A 2016 academic analysis by David Albouy, Gabriel Ehrlich and Yingyi Liu estimated that, in general, rents decrease by 3 percent for each 2 percent increase in the housing stockAs the author, Patrick Wolff, here points out (talking about San Francisco and Silicon Valley):
The Bay Area must increase its total housing stock by 50 percent over the next 20 years to bring affordability down to a reasonable level.Wolff also reminds us that this degree of growth is perfectly possible:
Detroit and Texas grew far faster during their booms, as did our own Bay Area in the 20 years following World War II.As, of course, did London in the 1930s. I don't have the detailed figures to hand for London, it's not growing as fast as the Bay Area and growth may be slowed a little by Brexit, but there's already an undersupply (high rents tell us this). So let's go with Wolff's 50% and reduce a bit to, say, 40%. There are currently about 3.27m households in London and I'll assume they're all housed. Using Wolff's model London will need 1.3m new homes over 20 years to meet demand and address the problem of affordability (which is 65,000 per year). The current London plan proposes fewer than 50,000 per year resulting in a shortfall on demand of 320,000. The absolute effect of this will be higher rents and house prices. And remember that all this assumes London's growth is lower than San Francisco's - if the city matches that growth it will need a further 300,000 homes just to keep pace.
I'm not going to set out what should be done - everybody knows. We just need to ask why we're not doing it.