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Mythbust

Quitting EU wouldn’t solve housing crisis

by Luke Lythgoe | 30.04.2016

Myth: Quitting EU would solve housing crisis

InFact: Bad policies are the main reason why Britain doesn’t have enough homes. While Brexit might cut migration a bit, it would destroy wealth that could be used to build new houses.

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A common Brexiteer refrain is that uncontrolled migration is putting a strain on housing. With many young people struggling to get on the housing ladder, the line sounds powerful.

But the argument is lopsided. While migration from the EU does boost housing demand a bit, it also creates wealth that could be used to build homes, if only the government took the necessary steps to make this happen.

The growing need for housing is driven by an increase in the number of UK households. Some of the factors, according to the House of Commons Library, are increasing life expectancy, the breakdown of households after divorces or couples splitting, as well as “hidden demand” for example in the form of adults moving back in with their parents.

Around 232,000 new households will be formed a year until 2033, according to the Department for Communities and Local Government. EU migrants will account for only 20% of this, with non-EU migrants responsible for a further 15%, according to a study by the Centre for European Reform (CER).

Britain needs to build between 230,000 and 300,000 new homes a year, according to recent reports. The snag is that we aren’t meeting those targets. Even in the boom years before the recession, the Labour government was only managing 219,000 (Table 209). In 2014/15, Britain built 152,000, though David Cameron has pledged to up this to 200,000 by 2017.

Solving the problem will require action on multiple fronts. Brownfield sites need to be cleaned up so new homes can be built. High rise blocks should be built so more people can live in London and other densely populated areas. Single people living in large houses could be encouraged, perhaps via the tax system, to move to smaller properties and so free up space that could be used by other people. Developers could be incentivised to build homes rather than hoard their land banks. Planning rules could be reformed so it is easier to construct new houses.

The failure to do all this is not the fault of EU migrants. It is the fault of successive UK governments.

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But aren’t EU migrants still making the problem worse, even if they only account for 20% of the forecast increase in households? No, because the same EU migrants are boosting the economy, creating the wealth that could be used to help solve the housing crisis. As the OECD said last week, “immigrants, particularly from EU countries, were responsible for roughly half of GDP growth in the UK since 2005”.

If the government had an effective housing policy, this wealth could flow into building new private sector houses. The taxes provided by EU citizens could also help fund the creation of social housing and the clean-up of brownfield sites.

By contrast, if we quit the EU and decided to put an end to free movement of people, migration would drop a bit. But so would our supply of builders which wouldn’t be good given the skills shortage in the construction sector.

Brexit would also probably mean losing full access to the EU’s single market – something which would damage our economy and lead to a hole in the public finances, according to a Treasury report. Mortgage rates would probably go up too. In other words, there would be less money to build homes.

This article is an adaptation of a piece that previously appeared on InFacts.

This piece was updated on May 14 to add that Brexit would cut the supply of builders and probably push up mortgage rates.

Edited by Hugo Dixon

Tags: , Categories: Uncategorised

5 Responses to “Quitting EU wouldn’t solve housing crisis”

  • APPEAL TO ALL UK WORKERS in MANUFACTURING and FARMING SECTOR (regardless of political orientation): As it can be read from the article from THE SUN newspaper (not a pro-EU one!) about the interview from prof Minford (date 15 March 2016) and on the UK Reuters Article at the launch of the pro-brexit manifesto on 28 April 2016 (publicly endorsed by Nigel Farage as from his speech on 29 april 2016). Before voting please read carefully what the official pro brexit economic future would be for the Brirish workers in manufacturing and farming: 1) Prof Minford words (SUN article titled “Brexit will boost our economy and cut the cost of BMWs and even brie”): “Over time, if we left the EU, it seems likely that we would mostly eliminate manufacturing, leaving mainly industries such as design, marketing and hi-tech. But this shouldn’t scare us.
    Britain is good at putting on a suit and selling to other nations.
    Around half of young adults now go to university, ending up in professions such as finance or law, while the making of things such as car parts or carpentry has hugely shrunk — but there will always be jobs for people without sophisticated skills.” (my note: I wonder in such scenario what will be left to do for the persons who did not attend higher Education?)

    2) Prof Minford words (UK Reuters article titled: ” Pro-Brexit economists hail benefit of scrapping EU tariffs and rules” ): “FARMERS, as well as CAR MANUFACTURERS, would SUFFER from lower exports to the EU, Minford said. But the economy as a whole would benefit from being able to SCRAP EU REGULATION on WORKER’S RIGHTS and CLIMATE CHANGE, and FOCUS on SERVICES where it had a competitive advantage”. Therefore the pro-Brexit UKIP endorsed economic model (so far the only official one from the Leave camp) views the loss of farming and manufacturing jobs as an acceptable thing as far as to protect and push only for the service sector (for the skilled, high Education British people only). Therefore FORGET about any possibility of Government TATA STEEL PROTECTION for workers. Moreover, on the same article, prof Minford states: “By leaving the EU and unilaterally scrapping tariffs on imports of food and manufactured goods, Britain would be able to reduce average prices by 8 percent”. (My note: OK prices WOULD reduce 8% – if lucky but this attitude will mean opening to DUMPING from whoever country wants. WTO rules are restrictive insomuch that a country, for example UK, will be obliged to adopt the same tariff (or no tariff) to every country in the world, without possibility to adopt one tariff vs a country and another tariff vs a different country. NO! Whereas the other country does not need or simply can not reciprocate as bound also by the WTO rules).

  • IS EU ECONOMY REALLY CRUMBLING? Answer to be read here: official statistics about 2015 economics of the EU (source completely unrelated to any EU referendum debate) the EU economy as a whole grew more than the UK one. The intra EU country as well as the extra EU exports grew significantly (source: “International trade in goods – Statistics Explained – Europa.eu” dated 7 April 2016). All details are in the report as from the source posted (not intended for the EU referendum but as a summary of EU trade). Therefore the EU is far from crumbling economically. The problem is to ask why UK exports are falling to other EU countries. Most likely (my suspicion) is that this is in relation to fall in output (productivity) of UK goods. In brief: other EU countries cannot import what is not there and does not exist because it has not been produced (UK problem, not EU one)

  • See “we are Europe” facebook page promoting what is good or and from Europe, cred by tech people with the support of actors and artists. For a passionate positive argument in favour of urope and the EU. EU is not only economics for UK but more, much more in positive terms.

  • Were we to quit the EU we could stop rich citizens from other EU countries and elsewhere from driving property prices up. EU rules prevent us from doing so at present.

    • Isn’t most of the foreign “hot money” driving up property prices (especially in London) coming from non-EU plutocrats (such as Arab oil sheikhs and Russian commodity oligarchs) who want boltholes in case their own authoritarian governments turn on them?