Friday, March 08, 2013

empty homes to drop to zero next year

The number of empty homes in England is set to drop to zero next year. This may sound improbable, but if you follow current projections of house building rates and household formations it must be true.

Government projections show the number of households in England growing to 27.5 million by 2033. In 2011, the year of the last census, the official statistics showed a surplus of 750,000 dwellings. In other words there were three quarters of a million more homes than households. This neatly coincides with the official number of empty homes that year.

But the population is growing fast and as we are often told, house-building rates are not keeping up. In fact if we were to assume that house building carried on at it’s current rate for next few years (and there is no obvious reason to think that anything else will happen) the surplus will reduce to 200,000 this year and disappear altogether in about November next year.  This scenario would have many effects including me being out of a job!

But this surely cannot be true. If it were, work would already be underway on every single empty building in England. A glance out of my window here towards the Heygate estate would indicate this is very definitely not the case.  In fact, although the numbers of empty homes are linked to housing demand, the effect is quite slow. Empty homes are what economists call an inelastic supply. This means where there is a high level of demand for homes the number of empty ones will reduce, but not by anything like enough to meet all of the demand.  The number of empty homes has indeed decreased in recent years, but never by more than 20,000 in a single year.

There is an old adage that all models are wrong, but some models are useful. As such, the apparent empty homes conundrum will probably be solved when we find out the government household projections were incorrect. If for example, the number of single person households turns to grow at half the rate that the projection indicates, the current housebuilding rate is just right and there will be no shortfall. 

This all goes to show that we shouldn’t get too bogged down in statistics. We all know that real people are facing real housing problems (most of them linked to housing being too expensive). It’s self evident that getting empty homes into use is a useful thing to do in these circumstances but won’t solve all of the problems. Its also certain that it won't work the other way either. I predict another significant drop in empty homes numbers this year, but I would bet my job on it not droppping to anything like zero next year.