Immigration has fuelled the housing shortage, but not how you think

07/05/2024

This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.

Good afternoon and welcome to this week’s Home Front. In the run-up to last week’s disastrous local elections for the Government, one story dominated the headlines: Rwanda.

As polling day approached, it emerged a failed asylum seeker had been paid £3,000 to get on a plane to the African country. The flight was hailed as a triumph by the Government while others accused it of being a distraction technique. With protesters surrounding coaches reportedly set to transport other asylum seekers, across TV and radio commentary the importance of controlling immigration was discussed as a key election issue.

One reason for this being often cited and flagged, by no less than a former immigration minister, Damian Green, last week on Politics Live, is that immigration has “caused housing shortages across Britain”.

Indeed, two weeks ago, while on holiday with my grandmother I found myself explaining that it’s not quite the case that “people come to England on small boats and take all of our social housing” while she was reading a newspaper article which implied there was a clear link.

So, what’s the truth about the relationship between migration – legal and illegal – and the housing crisis?

The director of the University of Oxford’s Migration Observatory, Madeleine Sumption, told me the relationship between the migration of people to the United Kingdom and the shortage of social housing, as well as affordable homes to rent and buy, is not as straightforward as some make it out to be.

So far in 2024, 8,278 people have arrived in Britain by crossing the English Channel in a small boat.

Firstly, Sumption notes that the narrative that asylum seekers come to Britain and take the scarce resource that is social housing away from British people is not true.

There are currently more than 1 million households in England alone waiting for social housing.

And according to the latest government data, 90 per cent of lead tenants living in social housing are British citizens.

Where there is now a problem, Sumption notes is that in some areas the Home Office is “bidding against” local councils for temporary housing to house asylum seekers which is also needed as temporary accommodation for people who are on social waiting lists.

“There has been a real difficulty finding accommodation [for asylum seekers],” Sumption notes. “And that has created a little competition and pressure in trying to source low-cost accommodation for people who need housing assistance.”

However, Sumption is clear that sending “a few hundred” people to Rwanda won’t solve this problem.

The reason for social housing lists is simple: social housebuilding is low and, since the 1980s, 1.9 million homes have been sold through the Right to Buy policy. According to the Chartered Institute of Housing, 40 per cent of those are now owned by private landlords. In 2023, the demolition and sale of social housing outstripped new builds.

Research from Oxford’s Migration Observatory also shows that lower-income migrants are likely to live in overcrowded privately rented accommodation, suggesting that they do not take up more housing but instead occupy some of the worst homes in Britain’s housing market.

Next, Sumption addresses the impact of migration on the availability of homes to rent and buy where there is research to suggest that immigration “puts pressure on housing costs.”

There is no way around the fact that when people arrive in Britain legally through official channels they need somewhere to live.

Net migration has been particularly high in recent years. In the year ending June 2023, 672,000 people from all over the world arrived in Britain, according to the Office for National Statistics’ revised estimates. That was significantly higher than the pre-Brexit peak of 332,000 in 2015 and the equivalent of adding a city bigger than Manchester to Britain’s population.

Overall, the largest contributors to long-term immigration in the year ending June 2023 were non-EU workers and their family members (322,000) and non-EU international students and their family members (378,000).

House prices stagnate but flats rise in value as buyers swap to smaller properties

Sumption says it is important to flag that the evidence on the impact migration has on housing is “not as good as it could be”.

“We’re looking at a relatively small number of studies,” she explains. “But, with that caveat, I think housing is one of the areas where there is some reason to be concerned about the impact of immigration.”

Unlike the labour market where Sumption adds, “the evidence suggests that immigration isn’t really a problem,” because people aren’t coming from overseas and taking British people’s jobs, “the impact of immigration on housing does seem to be negative”.

As the Oxford Migration Observatory’s research notes, people born abroad have lower home ownership rates than UK-born people (47 per cent vs 70 per cent) and are therefore more likely to be in the private rental sector.

“In the context of population growth, immigration is likely to add to pressures on housing costs,” Sumption says because British home ownership rates have fallen for younger adults and there is now more demand for privately rented housing.

This is for several complex reasons which are not related to immigration. Consider the banks tightening up their lending criteria after the 2008 financial crisis and making it harder for first-time buyers to get mortgages. Consider the epic house price inflation which took place in the 90s, Noughties and 2010s which priced those without high incomes or inherited wealth out of home ownership. And, don’t forget, the sell-off of social homes that has pushed low-income British renters into private renting.

So, it is technically true that someone who comes to Britain legally to study, work in the NHS or hospitality, for instance, will be taking up a home that a British person might also want to live in.

However, while you could reasonably argue that immigration has exacerbated the housing crisis, you could not straightforwardly say that it is the cause of the dearth of affordable homes.

Sumption is clear that the issue of immigration and how British politicians respond to immigration should not be confused.

“If we had more houses, the impact of immigration on the housing market would look different,” she concludes. “It’s important to note that there are cases of local authorities who have been building new homes where immigration has not put pressure on housing costs.”

Sumption notes that another study from the Oxford Migration Observatory recently noted that immigration seems to drive up housing costs more for local authorities who have the most restrictive planning practices.

