Housing markets and economic stories

Part of the story isn’t being told.

As we move towards the General Election strands of news and snippets of information have emerged which circle around the issues but there is a gap in the middle where the story could – and should – be.

I’m thinking here of housing-related aspects of the party manifestos: cuts in inheritance tax on property versus mansion taxes. I’m thinking of the observation that buy-to-let lending was the only component of mortgage lending not to stall in February. I’m thinking of Hannah Fearn’s thought-provoking piece advancing the argument that removal of the obligation to invest pension pots in annuities can be interpreted as a move to recapitalize the bank of mum and dad. And finally I’m thinking of Christine Lagarde’s words of support for George Osborne’s strategy for economic management.

So what’s the story that is missing? [Read more…]

Selling off social housing

8182240298_f9770a9cbeRumours have been circulating in the housing policy ether for several months now. Given the housing policy influence of the Policy Exchange at No 10 those rumours should have been, and were, treated seriously.

And now it looks like those rumours are well-founded. They’ve only gone and done it.  The Conservative manifesto pushes the Policy Exchange line that local authorities should be forced to sell high value properties in order to fund building new properties in lower value areas, and, if elected, they are proposing to extend the Right to Buy to housing associations. This opens up the possibility of an extra 1.3 million households having the chance to buy their home at a discount.

This is supposed to be the Conservatives’ big offer. Although, to be fair, it would seem to be a big offer targeted at a relatively small group of people – housing association tenants who earn enough from stable employment to be able to afford a property which, even at a substantial discount, is going to be a financial stretch.

Despite what some people seem to think, extending the Right to Buy to housing associations is not a new idea. [Read more…]

Policy unpacked #9 – Housing and the General Election

Policy UnpackedFor this podcast I am joined again by Ken Gibb to discuss housing policy ideas emerging from the political parties in the run up to the General Election. We review some important discussions over the future direction for aspects of housing policy in Scotland, and reflect on the development of policy competition between the Edinburgh parliament and Westminster. We also consider one or two policy proposals emanating from other commentators.

(Running time: 50′ 05″) [Read more…]

On the NHS budget black hole

Modern hospital and emergency signToday’s FT carries a front page story (£), based on research by the Health Foundation, stating that the financial ‘black hole’ facing the National Health Service is bigger than previously forecast. This is a result of a sharp decline in productivity during 2013/14. It is suggested that the NHS will need an emergency injection of cash after the election, whoever forms the next government.

This productivity decline follows an increase in the number of agency nurses employed in the wake of concerns about understaffing. It also follows the reorganisation that followed the 2012 NHS and Social Care Act. There is, as one might wearily anticipate, dispute over whether the reorganisation has also contributed to this drop in productivity.

Three things struck me on reading this FT report. They are not entirely novel thoughts, but I’ll share them anyway. [Read more…]

Liberal Democrats in a ConDemNation

4432788423_187ca72566_nLast week I took a trip up to Sheffield for the Political Studies Association Annual Conference. I presented a paper in a panel organised by the British Liberals and Liberalism Specialist Group. The paper looks at the Liberal Democrats’ strategy in coalition government and how it interacts with the party’s unstable identity to pose challenges for the party’s future survival.

I’m not particularly planning to do anything further with the paper. So rather than leave it languishing on my hard drive, I thought I’d make a version of the paper available on Scribd in case anyone was interest. Below the fold you’ll find a revised version of the paper I presented in Sheffield. [Read more…]

Bringing economics to the people

Business Financial Disaster HeadlinesFor three days this week Manchester played host to the (un)conference Boom Bust Boom Bust: why economics is for everyone. The organisers put together an impressive programme of speakers and participants, including a number of the highest profile academic economists, political economists, and economics commentators in the UK.  The programme also included a number of contributions from policy professionals and activitists. The fact that the event was organised by enthusiastic students from Post-Crash Economics Society at the University of Manchester and other UK institutions makes this doubly impressive.

