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The Impact of New Supply


By Paul Smith

It is often claimed that people oppose new housing developments near their homes as they are worried that it will reduce the value of their home. Others oppose new market developments on the basis that they don’t improve affordability.

A new analysis of recent research suggests the former claim is correct while the latter is erroneous. There can be little doubt that paper from the GLA will further fuel the contests around new developments: “The affordability impacts of new housing supply: A summary of recent research” by James Gleeson is both informative and controversial.

The collection of research confirms that developments alone do not have a measurable impact on market-wide house prices or rents; however the local effects can be significant. Drawing upon research from across the world reviews of subsequent moves following developments showed the knock-on impacts of local moves, or chains of moves had the impact of improving housing conditions and choice for many people who did not move into the new development but the vacancies it created in the locality. This in turn would lead to measurable reductions in house prices and rents and owners sought to fill those empty properties. This effect was partially, but not wholly, offset by the growth in local services, such as restaurants making developed and redeveloped areas more attractive and pushing up values. There was also some evidence that moving market housing into low value areas would reduce crime and increase in school performance. The provision of more homes also increases, almost inevitably, housing choice. These impacts are fairly fast acting as well as localised as the new homes and the subsequent knock-on empty homes tend to be filled very quickly.

The paper also assesses whether this is the impact of gentrification. This can be offset in two ways, firstly by building more affordable housing in the same locality or building more market homes in high value areas.

The provision of additional affordable housing can also have the same impact creating a knock on of moves allowing people to move to more appropriate homes. I saw this in Bristol as people moved out of council flats into new social rented homes (council and housing association) creating opportunities for people often living in temporary accommodation to gain a permanent tenancy. Of course, some people would move directly from temporary accommodation into new homes which doesn’t increase that knock-on vacancy. The more social homes there are they greater the impact of building more in creating those additional benefits. At my previous housing association, we conducted some research into the impact of building extra care housing for older people. This produced similar benefits with sometimes one new property creating four beneficial moves and on average at least two. One hundred additional affordable homes can produce housing improvements and moves for two hundred households.

The caveat is that the benefit of new homes on a local housing market is reduced if the majority of new residents are from outside of the area, for example provisional towns and cities being overwhelmed by people moving out of London and the Southeast. I live on a new estate on the outskirts of Bristol and most of my neighbours have moved here from nearby areas of East Bristol, rather than from many miles away. Those local moves have had the benefit described in the research of creating opportunities for people looking locally for homes who don’t move onto this estate. The same is true of the social rented housing here, my association owns some of it, which is also largely people from the surrounding communities.

I’m sure this report will be used by both sides of the development debate; however, it is good to read a positive assessment of the impact of development in a time when we know that so many people are impoverished by our housing ‘market’.

21 August 2023

Planning for a local future