Flat Wales

Concerns about housing affordability and a series of high profile reports and announcements have resulted in a widespread recognition of the need to deliver a step change in the supply of new housing in the UK. Yet the headline growth figures might serve to obscure the specific nature of demand and may also result in building new dwellings that do not reflect the requirements of potential purchasers. Evidence of this is shown in the fact that the major boost in construction of apartments in urban locations has not been matched by the supply of larger family homes.
Nathaniel Lichfield and Partners is actively involved in a wide range of residential developments throughout South Wales – and in particular in Cardiff – where this trend has been particularly acute, to the extent that it is now threatening the efficiency of the housing market.

Demographic and housing change
Cardiff is the largest city in Wales and its 317,500 population accounts for 10 percent of the total within the Principality. Cardiff’s recent population growth has been largely fuelled by migration – which in turn is influenced by Cardiff’s profile as a vibrant economic, political and cultural centre. Between 2001 and 2005, there was a 1.3 percent increase in Cardiff’s total population and a 4.5 percent increase in the working age population. As in other parts of the country, Cardiff’s residents are living in increasingly small households: between 1991 and 2004, the average household size fell from 2.54 to 2.37, a trend that is expected to continue in the future. Together with the net effect of births, deaths, migration and personal preferences, this will have a considerable impact upon the demand for new housing – in terms of the number, type and size of units that are constructed.

Research undertaken by Cabe has highlighted an ‘understandable reluctance’ on the part of both builders and home buyers to depart from traditional forms. It noted that whilst there might be a case for policymakers to ‘explain and reassure’ (i.e. to seek to alter demand), ‘the views of home buyers themselves cannot simply be ignored’ and that in some cases ‘supply should change to accommodate demand’. However, although homebuyers in Cardiff (and elsewhere) aspire to purchasing a house and a significant proportion requires larger family homes, Cardiff has recently been described as ‘turning into a kind of “apartment city”’.

This view is supported by evidence of housing completions within Cardiff where over the last 10 years 43 percent of new dwellings in Cardiff were apartments. At the end of that period – in 2005/2006 – flats accounted for nearly 70 percent of new residential completions. This trend in the number of new apartments exceeding the number of new housing by a ratio of 2:1 is set to continue in the future. Of the dwellings with detailed planning permission at 31 March, 2007, 64 percent were flats and only 36 percent were houses (and only 30 percent provide family homes of 3 or 4+ bedrooms).

These figures cast doubt as to whether they reflect market requirements and preferences. It is well known that, in addition to families requiring larger properties, smaller households also aspire to live in larger dwellings which offer greater personal flexibility. The trend to smaller households does not necessarily equate to a willingness to live within smaller dwellings, particularly given the long term investment value of home ownership.

Research was undertaken into housing consumption and household size by Professor Dave King of Anglia Polytechnic University in 2005. He found that home owners exercise choice over their housing consumption, conditional on income and trade up to the dwelling size and type they can afford. Household size was shown to exert a much weaker influence upon demand. Moreover, space consumption was shown to decline only modestly as people age, with a tendency for older people to remain in their family home.

There is no reason to suggest that Cardiff is any different from these national trends, with a significant proportion of the City’s family dwellings likely to remain under-occupied by older households. As people live longer, the increased number of older home owners in Cardiff over the next 20 years will therefore be a major influence on housing needs.
The type of housing to be built in Cardiff will influence the extent to which younger households will be able to get onto and move up the housing ladder. The overwhelming emphasis on smaller properties and flats in the supply of new dwellings will only increase competition for larger family dwellings in Cardiff – and distort cost differentials between smaller and larger dwellings.

In his review of Dave King’s research, (Room to Move? Reconciling Housing Consumption Aspirations and Land-use Planning’) John Stewart suggests that the implications of planning policies concentrating on the delivery of smaller dwellings will have an especially big impact on younger households. He suggests that the growing shortage of larger homes and rising relative prices could make communities less sustainable by squeezing out middle-income households, including many key-workers, leaving more polarised communities of the very poor and well off.

The disparity in the supply of flats and houses is clear in the availability and affordability of the different types of property. The average price for houses in Cardiff has risen by 81 percent over the past five years whilst the average price of apartments has risen by only 68 percent over the same period. Although house prices rose by only 2 percent between April 2006 and April 2007, average apartment prices actually fell by 1 percent.

Implications
These trends are partly a factor of an existing (and continuing) shortfall in houses and a relative over-supply of flats. Whilst the overall demand for dwellings in Cardiff continues to increase, the high number of new developments has led to apartments remaining unoccupied. Increasing the supply of flats within Cardiff by almost 4,000 units by implementing existing planning permissions would further increase the level of vacancies within new apartments. By contrast and despite the falling average household size, the low number of new family homes is likely to exacerbate existing shortages in this sector, with implications for house prices and affordability.

Cardiff is recognised to be an economically vibrant city based on a wide range of characteristics, not least its demographic profile and its ability to attract and retain a large number of highly skilled workers. More than being inward looking, Cardiff is recognised as playing a leading role in the Welsh economy and, in particular, within the South East Wales City Region. The Cardiff Economic Strategy quotes the former European Commissioner for Regional Policy, Danuta Hubner, who stated that “a region can only be successful if its cities are successful”. The implication of this in the South East Wales City Region is that an increasingly successful and vibrant Cardiff will lead to increasingly successful and vibrant towns throughout South East Wales. The maintenance of Cardiff’s dynamism will, however, depend upon the provision of an adequate supply of housing.

A failure to deliver family housing will result in a further shortage of provision and increased affordability concerns. This would limit the opportunity for people to move up within the housing market and might constrain Cardiff’s ability to retain or to continue to attract the high quality employees upon which its success has depended. The implication of this would either be a threat to Cardiff’s continued economic growth or an increase in unsustainable commuting patterns to Cardiff. Neither option would accord with the sustainability aspirations of the Welsh Assembly Government. Careful consideration should now be given to how (and where) a more equitable range of dwelling types might be delivered, in line with consumer requirements and aspirations.

Gareth Williams is a Senior Associate Director and Simon Coop is an Associate Director at the Cardiff Office of Nathaniel Lichfield and Partners

1st Floor Westville House, Fitzalan Court, Cardiff. CF24 0EL
02920 435880
gwilliams@nlpplanning.com; scoop@nlpplanning.com