Why are so many of the UK’s homes under-occupied?

Housing has become much more expensive in the UK over the last few decades but, rather than encourage the more efficient use of housing, under-occupancy has markedly increased.

At the same time, there is evidently a housing crisis – housing at market prices is unaffordable for many and homelessness is on the increase. The need for social housing has never been higher. How could making better use of our existing housing stock contribute to resolving housing needs?

‘The existing stock of housing in England is not used particularly efficiently’, the Economic Affairs Committee of the House of Lords concluded in a 2016 report. However, most debate as to how to resolve housing issues concentrates on the provision of new homes, often on greenfield sites. As is apparent from my work for the Campaign to Protect Rural England (CPRE), this, in turn, is likely to result in urban sprawl, loss of Green Belt and other countryside, and higher infrastructure costs, without necessarily addressing affordability issues.

The DCLG’s English Housing Survey 2014/5 reveals that 51% of owner-occupied homes in England (7.3 million households) are under-occupied, that is the homes have at least two bedrooms that are not regularly occupied. In 1995/6, the equivalent figure was 39% (5.3 million households). This indicates that our existing private sector housing stock is being utilised less and less efficiently. Why is this?

It seems that as houses are ‘increasingly seen as a store of wealth’, the market appears to become less efficient in allocating housing according to the National Institute for Economic and Social Research (NIESR). There appears to be something of a dearth of research into precisely why this is the case and how the better utilisation of the existing housing stock could be achieved. Exceptions include recent publications by Danny Dorling, Ian Mulheirn and Legal and General.

Research is needed that explores how under-occupancy in the UK’s private sector housing market compares with markets elsewhere, particularly in other parts of Western Europe. What is the impact of property-relevant taxes in other countries? What signals does our current tax system send out to UK home owners? To what extent does Stamp Duty introduce significant inertia into the housing market? Does Council Tax banding, particularly at the top end, result in market distortions? What is the effect on the housing market of excluding owner occupied properties from Capital Gains Tax? How might recent changes in Inheritance Tax affect housing occupancy? Do the equity release encouragements offered to home owners have an impact? What fiscal and other incentives could encourage more home owners to take in lodgers?

In addition to fiscal measures, what other factors might affect housing under-utilisation rates in the UK? Are suitable smaller properties available, in retirement villages and elsewhere, which downsizers might occupy if they wish to move? What psychological, cultural and institutional factors inhibit downsizing?

Research to better understand these issues and to develop a more informed understanding of private sector housing issues is urgently needed. I invite and encourage comments, suggestions and support for such a research programme from RSA Fellows and hope that this is a challenge that will be taken up by the RSA’s Action and Research Centre and amongst the Fellowship.