Study detects mismatch between new housing supply and demand
A study published today by the UAB Centre for Demographic Studies points to a mismatch between housing demand and the amount of new housing available, mainly due to immigration. In the 2014-2020 period, the number of households grew four times faster than the number of dwellings: Catalan households increased by 222,000 units (175,000 explained by immigration), while only 50,000 new dwellings were built. The cyclical evolution of international migration is already a key demographic factor in estimating future construction needs. Similar mismatches also occur in Spain. The study asks whether a demand system based on immigration may not have the same effect on offer as one based on young endogenous demand.
The number of household units has grown four time faster than the number of new dwellings.
The study La demanda d'habitatge. Quo vadis? published today by the UAB Centre for Demographic Studies of the Universitat Autònoma de Barcelona (CED-UAB) in the journal Perspectives Demogràfiques shows important developments in the relationship between demography and residential demand. It analyses the shift in housing demand towards a greater weight of less stable factors such as immigration (which accounted for 93% of net household growth in 2019), using the case of Catalonia, although its conclusions can be extended to Spain as a whole. Using data from Population Statistics and the Labour Force Survey (EPA), it offers an X-ray of what is currently happening.
The number of households added each year no longer shows a linear and predictable trend, but has a marked cyclical nature. In 2013 some 9,000 households were added to the stock, and in 2019 there were 45,000.
While fertility remained relatively high, there was a stable flow of people reaching adult ages. The decline in fertility since the 1980s and progressive ageing has led to a reduction in the weight of the population born in Catalonia in the generation of new demand since 2005-2010. The net number of households added by the native population has gone from around 30,000 per year in 2000 to below zero today.
Parallel to this reduction in net demand, the relative weight of other components has increased: the dynamics of the emancipation of young people and, particularly, migration.
The cyclical evolution of international immigration is currently the key demographic factor for the overall quantitative estimation of future construction needs. Therefore, the overall demand for housing is very sensitive to so-called high immigration events, such as in the early 2000s or prior to covid-19 (immigration explained 41,000 more households in 2019 alone), or to significant reductions such as that experienced after the 2008 crisis.
The study carried out by Juan Antonio Módenes, professor of Geography at the UAB, empirically analyses the four factors that explain the variation in the number of households: the number of adults likely to form households in relation to the natural growth of the past, the age distribution of adults, external migration and the dynamics of household formation (emancipation, dissolution and reconstitution of households, and residential autonomy of the elderly).
Managing this disconnection between demographic demand and housing supply
The study points out that this new pattern of cyclical residential demand is beginning to coincide with an incipient mismatch between the growth in the number of households and the number of dwellings completed each year.
According to the estimates provided, in the 2014-2020 period Catalan households increased by 222,000 units (175,000 explained by immigration), while only 50,000 dwellings were completed. In 2019, the deficit of new housing, measured as the difference between the net balance of households and completed dwellings, was 35,000. A match between supply and demand only appears at the low points of the cycles.
Does a demand system based on immigration not have the same effect on supply as one based on young endogenous demand? Could it be that the change in the demographic bases feeding residential demand has affected the system of stimuli received by developers and builders, both public and private? These are some of the key questions asked by the author of the study.
If this cyclical pattern consolidates, housing shortages will accumulate and overall unmet housing needs will emerge for the first time in 50 years, warns the study by the UAB Centre for Demographic Studies.
In conclusion, Módenes points out that, as the future will continue to be marked by crises and cycles in which immigration will continue to be a key driver of demand, housing policy and the demographics applied to support it, there is a challenge to incorporate uncertainty and demographic cycles into the analysis and management of the relationship between housing supply and demand.
ORIGINAL ARTICLE: Perspectives Demogràfiques: "La demanda d'habitatge. Quo vadis?". Juan Antonio Mòdenes. July 2023