My wife and I went pillow shopping on Oxford Street over the weekend – doing our bit for brick-and-mortar retail (you’re welcome, kind reader). On the way home, we were switching from London’s Elizabeth Line to the Overground when, to our bemusement, a fellow commuter decided to await their friend at the foot of the escalator. As you’d imagine, what followed is best described as a mechanically fed human pileup… perhaps we really should fear the rise of the machines.
This situation reminded me of a recent commitment I made to an industry colleague to share a simple mathematical equation known as Little’s Law which could estimate the impact of the UK’s much derided homebuying process on the availability of homes in the private rented sector (PRS). If you don’t get the relevance of the escalator straight away, be patient. It’ll come.
What is Little’s Law?
According to the Corporate Finance Institute, Little’s Law “is a theorem that determines the average number of items in a stationary queuing system, based on the average waiting time of an item within a system and the average number of items arriving at the system per unit of time.” It was introduced to me a number of times throughout my tertiary education – most recently a few years back during a class on technology and operations management. The equation is used in manufacturing, retail, aviation, and many other fields. In this analysis, we’ll be using it in the home sale process to determine the impact of delays (average waiting time within a system) on the total availability (or supply) of homes in the PRS (average number of items in a stationary queueing system).
How long does it take to buy a home in the UK?
Estimates of how long it takes to buy a home in the UK vary widely. A general consensus seems to exist around three-to-six months which relegates a needlessly excessive percentage of the country’s housing stock to a state of occupier purgatory. According to Siran Seevaratnam from Osborne Clarke, some of the primary causes of this delay are marketing, loan applications, contract negotiations, surveys, and other factors. Added to the homebuying timeline are, of course, any challenges emerging from the negotiation, finance application or contract of sale processes. This is before any complexities emerging from the buyer and/or seller being part of a “chain”. Since completion of a sale can be achieved without titles formally being registered, Seevaratnam does not consider the HM Land Registry’s (HMLR) backlog as a significant factor in homebuying delays, however it could affect the perception of some buyers if the home is resold before registration of title is completed. On 26 May 2023, HMLR reported that although 33.9% of changes to existing registered titles are automated and processed within a day, 37.3% take longer than a month and that “in some instances these applications are taking around 6 months to complete.” Errors in an application, or a complex change or new entry can take upwards of a year.
Housing tenure in England
According to the 2021-22 English Housing Survey, there “were an estimated 24.2 million households in England living in self-contained accommodation.” Of these, 64% were owner-occupied (split further into owned outright and mortgagees). 19% of England’s self-contained accommodation was attributed to the PRS, and 17% to the social rented sector. This has changed over successive generations and continues to change (Figure 1). In the interest of simplicity, my analysis will treat these numbers as static.
