London has seen large increases in its population over the last 20 years. The city reached 8.6 million residents in 2015, and is set to continue its rapid growth - by 2025 London’s population is projected to grow by over one million people. This has far-reaching implications on all property in the capital and, in particular, housing. With the number of new homes being built already behind most measures of need, we will need a step change in housing supply to keep up.
Official government population projections are the foundation of planning just how many homes we need. Forecasting population is very tricky and, more often than not, those projections are lower than the reality. The 2011 census found 105,000 more people living in London than had been forecast in the 2010 based population projections. This theme continues in more recent projects, with consistent under forecasting.
The impact of London’s growing population is further exaggerated by an equally important component – household size. The size of households in the UK has been falling for several decades and London is no different. This is due to a complex mix of demographic factors, and pressure on the space available in existing stock is increasing, driven both by our tendency to want more space as we get wealthier as well as cultural and lifestyle changes.
The 2011 census, however, actually showed that London household size bucked that trend and increased slightly. The affordability pressures in London, that have in most instances been exacerbated in recent years, have seen one of the few flexors moving to cope with high prices. While a buyer or renter cannot often change the price of their home, they can opt for a smaller property or club together with friends and family to afford the home they want to live in. Affordability pressures have also delayed the formation of new households. There has been a sharp increase in the number of 20 – 34 year olds living with parents in recent years.
Larger households are also a feature of the private rented sector (PRS) as available space is used more intensively to keep costs down. The PRS, by its nature, is more efficient in using space than owner occupied. Rising costs of housing for all tenures has led to more ‘hutching up ‘ in rented homes. If household sizes across all tenures in London were similarly large, the effect on housing need would be significant. We estimate that we would only need to be building 18,000 homes per year to accommodate the growing population. While shifting household size can adapt to affordability constraints, we should be aiming for a city whose residents can afford their own private space.