by Dannielle Sinnett, Hannah Hickman, Katie McClymont, Stephen Hall, Cat Loveday, Jessica Lamond and Rebecca Windemer
We were commissioned by Homes for the South West, a consortium of housing associations, to examine the factors affecting housing affordability in the region and provide an estimate of future housing needs. To do this, we drew on Government data, a survey of local authorities, interviews with housing associations, local authorities and private developers, and a review of planning policies in the region.
How affordable is housing in the South West?
The South West faces acute problems of housing affordability. The region is conspicuously less affordable than England as a whole, and the North and Midlands in particular. In 2021, median house prices were approximately ten times greater than the median earnings. These inter-regional disparities are also becoming progressively more pronounced; in 1997 house prices were around four times greater than earnings.
Three quarters of local authority areas have affordability ratios (the ratio between house price and individual earnings) higher than that for England as a whole, and all have affordability ratios higher than those for the North of England. There is also substantial diversity in affordability ratios within local authority areas in the South West. The ten least affordable neighbourhoods in the region have median house prices more than 28 times median earnings. Even in the most affordable neighbourhoods median house prices are still more than three times median earnings.
Which factors impact housing affordability?
Property prices in the South West are markedly higher than England as a whole, and have risen nearly fourfold – faster than the national average rate of increase – in the past 25 years. However, the region has lower than average earnings, which have failed to keep up with house price increases. This has significant implications for local people, especially younger households or first-time buyers.
House prices are often higher in places with a high environmental quality and good access to local amenities and services. We found that, within a local authority area, neighbourhoods closer to the coastline are less affordable, as are those in Areas of Outstanding Natural Beauty. In general, more rural places are less affordable than towns and cities, but within these rural areas, those with better transport and broadband connectivity were even less affordable. Stakeholder reported that the high land values in the region undermine the viability of affordable housing.
Furthermore, these locations are also popular retirement and tourist destinations. It appears that local authorities in the South West with a greater proportion of second homes are less affordable and in-migration is dominated by arrivals from elsewhere in the UK (as opposed to international migration). This suggests, perhaps, the existence of a distinctive residential ‘offer’ in the region, one that attracts retirees, people working from home and those commuting to London and the South East, further increasing demand for new homes.
Finally, we looked at the supply of new homes compared with projected household formation since 1997. Over this period, the supply of new homes in the South West has not kept pace with demand, with an estimated deficit of 99,978 homes. This shortfall does not account for holiday lets or second homes, so is likely to be much greater. Most local authorities’ assessments of housing need will not address this shortfall by 2032.
What is the impact of Right to Buy?
Housing providers in the South West report that Right to Buy has had a detrimental impact on housing affordability in the region, particularly in respect of its role in the depletion of the overall stock of affordable housing. Since 1997, some 33,220 local authority-owned homes were sold through Right to Buy, whereas local authorities in the South West delivered only 2,320 new homes. The impact of Right to Buy appears to be particularly acute in small rural communities where a handful of sales locally might equate to a high proportion of total stock and may be difficult to replace given the higher unit costs of construction on small rural sites. In addition, development viability and funding challenges make it difficult for local authorities to replace social housing on a one-to-one basis.
What is the impact of national and local policy?
Regional stakeholders were critical of the complexity created by multiple definitions of affordable housing observed in planning policies. More importantly, they argued that these definitions do not equate to genuinely affordable housing.
The under-resourcing of planning was identified as a significant impediment to timely decision-making and on-site delivery.
Assessing future affordable housing need
To assess future housing need we estimated the number of new homes needed for each local authority in the South West from 2022 to 2039, and the proportion of new households that would need to spend more than 40% of their monthly income on mortgage repayments (i.e. unaffordable housing).
We estimated that around 28,337 homes need to be delivered in the region each year between 2022 and 2039, of which 17,282 would need to be affordable for those on median incomes – around 60%. These proportions are far greater than the thresholds in many planning policies.
Despite these challenges, stakeholders detailed how collaboration and partnership working between housing associations, local authorities and SME housebuilders was able to deliver affordable homes. They also highlighted that the delivery of affordable homes was intrinsic to other priorities, including ensuring high quality homes and responding to climate and ecological emergencies. Such practices provide opportunities on which to build to ensure that housing is delivered in the region which is affordable and sustainable.
The full report can be found here: https://homesforthesouthwest.co.uk/home/affordability-report/