the needs of the people who buy them.
Is the average size of UK households reducing?
According to the Office for National Statistics, the UK’s average household size was 2.4 people in 2019. This number has been declining over the years, as more people choose to live alone or in smaller households. For instance, in the 1960s, the average household size was over three people.
Over the last 50 years, a combination of an ageing population, an increase in the number of divorces, plus more people choosing to live alone has caused a fundamental change in household composition – particularly amongst single person households which has doubled in number. These changes have increased the demand for properties.
Recent research indicates that the number of one-person households has risen sharply in the UK. In 2021, there were around 8.2 million one-person households, up from 7.7 million in 2018. This trend is expected to continue, with projections suggesting that by 2043, almost one in three households will comprise just one person.
But it’s not just one person households that is dictating what type of properties are being built. In its excellent recent report entitled “The Case for Housebuilding”, The Centre for Policy Studies, highlighted two other key changes in household composition. The fastest growing household category over the last two decades has been households containing multiple families which has increased by two-thirds to an estimated 278,000 households in 2020. The report states that this could be because of major social change, but it says that it seems strange that this increase in multiple families has gone hand in hand with higher house prices.
However, the report states that there has been a major increase in the number of 20-34 year olds who have either never left their parents’ home or have returned to live there. In 2000 around 20% of 20-34 year olds lived with their parents (2.4 million), rising to 22% (2.7 million) in 2008 and currently stands at 28% – equating to around 3.6 million people.
The lack of affordable homes is a particular issue for younger generations. Research suggests that millennials and Generation Z individuals are struggling to afford to buy their first home, with many forced to rent for longer or live with their parents.
It is this lack of affordable housing that means that housing is currently at its most unaffordable level for around 150 years. At 5-6 times average earnings, first time buyers currently have a higher average House Price to Earnings Ratio than ever before. This particularly impacts young people and their ability to get an initial foothold on the housing ladder.
Rates of home ownership amongst 25-34 year olds is currently 41.4% and has collapsed since 2003 when it stood at 58.6%.
Are houses getting smaller?
Yes – all the evidence suggests that new build properties are getting smaller. Although developers have been taking account of changing household patterns, the availability of suitable land to build on has also had an impact on the size and type of properties they have been building.
It is estimated that in the decade after 2005, around 44% of all new build homes were flats. Coupled with the actual dwelling size falling, the number of bedrooms in homes has also hit a record low. Homes in 1940 boasted an average of 3.63 bedrooms per property. Today that number has fallen to an average of 2.95 bedrooms and interestingly the size of these bedrooms has not increased to compensate: if anything they have been getting smaller.
And it’s not just bedrooms that are getting smaller. According to property firm Spring, and the housing market analyst, Propalt, the average living room in 1970 was 268 square feet, but by 2020 that had shrunk by almost 30% to 195 square feet. Meanwhile the average kitchen built in 2020 was almost a fifth smaller than its 1970 equivalent. In the past, new build properties had bigger, and separate rooms. Now many properties are open-plan, and this is one of the reasons developers can build more, smaller properties in limited spaces – making smaller homes work for homeowners.
So, is the planning system fit for purpose?
It’s very clear that the UK planning system is outdated, complex, underfunded and understaffed. Years of partial, stop-start reform and budget cuts have slowed the process which must now be brought back up to a sensible speed. That starts by recruiting and training enough new staff to support the planning process in local government.
The availability and cost of land is one of the most significant long-term barriers to building more homes of the right size and of decent quality – and all at affordable prices. We urgently need to have a serious conversation about the green belt – the current guidelines were introduced in the 1950s and were designed to stop urban sprawl. Despite conjuring images of our green and pleasant land (and evoking the kind of reaction to development that would match), the truth is that much of it is neither green nor pleasant, and the rules now hinder many planning decisions.
While brownfield sites have a key role to play in the provision of new development, we also must acknowledge the cost and complexity of getting this land ready for building, not to mention its finite availability. According to Lichfields, the planning and development consultancy, brownfield sites can only deliver around 1.4 million new homes. With the UK in the midst of a housing crisis, clearly this is not in itself a practical long-term approach.
Last November, Leeds Building Society published a public policy report which looked at how the UK could address the housing crisis it currently faces. Part of the report looked at current planning guidelines and how they might be reformed. We support calls to reform the 1961 Land Compensation Act and end ‘hope value’, an old law that inflates the cost of land by making councils pay more to landowners based on what it could be worth after planning permission is granted. The rule pushes up the cost of housing, seriously impacts builders and makes affordable homes less viable.
Not only do we need to reform land compensation laws, but we also need to ensure that any change to land value rules facilitate more affordable homes. Section 106 agreements – which a developer pays towards local infrastructure as part of the planning process – are by no means perfect, but they remain the biggest funding source for affordable housing in the country. We need a clear commitment that the purpose of reforming Section 106 is to deliver more affordable options.
It’s clear that not enough homes are being built – and the homes that are being built are getting smaller as builders try to negotiate out-dated planning laws. The problems affecting homeownership are deep-rooted and wide-ranging but building enough homes of the right size, design and quality to meet demand is the right place to start.
With housing now at its most unaffordable level for around 150 years, reforming the planning system has surely to be top of the government’s housing policy.
Written by Martese Carton, Director of Mortgage Distribution, Leeds Building Society.