By Claire West

England faces a shortfall of 750,000 homes by 2025 according to a new report from ippr. New analysis of official government projections show that if the economy bounces back the gap between supply and demand could be equivalent to the entire housing demand of the populations of Birmingham, Liverpool and Newcastle combined.

ippr analysis shows how housing demand responds to three different economic scenarios and projects that even a faltering economy will lead to demand for more than 200,000 additional homes each year. The best case scenario for the economy will require more than 280,000 extra homes each year. But if housing supply continues at the rate of the last twenty years — around 160,000 additions per year — the gap between the number of households and the number of available homes ranges from 255,000 and 1.2 million by 2025.

Using the government’s own projection for household growth, ippr analysis shows that England will be 750,000 homes short of the required housing demand by 2025. The worst supply and demand mismatches will be in London, the South East, East of England and Yorkshire and Humberside. In these regions demand is projected to be substantially higher than net additions to the housing stock in recent years.

London faces a housing gap of 325,000 homes

Yorkshire and Humberside faces a housing gap of 151,000 homes

East of England faces a housing gap of 132,000 homes

South East of England faces a housing gap of 77,000 homes

East Midlands faces a housing gap of 66,000 homes

West Midlands faces a housing gap of 28,000 homes

North East of England faces a housing gap of 16,000 homes

South West of England faces a housing gap of 7,000 homes.

The North West of England is the only region where supply could meet demand, with 40,000 extra homes compared to the number of households, due to the high rate of unoccupied premises at present.

The report shows that the social housing sector in particular will be under extreme pressure, no matter how the economy performs in future. If the economy performs poorly, up to 1.2 million households will priced out of the private sector and will need social housing. Even under good economic circumstances, an additional 550,000 households will need social housing by 2025. The report says that without a new housing policy, this demand will not be met.

There are currently around 4.5 million people waiting for social housing (1.8 million households, equivalent to 8 per cent of all English households). Last year’s Spending Review saw the housing budget cut from £8.4 billion over the previous three-year period to £4.4 billion over the next four years.

Nick Pearce, ippr Director said:

'We can’t go on as we have done. Britain needs to build more homes. That’s not going to happen without a fundamental review of housing policy. This new analysis shows the serious scale of the problem.

'If the rate of house building doesn’t radically increase, we face a growing housing crisis. Whether the economy performs well or poorly, a serious gap looms between housing supply and demand. Our ageing population and rising expectations for living standards are going to drive up demand but if there’s no change in housing policy it will seriously hold back supply.'