A characteristic that united the unconference organisers and the contributors is a dissatisfaction – at the very least – with the way that mainstream economics tends to approach its subject. Pluralism and non-mainstream perspectives on a range of key economic issues and debates ran throughout the event. A second characteristic was a desire to move economic debate out of the seminar room and elite policy circles in order to engage a wider public in deliberation about some of the biggest challenges society currently faces. [Read more…]

The Q#1 quintet (usual suspects edition)

Here are the five posts on this blog that recorded the most hits between January and March 2015:

  1. Uncertain terrain: Issues and challenges facing housing associations (11th May 2013)
  2. Why is Owen Jones so annoying? (4th July 2013)
  3. Economists and their politics (11th Jan)
  4. The political classes lagging not leading on housing (29th Jan)
  5. The Tory £12bn and manifest inadequacy (28th March)

So the two hardy perennials reassert themselves and head back to the top of the charts. Economists and their politics wasn’t too far behind, but couldn’t quite topple these two evergreens.

[Read more…]

The Tory £12bn and manifest inadequacy

The leak to the BBC hinting at the scale of the cuts to welfare budgets being modelled by the Department for Work and Pensions has caused consternation. And so it should.

Given that George Osborne has refused to say what he is proposing to cut from welfare spending it was inevitable that any halfway credible information would attract attention. It is frankly outrageous that he is unwilling to be transparent with his plans. But that’s a different issue.

The BBC leak suggests that disabled people, unemployed people and those with caring responsibilities could bear the brunt of reduced spending.

The Conservatives have been quick to deny that the leaked figures represent agreed policy. This is just modelling possible options. Nothing has been decided. This statement is presumably aimed at defusing the row or deflecting attention.

But it shouldn’t. [Read more…]

Economics blogging and the return of political economy

BlogAlex Tabarrok posted yesterday on the relationship between the economics blogosphere and academic economics. He identifies three contrasts between economics blogging and publication in academic economics journals:

  • Blogs are fast, journals are slow
  • Blogs are open, journals are closed
  • Journals reward cleverness, policy requires wisdom

He notes that blogs play a key role in policy debate not simply because it is possible to conduct the debate on a timescale that is relevant to policy (fast not slow) but also because blogs allow you to do things that journals don’t value. The journals worry about the logical consistency and coherence of models, and are less concerned about whether the models capture particular real world situations in meaningful ways. In contrast, policy needs the judicious application not just of an economic model but also “economic history … psychology, politics and law”. The sort of knowledge useful for policy is hard to represent in the academic economic journals. It is inherently eclectic: wisdom not cleverness.

These aspects of Tabarrok’s post reminds me of some of the comments made by policymakers who participated in the debates at the UK Treasury a while ago on what sort of economics education is useful for policy.

But Tabarrok takes things further than that discussion with his second point. [Read more…]

International evidence on housing booms

This post is the first of its kind for me. The post is jointly authored by myself and my friend and colleague Ken Gibb. It is being published simultaneously on both our blogs. You can find Ken’s post here.

A recent NIESR paper by Armstrong and Davis (November 2014 (£)) compares the last two booms and busts in major OECD country housing markets. The authors present a thoughtful macroeconomic analysis of national housing markets and from there conduct panel data analysis of the determinants of house prices focusing on financial, debt and related variables.

The authors argue that comparison of the two most recent housing market cycles (1985-94 and 2002-11) can test the hypothesis that there was something unique about the most recent boom and its aftermath. They state that the housing market is widely considered to be the main cause of the global financial crisis (quoting such authorities as the IMF). However, the authors come away from overall reading of the data for the two cycles unconvinced. In their view the two cycles are sufficiently similar that it difficult to draw the conclusion that the most recent cycle is different in meaningful ways: it is certainly not unique. The implications is that if the received wisdom is incorrect and other factors were important in causing the crisis then macro-prudential policies in countries like the UK may be incorrectly targeted at the control of house prices and mortgage lending.

We are interested in this broad area for several reasons: why did economists miss the bubble nature of the housing market and its departure form fundamentals? Why did they miss the downturn in national housing markets? How plausible are the microfoundations of the models being used to analyze the housing market and explain what is actually going on? What do these analytical weaknesses tell us about the health or otherwise of economics and its capacity to evolve and learn for future challenges? [Read more…]