Running up the down escalator

What's Really Going on with Housing and Migration?

The most viral tweet I ever made was about housing:

We all know why: whether you’re renting or seeking to buy, the housing crisis is one of the most immiserating factors of life for many people in modern Britain. Only 39% of 25 - 34 year olds own their own home, down from 59% in 2000. Meanwhile, the share of 25-29 year olds living with their parents has gone from 20% to 28% in the last 15 years. Rental prices are shooting up across the UK.

This makes life worse for people in so many ways. It makes it harder to enter a stable relationship - or to have children. It sucks up money that could be used for other things (and, if renting, with nothing to show for it). It strikes at the heart of the social contract: that if you do the right thing, work hard, obey the law then you will be able to have a decent place to live, have a family and a decent life.

There are also good arguments that the housing crisis harms the UK economy more broadly. Ever-increasing house prices diverts capital into housing, increasing asset prices rather than productive capital investment. High house prices make it harder for people to move where jobs are. And money spent on rent or mortgage is money that’s not supporting consumption or investment¹.

The core reason for this is that we’re not building enough houses² - and that, fundamentally, is the fault of government, of both parties, who have snarled up the planning system so much that supply is unable to keep pace with demand³. At just 434 houses per 1000 people, England has a notably lower number of houses per capita than comparable countries in Europe, or than the United States, or even Japan. And so house prices keep shooting up, in real terms from just over 3 times the median salary in 1997 to over 8 times that today.

But while people are comfortable talking about the housing prices, something that’s often shied away from is the link between house prices and immigration. It stands to reason, of course, that more people = more demand for housing. But is immigration really enough to make a significant difference here? Let’s have a look at the data.

But before we do, thank you to everyone who took part in the 2025 Forecasting Contest. This year we had an absolutely fantastic 381 entries - making it the largest exercise of its type in the UK that I’m aware of⁴. I’ll be cleaning and processing the data⁵ and publishing the Wisdom of Crowds this weekend - and then, of course, it’s wait until next January to find out how we’ve all done.

Why are you even talking about immigration, anyway?

Almost always, when someone raises the issue of immigration in a housing context, a well-meaning progressive⁶ will pop up to ask why our minds have gone to immigration, when actually housing demand is caused by a number of factors, including a growing and ageing population, or changing family structures such as fewer people living together in couples, more older people living alone for longer in big houses with spare bedrooms and an increasing number of separations and divorces. And they’re absolutely right: these things are all increasing demand for housing.

But here’s the thing. It’s pretty hard for the state to do anything about these sorts of social factors, unless you’re up for considering pretty draconian measures such as one child policies⁷, banning divorce⁸ or forcing people to live in multigenerational families even if they don’t want to. Are you proposing those sorts of policies? No? Neither am I. So let’s turn to the things that the Government can legitimately control: immigration, and the number of houses built.

Of course, it’s important to say that there’s nothing wrong with immigration per se. My Dad was an immigrant - but when he arrived here in 1983, net migration was 17,000 per year. Last year it was over 900,000⁹ - or over 50 times as great¹⁰. The UK’s era of mass-migration can be dated to 1997: before then, net migrations was never more than 100,000; since that year, it’s never been less. Even the most ardent proponents of migration will usually accept that when very many people arrive at once, this creates greater strains, at least in the short term, on public services, integration - and on housing

Migration Observatory, 2024

Many people, including

Neil O'Brien

, have written extensively about how not all migration is equal, how certain migrants - based on their skill-levels, education or other factors - are more or less likely to be net contributors¹¹, to commit crimes, or to otherwise contribute positively or negatively to the UK.

But one thing that everyone who comes to this country needs is somewhere to live.

Housing

Britain hasn’t built more than 300,000 houses a year since the 1970s. For most of the New Labour years, and after the financial crisis, we failed to buil over 200,000, with the number completed per year sometimes falling as low as 130,000. There was a steady rise from 2012 onwards, to peak at 248,000 in 2019, before falling back again.

NHBC Foundation, Homes Through the Decades, 2015

Labour has pledged to build 1.5 million houses over the course of the Parliament, which is being interpreted as 375,000 per year once they get up to speed¹². Most people I speak to, on both sides of the political spectrum, don’t think they’ll manage this: most estimates I hear is that they’ll get it up to the high 200s - better than the Tories, but a long way off what is promised - or needed.

The reality is, we’ve been underbuilding for so long that we need a LOT of new homes. Some estimates say we’d need to build half a million a year for at least a decade to get house prices (and rents) back to a reasonable level, relative to incomes. Whatever the exact n¹³umber, it’s clear that it’s a lot - and given the absolute maximum in recorded history is 412,000, we’ve got a real challenge on our hands - even before considering the impact of mass migration.

How much housing is required for immigration?

