How Many New Homes are Needed in the UK?

As the UK grapples with a rapidly growing population, the need for new homes has never been more pressing. With projections indicating a rise to over 74 million residents by 2036 from 67 million in 2021, our housing landscape faces unprecedented challenges to provide housing for the UK’s growing population. Coupled with an ageing population and the rising age of the average first-time buyer, the pressure to develop suitable, affordable housing has intensified. But how do we solve this, and how many new homes are needed in the UK to curb this huge supply and demand imbalance? 

The Need For New Homes

The UK’s population is expanding at a rapid pace. According to the Office for National Statistics, the country now has over 67 million residents, with projections estimating that the population will swell by a huge 10% over the next fifteen years. This trajectory could see the UK becoming the most populous nation in Europe by the second half of the century—an impressive statistic given the UK’s relatively small land area.

However, it’s not just growth but also an ageing population that’s reshaping the housing landscape. With advancements in healthcare, people are living longer, pushing the average age of a UK resident higher each year. For example, the number of those aged 65 and over rose from 9.2 million to 11 million between 2011 and 2021, highlighting the need for homes that accommodate this demographic shift.

These population changes are placing considerable pressure on the property market. Existing housing stock must be upgraded to adapt, new homes need to reflect changing needs, and, most importantly, more properties must be built to meet increasing demand. With such drastic population growth, it is no wonder that there is now a significant backlog of individuals looking to buy or rent properties as people seek to relocate for various reasons—whether due to affordability, unsuitable housing, or the need to move for work or education. National and international migration, notably influenced by events like the war in Ukraine, has also driven demand, with net migration reaching 685,000 in the year to December 2023.

Adding to this, first-time buyers continue to fuel demand, with 293,000 purchasing their first home in 2023. Without adequate housing supply, the country faces rising overcrowding, delayed independence for young adults, reduced labour mobility, and growing homelessness. One thing is abundantly clear – the need for new homes in the UK is greater than ever before.

How Many New Homes Are Needed In The UK?

With population growth continuing at a steady pace, estimates from the UK government suggest that around 300,000 new homes are required annually across the UK. However, the National Housing Federation estimate that even more are required, suggesting that at least 340,000 new homes are needed each year to meet the current housing shortfall, while other research indicates that as many as 550,000 new homes are needed per annum. 

Is The UK Building Enough Homes?

In short – No. Despite these pressing needs, multiple, successive governments have consistently fallen short of targets, most recently under the Conservative leadership of 300,000 new homes a year. Labour has since revised these goals, setting new targets in July 2024 and committing to deliver 1.85 million homes within the first five years of their term, a more ambitious target than previously set – however, with historically low net new housing completions, uncertain building costs and pressure on funding options, many remain skeptical of the new government’s ability to construct enough properties to meet their target.

In fact, the closest the UK has come to reaching its homebuilding target since it was announced by Michael Gove in 2019 was when 243,000 homes were built in 2019/20, still 57,000 short of the goal. While this is a substantial increase from the 125,000 homes constructed in 2012/13, it’s clear that Britain continues to struggle with meeting the housing demands of its growing population.

The outlook remains concerning. According to a report by the Home Builders Federation, planning approvals for new homes have hit a decade low. In the year leading to June, just over 230,000 units were approved, and the number of sites granted permission dropped by 10% compared to the previous year, reaching its lowest level since 2006. This certainly does not bode well for Labour’s elevated housing targets but could the increase in planning resource help? We shall see in time.

How Will The UK Build More Homes?

There are ongoing debates around building on greenbelt and ‘greybelt’ land—a strategy proposed by the current Labour government – as part of the solution to building the homes of the future. The greenbelt, established over 70 years ago, spans around 13% of England and was designed to control urban sprawl and prevent large towns from merging. Under Labour’s plans, councils unable to meet their housing targets could see some greenbelt land reclassified as greybelt, unlocking it for new home construction. Notably, half of the homes built on this re-designated land would need to be affordable, which bodes well for first-time buyers stuck in the rent cycle.

But how much development can actually happen on this land? While official data on greybelt land doesn’t exist yet, estate agent Knight Frank has identified over 11,000 previously developed sites, amounting to less than 1% of the current greenbelt. These sites, primarily in southern England, with over 40% in the London greenbelt area, could potentially accommodate between 100,000 and 200,000 new homes.

Beyond land reclassification, repurposing existing buildings of ‘changing use cases’, such as converting old office spaces, offers additional opportunities. In fact, Habitat for Humanity GB estimates that vacant commercial properties owned by Local Authorities could generate approximately 19,500 new homes. This certainly won’t solve the supply-demand imbalance on its own, but is a viable avenue many developers are taking, with almost 10,000 change of use cases into residential properties occurring over the 2022/3 period.

Where Do We Need To Build New Homes?

Building new homes must also be strategically distributed across the country. While the demand for housing is widespread, it’s particularly acute in urban areas where job prospects and educational institutions are concentrated—a shift from the pandemic trend that saw a rise in rural living. Cities like Manchester and Leicester have experienced significant property price surges, with growth rates of 87% and 85% over the last decade according to the ONS.

Each region also has its own unique housing needs. Some suburbs are home to older populations, others cater to students, and certain neighbourhoods draw in specific types of buyers or renters. This variation is reflected in the recently updated local housing targets, revised by Labour in July. In addition to reinstating mandatory targets, the calculation method, previously based on outdated data, has been refreshed. The new approach ensures that housing development is proportionate to the community size, while pushing for more ambition in the most unaffordable areas.

What Are The Consequences Of Inadequate Housing Supply?

Unattainable Homeownership

The rapid rise in home prices has outpaced wage growth. According to data published by the ONS in March 2023, the median salary in England was £20,739 in 2002, with the median house price at £102,000, resulting in an affordability ratio of 4.92. By 2022, the median salary had risen to £33,208, while the median house price soared to £275,000, leading to an affordability ratio of 8.28. This is particularly prevalent in London, which emerged as the least affordable region, where the median home price was 13.3 times the annual median salary. In short, this means that the average person cannot save as easily for a home to purchase, and may struggle to meet basic rent affordability.

More Adults Stay At Home

In 2002, 2.4 million young adults aged 24 to 30 in the UK lived with their parents. By 2022, this figure surged by over a million to 3.4 million, equating to about one in four individuals aged 20 to 24. The growing affordability crisis means many young people cannot purchase homes in their hometowns, where they were raised, or find the independence they want by moving into accommodation outside of the family home.

Inadequate Living Standards

In the 2021/22 period, 3.5 million homes in England were classified as ‘non-decent,’ impacting 12% of households with dependent children, posing serious health risks to occupants. Additionally, in 2021/22, 732,000 households in England were deemed to be living in overcrowded conditions, with some homes deteriorating beyond their original lifespan and not being replaced. With so few available homes, and existing builds deteriorating in quality, the need for new homes is great.

Land Buying, Developing and Selling Made Simple

It is evident that, more than ever, the UK desperately needs new homes – demand has long been outpacing supply so it is now the responsibility of both developers and government to take action and create the homes of the future that the UK both needs and deserves. 

At Centrick, we specialise in land development and consultancy, guiding clients through the complexities of the property market. Our expertise helps ensure that new homes are not only built but are also tailored to meet the diverse needs of the communities they serve. To delve deeper into the intricacies of land acquisition and development, be sure to download our comprehensive guide, “Land: How To Buy It, How To Develop It, How To Sell It.” Fill out the form at the bottom of the page to access this valuable resource for free and empower your next property venture with Centrick.