Transcript Affordability and household projections, Geoff Meen

Affordability and
Household Projections
Geoff Meen,
University of Reading
July 12, 2016
© University of Reading 2006
www.reading.ac.uk
The Problems
•
The official projections are trend based and deliberately do not attempt
to take into account changing economic environments – affordability is
the obvious factor.
•
But they are still used for estimates of housing need/demand.
•
From the next graph, in many locations HRRs for the young have fallen
since the early 1990s.
•
How should these be projected in the future? Do we assume that they
return to “trend” (implying that affordability will not continue to worsen) or
do we attempt to take into account possibly worsening affordability due to
housing supply shortages?
•
The levels of housing construction currently taking place are not
consistent with the household projections.
•
The following graphs shows that, for these locations/group, HRRs rise
again. This is not necessarily “wrong”.
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Household Representative Rates 1991-2012
single males aged 25-29
0.6
Barnet
0.5
Barnsley
Basildon
0.4
Basingstoke
Bath
Birmingham
0.3
Blackpool
Bournemouth
0.2
Bradford
Bristol
Cambridge
0.1
Canterbury
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
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Household Representative Rates 2012-2037
single males aged 25-29
0.6
0.5
Barnet
Barnsley
0.4
Basildon
Basingstoke
Bath
0.3
Birmingham
Blackpool
0.2
Bournemouth
Bradford
Bristol
0.1
Cambridge
Canterbury
0
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What does economics tell us could happen to HRRs?
•
Work carried out for DCLG/NHPAU since 2005 has attempted to model
the probability that individuals with different socio-economic
characteristics would become household heads given the level of
affordability where house prices are determined by the interactions of
demand and supply.
•
This work has consistently shown that, even with higher levels of housing
supply, affordability could worsen considerably over the future.
•
This implies that the number of households would be lower than in official
projections.
•
As an illustration – and it is only that, not a forecast …
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Households (% difference between official and “economic
estimates)
percent difference between "trend" and "economic" estimates
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
0
-1
-2
-3
percent difference between "trend" and
"economic" estimates
-4
-5
-6
-7
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Problems with “economic” estimates
•
These imply that we can predict affordability into the future.
•
We know what sorts of variables are likely to be important, but
reasonable estimates of affordability to 2037 is pushing the bounds of
credibility.
•
Is there really a problem of lower HRRs? They imply staying with parents
for longer or sharing. These are only “problems” if there are efficiency
losses to the economy or possibly if they violate social norms which have
become accepted because of rising incomes.
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