Research suggests building new urban homes drives 50% more economic growth

Research suggests building new urban homes drives 50% more economic growth

The latest research by KPMG shows that new housing developments built in city centres have the potential to stimulate 50% more economic growth than similar developments located at urban fringes.

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The study, conducted by the firm’s specialist Infrastructure, Building and Construction team, raises important questions for housing strategy.

Jonathan White, UK Head of Infrastructure, Building and Construction at KPMG, commented: “The UK’s housing crisis continues to need urgent attention, but that entails more than just hitting ambitious targets for building new homes. Housing is more than a numbers game.

“Where those housing developments are placed, and how they interact with infrastructure investment, also matters and getting it right could help boost economic growth and bridge the productivity gap.

“Clearly housing policy also needs to evolve so that all the moving parts are coordinated. That includes ensuring that investment is deployed as effectively and efficiently as possible.”

Reinforcing the importance of place-making and infrastructure, the research by KPMG found that the expected economic impact associated with the development of housing is stronger when located in regional centres, especially those which are served by high-capacity public transport. These factors drive business investment and stimulate greater activity within the economy, which in turn results in higher productivity. More urban homes and good transport links could also boost the high street by bringing more residents closer to key retail and leisure hubs at a challenging time for the sector.

However, the study suggests that without complementary investment in sustainable transport infrastructure, increased housing stock can lead to greater congestion, which in turn will drag on the economic gains equal to the loss of around 10% of the growth the housing might otherwise have generated. As such, new housing developments need to be planned, funded and delivered in conjunction with infrastructure projects in order to maximise the economic benefits of both public and private investment.

Jan Crosby, UK Head of Housing at KPMG, added: “Joined-up place-making that seamlessly marries social, economic, health, transport and educational infrastructure is a vital consideration in addressing our country’s housing shortage.

“Infrastructure provision alongside housing creates local market demand and hence in turn accelerates rates of build. Housing on its own is accommodation; housing with the right infrastructure is a more sustainable and productive place – and one that people want to live in.

“All stakeholders, from government to the private sector, must be coordinated in their efforts to ensure that new housing stock reflects the varying needs of would-be occupiers. Likewise, it also must enhance an area more fully, including how the development may benefit the local economy.”

KPMG undertook research for Greener Journeys that included economic analysis using a Land Use Transport Interaction (LUTI) model. The modelling estimated the potential economic benefits associated with residential and commercial developments as well as transport improvements in different locations within a major English city region. The analysis considers the relative strength of the benefits delivered in each location compared to a “base case” under three additive scenarios, specifically including: (i) The potential impact of residential and commercial development (ii) The potential dampening of economic output as a result of additional transport congestion (iii) The synergetic impacts of improvements in public transport. The full report can be found here.

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