Young people are paying the price as high net migration contributes to housing crisis

December 21, 2017

Rents

High levels of net migration have driven the soaring demand for rental properties over the past decade and it is young people who are paying the price through ever higher rents which in turn has made it more difficult to save for a deposit. That is the conclusion of a Migration Watch UK paper being published today.

Immigration has been a major driver of the demand for privately rented properties across England. Privately rented homes with foreign-born heads now account for a third of all households in that sector, up from around a fifth in 2000. As supply has failed to keep pace with the rise in demand, rents in England have risen by 23% over the past decade.

The paper also shows that London is bearing the brunt of ballooning demand for rental properties, which has largely been driven by unprecedented levels of net migration.

Analysis of the Labour Force Survey shows that homes headed by those born abroad accounted for more than 80% of the total growth (265,000 out of a total 328,000 net increase) of households in London’s private rented sector over the past decade. Over the same period, London rents have been increased by 36%, considerably more than the 21% rise in average earnings between January 2008 and January 2017.

The supply of homes

The fact that immigration is a major component driving the demand for homes across England is often ignored or downplayed by many commentators and politicians. This is all the more indefensible given that, during the last decade, more than 90% of additional households in England had a foreign-born head. ONS figures show that of the net change in the number of households in England of just over 1.2 million between 2005-2014, more than 1.1 million had a foreign-born head (for more, see Annex A of our recent paper 'The Impact of Immigration on Housing Demand in England')

Meanwhile, the supply of new homes has failed to keep pace. Housebuilding across the UK has fallen short, averaging only 130,000 a year in the past ten years. In contrast, the House of Lords Economic Affairs Committee said in its July 2016 report ‘Building more homes’ that at least 300,000 homes need to be built across the UK each year, the majority of them in England.

Nowhere is the impact of the soaring demand for homes more apparent than in London, where net migration is entirely responsible for the population increase of 1.1 million over the past decade. The paper argues, that, despite losing more people each year to other parts of the UK than any other region of the country, the rapid growth in the migrant population in the Capital has put a huge strain on the city’s housing stock.

The impact on young people

Rents have risen as demand has outpaced supply leaving many young people increasingly unable to buy their own home while developers, landlords and private investors have benefitted financially.

The higher cost of purchasing a property has contributed to an increase in the number of young people being forced into the private rented sector – the paper finds that the share of 25-34-year olds in England heading privately rented homes has nearly doubled (from 24% to 46%) over the past decade, while the proportion of owner-occupiers in the same age bracket fell from 57% to 38% during the same period.

For some young people the high cost of renting can mean spending longer living in house shares or with parents. Indeed, research by Shelter recently revealed that ‘three in five (59%) 18-44 year olds in Britain say they will be forced to put their lives on hold as a result of the housing crisis’.

The way forward

Clearly, more homes need to be built. However, at current levels of net migration a new home will have to be built every five minutes, day and night, just to house new migrants and their families (see DCLG projections). It follows that any solution to the housing crisis must include a significant reduction in levels of net migration (which has averaged 208,000 a year for England alone over the past decade).

Commenting, Lord Green of Deddington, Chairman of Migration Watch UK, said: