Estimating future household formation:some observations

BSPS Seminar: 16 December 2013

Neil McDonald: Visiting Fellow CCHPR

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Departure from trend is age dependent

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• Biggest departures were in 25-34 and 35-44 age groups

• Headship rates in 55-59 group higher than projected

From: Comparison of England Headship Rates

Projections for most affected age groups

3 3From: Comparison of England Headship Rates

Projections for most affected age groups

4 4From: Comparison of England Headship Rates

Changing household formation patterns

• ½ million more adults aged 20-34 living with parents in 2011 than 2001.

• Increase started before credit crunch/ recession

5 5From: Copy of 121006 men and women living with parents

Changing household formation patterns

• LFS data for headship rates for 25-34 year olds (extracted by C. Udagawa) suggest rate began to fall before recession started

6 6From: LFS data for one person families aged 25-34

Regional variations: headship rate changes 2001 to 2011

7 7From: Regional Headship Rates

Regional variations: headship rate changes 2001 to 2011

8 8From: Regional Headship Rates

North v South East Divide

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• Fall in headship rate of 25-34 year olds much larger in south east

• 35-44 year olds: headship rates grew in north and fell in south east

• London only region in which headship rates fell overall

From: Regional Headship Rates

Regional variations: 25-34 year olds

1010From: Regional Headship Rates

Regional variations in house price affordability

1111From: Regional Headship Rates

Regional variations in house price affordability

1212From: Regional Headship Rates

Regional headship rates and affordability

1313From: Regional Headship Rates

Correlation between headship rates and affordability?

• Some correlation between headship rates and (un)affordability

1414From: LFS data for one person families aged 25-34

Source: DCLG

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0.3 0.35 0.4 0.45 0.5 0.55 0.6

Low

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Headship rate

Headship rates of 25-34 year lower quatile affordability ratio: East Midlands LAs

Allowing for the impact of international migration

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• Alan Holman’s work implies that headship rates of who are not migrants will have departed from trend much less than overall rates suggest

• Impact largest on 25-34 year olds

• Implication for future projections

Future household formation rates

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• Projections not “the answer” but a framework for discussion of scenarios

• Projections not forecasts; demographic forecasts not like weather forecasts

• Population projections a big uncertainty at the local level

• Future household formation rates depend on, amongst other things:

– International migration

– Affordability/housing supply

• Population not homogeneous: case for segmentation?

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Neil McDonald is a Visiting Fellow at the Cambridge Centre for Housing and Planning Research. He was Chief Executive of the National Housing and Planning Advice Unit up to its closure in July 2010. He also held various Director-level posts at the DCLG in the housing and planning fields. Since leaving the civil service in 2011 he has developed an expertise in the application of research and analysis to assist planning practitioners plan for housing. He has advised local authorities and others on planning for housing and is the author of “What Households Where?” an analytical tool produced for the Local Housing Requirement Assessment Working Group and available through their website, http://www.howmanyhomes.org/.

Email: neilkmcdonald@gmail.com