So how much of that, frankly already inadequate, flow of new builds is being taken up by the requirements of immigration? We need to compare the supply of new dwellings and the demand for new dwellings created by net migration.¹⁴

For the supply of new houses, we can take figures from the government figures for net supply of new dwellings for England. This shows the total number of new dwellings - e.g. including if a house has been divided into flats - as well as new builds.

We can then take the net migration figures from the ONS - at least back to 2012, before which we have to use the IPS data (you can see this in the graph from the Migration Observatory above).

New dwelling figures are for England. The Migration Observatory tells us that 90% of migrants live in England, so we need to adjust the total net migration figures down by 10% to adjust for this.

Finally, we need to compare the two: how many dwellings are required per 1000 new people? As set out above, an often quoted figure for England is 434. To check this, I've compared the population in 2011 and 2021 with the dwellings figures provided by the ONS for those years, and get 435 and 443 respectively, which align well with the 434 number. I’ve used 440 as representative figure.¹⁵

Putting all of that together we get the below:

We can see that back in 2000, approximately half (47%) of our new homes were going towards accomodating the flow of net migration, a number which rises to 73% in 2010, after the financial crisis (when house-building collapsed), only to fall back to 43% again in 2018, as Tory house-building hit its peak. We had a couple of good years during COVID, when net migration collapsed but we (somewhat surprisingly) kept building houses - only for the houses required for migration to soar in the post-COVID migration surge¹⁶, with a requirement of almost half again as many homes as were actually built.

In total, since 2000, 58% of new homes built have been required just to keep up with immigration. Over the last 10 years that’s 68%, the last five years 87%, and over the last three years a stunning 128%.

In attempting to solve the housing crisis, the Government has effectively been running up a down escalator. That escalator has gradually been accelerating - to the extent that over the last few years, we have actually been moving backwards. Far from improving, the housing situation is actually deteriorating - with new builds not even keeping pace with migration.

The Government could, of course, build more housing, if it wishes to maintain high levels of immigration - though that carries other disadvantages, such as the need to concrete over the Green Belt¹⁷. The wisdom of doing sometime deeply unpopular to facilitate something else that is deeply unpopular - rather than to make houses affordable for ou own citizens - is left as an exercise to the reader. Furthermore, given the track record of house building for the last 50 years, it seems only reasonable for to prove it can actually deliver the goods first - or else to cut migration to a more reasonable rate.

Otherwise, house prices and rents are only going to keep going in one direction: up.

1. A further concern is the pressure, in a few decades, it will put on old age. Many people count on owning their own home in retirement - and thus needing a lower income to maintain their quality of life. If they continue to have to pay rent, that assumption gets broken.

2. No, it’s not primarily that developers are hoarding land, or that we have oodles of empty properties (we have fewer than most other countries), or that it’s all about low interest rates (the last 18 months should have put paid to that myth). This is fundamentally about supply and demand.

3. In a functioning market, increasing prices would stimulate people to produce more of the relevant good, causing the price to fall again. But if people are unable to produce more, and demand keeps increasing, then the price keeps rising.

4. It is entirely possible there are larger ones I am unaware of.

5. There is always a small number of people who write things such as ‘yes’ or ‘probably’ as answers, rather than giving percentages.

6. But we still love you, well-meaning progressive readers!

7. Though with our TFR plummeting to 1.44 and showing no sign of stopping, this is really not contributing to upwards demand for housing - quite the reverse.

8. And separation!

9. Sometimes people suggest that the reason for the recent wave of very high migration is due to the schemes for Ukrainians and Hongkongers - schemes which should arguably be seen as separate for normal migration, as they were both responding to unique circumstances, were explicitly established by Parliament with cross-party support and enjoyed widespread support across all demographics (including from me). However, together only around 350,000 people have arrived on these schemes - or about 10% of the total immigration over the last three years.

10. I think it’s genuinely hard for many of us who grew up in the ‘90s, and was familiar with the occasional person whose parent or parents have migrated here, to really comprehend the sheer difference in scale compared to today.

11. It shouldn’t be surprising that many migrants are not net fiscal contributors. Most UK-born citizens are not net fiscal contributors: the richest 1% pay 29% of all income tax, and the top 10% pay 60% of it.

12. Given that this doesn’t start on day 1.

13. I am using financial years, I.e. the year to March. So a reference to e.g. 2012 refers to the period April 2012 to March 2013.

14. In case this isn’t unbearably obvious, I am not suggesting that all of the people migrating to the country are going into new builds - they clearly are not.

15. I did come across on figure that suggested it was over 500 (though still lower than other European countries). If this was correct, using a higher figure would make the impact of immigration worse.

16. And fall in house building.

17. Though we should do some building on the green belt - probably on the ‘grey belt’, as the current Government likes to call it.