Soaring immigration is fuelling Britain’s housing crisis, says Bank of England’s chief economist
High levels of immigration are fuelling Britain’s housing crisis, according to the Bank of England’s chief economist, who blamed skyrocketing rents on a shortage of properties.
Huw Pill said higher interest rates were not responsible for record hikes in rental costs, which jumped by 9.2pc in the year to March.
He said “quite large increases in immigration” were piling more pressure on Britain’s housing stock, after net migration hit a record-breaking 745,000 in 2022.
In comments made after the Bank of England held rates at 5.25pc for a sixth consecutive meeting on Thursday, Mr Pill said: “The population is growing.
“To some extent, the rents are really a reflection of supply and demand factors [and] reflect things that aren’t to do with monetary policy.”
A shortage of houses stems from delays in the planning sector, Mr Pill said, which has long been a source of concern for Britain’s biggest developers.
By arguing that monetary policy is not to blame for the housing crisis, he pushed responsibility towards politicians.
He added: “We don’t really build enough houses in this country. And the reason we don’t build enough houses or housing in this country is in large part [because] there’s a lot of issues around planning and so forth.
“So there’s a restraint on supply, which I think probably is not coming from monetary policy, it’s coming from other policy choices.
“And at the same time that is facing - and increasingly so - in recent times, increasing demand.”
His comments come after Andrew Bailey, the Bank’s Governor, has previously said that higher taxes have forced landlords to sell their properties in the face of higher interest rates.
This has increased financial pressures on tenants by driving up rents.
UK Finance data show the number of buy-to-let mortgages in arrears more than doubled in the first quarter of 2024, compared to the same period a year earlier.
Mr Pill admitted that “incentives” for landlords to rent out properties were reduced by higher borrowing costs, but added that higher rates had also made investing in other assets more attractive.
A report by the Centre for Policy Studies this week warned that record levels of immigration had failed to boost the economy while making the housing crisis worse.
The report, which was backed by former immigration minister Robert Jenrick, said migration now accounted for around 89pc of the 1.34m increase in England’s “housing deficit”.
This represents the number of homes the country has underbuilt in the last 10 years.
Mr Pill said the Bank had little influence over housebuilding, as he suggested politicians should do more to build more properties.
He said: “I think that the best role we can play is to do our job and let other people do their job.
“And their job might be: well should we look again at some of the things that are constraining supply? Should we look at planning regulation? Should we look at building restrictions?
“And of course, this is not a problem that will go away because the drivers of the population are going to be quite consistent.”
The Office for Budget Responsibility, the government’s tax and spending watchdog, has previously predicted that net migration – the numbers entering the UK minus those leaving – will average 350,000 over the next five years.
This is up from a prediction of 290,000 just a few months ago.
This will drive up the total number of adults in the UK from 55m in 2023 to 57m by the end of the decade.
Mr Pill added that rental prices were “a big” driver of domestic inflation.
He added: “We’re very cognisant that rents are growing fast, and they’ve still got a lot of momentum in them, and they haven’t peaked yet.
“And even if they have peaked, they’re at very elevated levels. So we need to bring them down. And that’s part of our job within the overall ambition to get headline inflation back to the 2pc target.”