Indeed, research conducted by another migration expert, Filipa Sà, a reader in applied economics at King’s Business School, found that immigration can actually lower house prices in some areas because “people from other countries moving into a place seems to cause natives to move out”.

“I conducted that research over ten years ago,” Sà explains over the phone. “So I don’t know if it would hold today but it’s interesting.”

Sà thinks that what warrants more attention is the impact of foreign investment on house prices. “People invest in British housing for capital appreciation,” she says. “They don’t have to live here, they can rent the property out or even leave it empty.”

“There we are talking about high-income overseas investors,” she adds.

In the run-up to the general election, both the Tories and Labour will promise voters that they are the party who will be toughest on immigration as well as supportive of housebuilding and home ownership.

If they are serious, they will be honest about the relationship between migration and increased house prices.

We should be talking about affordable housebuilding. It would reduce social housing waiting list for people across the country, reduce competition for homes between homeless families and asylum seekers and, above all, mean that Britain could be a place which welcomes people who want to work and live here while also boosting our economy.

As a report from the housing charity Shelter in partnership with the National Housing Federation has found, building social housing would generate huge savings for the taxpayer across multiple departments:

£4.5bn savings on housing benefit
£2.5bn income from construction taxes
£3.8bn income from employment taxes
£5.2bn savings to the NHS
£4.5bn savings from a reduction in homelessness
£3.3bn savings to universal credit

Those numbers speak for themselves.

Key housing

immigration has fuelled the housing shortage, but not how you think

Andy Burnham has pledged to build 10,000 new social homes across his patch after being elected as Mayor for a third term. (Photo: Christopher Furlong/Getty Images)

Next up, speaking of the controversial Right to Buy policy, the Mayor of Greater Manchester, Andy Burnham, has said he wants to suspend the policy in his area and focus on building new affordable housing.

Burnham has pledged to build 10,000 new social homes across his patch after being elected as Mayor for a third term last week.

Polling shows that the majority of people, including nearly three quarters of Tory voters, think more social housing should be built.

This morning, I spoke to Oxford academic and author of Why Politics Fails, Professor Ben Ansell, about the local election results.

He noted that local elections are never a direct predictor of national elections because voters behave differently in them – they’re more likely to give their votes to smaller parties such as the Greens or the Liberal Democrats than when voting in a general election.

“What we’ve seen with the locals is that things are as bad for the Tories as they were last year,” Professor Ansell told me over the phone. “They’ve lost by-elections with terrible, terrible swings. I don’t think there’s any reprieve for Rishi Sunak from this.”

Incidentally, Professor Ansell’s take on the local election results is not that they spell a future hung parliament at all but, instead, more Tory losses.

As Professor Ansell sees it “people do not want to put their votes in the blue box”. Why? “It’s probably because of the general economic catastrophe of the last few years – the cost of living crisis and mortgage increases I’m sure are affecting that.”

Voters spoke clearly in last year’s local elections too, when the Tories lost 1,063 councillors.

The problems facing the Government are a lack of good quality affordable housing, particularly for the under-50s, rents have hit historic highs, social housing waiting lists have exploded and 1.5 million people will remortgage this year and be hit with a higher rate at a time when house prices are not affordable for most.

Several of my friends who rent privately have had to move in with family. And, even amongst my more affluent friends mortgage payments now take precedence over holidays.

For my part, by the end of this year, my mortgage will consume so much of my take-home pay that even though I earned enough last year to push me in the top tax bracket, I will struggle to afford luxuries – no dinners out, no weekends away.

On top of that I, like millions of others, am struggling to access the public services that I am taxed to fund. In March, I was referred to see a consultant for some ongoing health issues. Yesterday I finally received my referral letter. I have been offered a phone call at the end of September.

That’s a full seven months after my GP referred me – far beyond the 18 weeks within which a patient is supposed to see a consultant after being referred to one.

And yet, last week the Government chose to spotlight immigration and their Rwanda policy.

It’s not even the vote-winner they might think, according to Professor Ansell. “I think their obsession is a distraction from where the swing voters are,” he concludes. “[Immigration] has been important to voters in the past but it’s not so much now.”

“Imagine explaining the Rwanda policy to your children in years to come? It’s such insider baseball…it’s far down the list of things that people care about now and it will be even more so then.”

Britain is breaking, the social contract is snapping. The question is whether politicians are paying attention?

Ask me anything

This week’s question comes from a reader. Her oven is broken, and her landlord is refusing to repair it.

“Our landlord said he wanted us to take on responsibility for appliances and that if he was putting the place back on the market, he would just remove them,” she explained. “Can he do this?”

“The oven has now been broken for over a month and he says he doesn’t know when he will get to it. He just accuses us of breaking it!”

My answer?

By law, landlords must supply a hob and oven, so tenants are able to prepare hot food. This is stated in Section 10 of the Landlord and Tenant Act 1985 which says “facilities for preparation and cooking of food” must be provided.

Thank you to everyone who has submitted a question. Please keep them coming there @Victoria_Spratt, on X, formerly Twitter, @vicky.spratt on Instagram or via email [email protected].

This is Home Front with Vicky Spratt, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.