Shifting ground on housing?

Building Site - New Home ConstructionSomething interesting is happening in the world of housing policy. At least it feels that way in my more optimistic moments.

Since the Coalition government produced its housing strategy in late 2011 there has been a lot of talk about the need to deal with the housing problem, particularly on housing supply, but the action has been an order of magnitude short of what is required. With the exception of the lumbering lunacy of Help to Buy and some more focused initiatives to unblock stalled sites, there has been relatively little concerted action aimed at getting the market moving. Arguably the NPPF has worked in the opposite direction. Sure there was some talk of a new generation of garden cities. Yes there have been modest initiatives to encourage self-build. But housing supply is still at historically low levels. And yet the housebuilding industry is hitting capacity constraints.

Nothing has been attempted that you might call transformative.

Just after the turn of the year the Guardian ran an editorial that ended with the following statement:

Housing … is a problem that can be fixed. But only by a government prepared to bulldoze the decrepid old structures of the British political economy, and start building again from the foundations, brick by brick.

Since then housing-related news seems to be appearing with great regularity. More importantly, the profile of housing policy seems to be rising. Last week Labour indicated that they thought housing was a key part of the ‘cost-of-living’ crisis and hence would be key to success in the 2015 election. There is also housing policy work going on in the Liberal Democrats, who have already produced, back in 2012, the most comprehensive statement of housing policy of any of the three main parties.

Has something emerged that suggests the imminent overthrow of “decrepid old structures”? Not yet. But it feels like the discussion is starting to get a bit more realistic.

Quite a bit of attention is focusing on new settlements. All the parties have indicated that new towns or garden suburbs are part of the answer to the housing crisis, although electoral calculation means they do so with very different degrees of enthusiasm.  Labour have indicated that new towns are a key part of their housing plans. What precisely this means has yet to be spelt out. Hannah Fearn at the Guardian today argues that Emma Reynolds, the new shadow housing minister, is not able to be specific in her plans because her work needs more support through clearer leadership on housing from the top of the party.

Reynolds’ first major speech, last week, has attracted most interest for its identification of industrial concentration in the housebuilding industry as part of the problem of supply. She called for more custom- and self-build housing and indicated that Labour would support the sector in pursuit of structural rebalancing. Reynolds argued for more transparency in land holding, alongside the aspiration to get more development on smaller sites.

This is a potentially important intervention.

For most of the last three years the focus of attention in the debate over the root causes of Britain’s poor housing supply performance has been the planning system. That is pretty much to be expected when the relevant parts of government operate from a strong and rather simplistic economic liberal perspective.

But the housing supply system comprises the planning system, the building industry and the land market. They are fundamentally and organically interrelated: together they form the particular and peculiar political economy of housing supply in Britain.

There has been plenty of debate over whether increasing concentration in housebuilding means the market is less competitive and supply is being managed to stabilize revenue and maximize profitability. Various inquiries over the years have not yielded compelling evidence of a problem. Yet there are plenty of stakeholders who consider that there is.

There has been quite a bit of policy hand-wringing on the issue and some very small scale initiatives aimed at rebalancing. Reynolds’ statement is the first to go after the issue with rather greater intent and, it appears, ambition.

No one has yet grappled directly with the operation of the land market. The Coalition was proposing to pilot Tim Leunig’s community land auctions to see whether that would more readily bring forth developable land. But I’m not entirely sure what has happened to that initiative. (If you know then please leave a comment.)

Reynolds makes an interesting point in passing in her preliminary remarks. She observes that “Adequate shelter is after all a basic human need – and a right enshrined in international law”. That is, of course, undeniably true. But it takes the housing debate back to first principles, which I am convinced is what we need if we are to make the case for housing.

The reference to international law is interesting and expands the terrain of the debate. One criticism of the current Coalition approach to housing policy could be that it has neglected the question of minimum acceptable standards. We are moving to a world in which poor people will have to occupy poor housing and accept their lot. The state isn’t going to do quite as much as it used to to ensure they are accommodated adequately. Or rather the definition of what is adequate is implicitly being renegotiated. Yet we’ve not had the conversation about when we hit rock bottom. When does this strategy result in unacceptable outcomes? The invocation of international law could serve to focus the mind and the conversation.

I’m not sure, however, whether Liverpool council’s bid to report David Cameron to the UN because welfare reform is going to breach international obligations – as reported in the Mirror last week – will move things very far forward.

The other interesting component of Reynolds’ speech is the payoff line. Having noted that in the post-World War II period housebuilding was a cross-party political priority – invoking Atlee, Macmillan and Wilson – she goes on to note:

Yes, they were different times but we must capture that post-war spirit.

But we will match the post-war zeal for numbers and volume, with a determination to deliver quality.

It’s not just about building homes after all, it’s about building thriving communities and places where people want to live.

There is definitely something in this framing of the issue. However much it goes against the grain of increasing individualisation, there is a need to rekindle some of the sense of empathy, identification and common purpose that characterised the post-war effort. If we seek to substantially expand housing supply without the case having been made then it will lead to more acute social conflict.

So 2014 may be the year in which housing policy debate gets serious. We can but hope – the moment has taken a long time to arrive.

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  1. None of these people recommending garden cities actually live in garden cities, of course. And why not? Because they are dull environments, with poor connections to jobs, culture, vibrancy, and progress. In fact, large swathes of housing are now being destroyed by local councils, because there’s no work near them.

    What we need is greater density in city centres where there are jobs, which frankly means mostly the South East. Most continental cities manage a far higher densities because they build far more apartments.

    We need to follow the principles of The New Urbanism – i.e., to increase density in the centre, not improve transport to new dormitory towns outside our cities. Swathes of dormitory ghettos already exist and incredibly dreary they are too.

    The trend in the US should send a message – the old “doughnut” pattern by which the rich live in the suburbs is being reversed. The suburbs are now decaying, the poor are taking them over, and paying the price in terms of large transport costs relative to their incomes, and in terms of poor social connections. The rich are moving to the newly revived urban centres, where they don’t have to go far to see people, socialize, and get new jobs.

    Greater urban density makes it viable to run more public transport, allows people to walk and cycle from one place to another, which improves people’s health. Greater density encourages more city centre shops, cafes and restaurants, and generally makes cities more vibrant.

    The Conservatives devolved planning to neighbourhoods. Great, because it is at neighbourhood level that people can understand what proposed changes mean. Does that development make sense? No! It is an eyesore! Not in My Back Yard!

    We should embrace and work with NIMBYism, which really means local democracy, local choice, and local intelligence. The much criticized NIMBY factor means no-one is going to vote for new building projects on brownfield sites near them unless there’s an incentive. And there’s an obvious answer to the reluctance to build – give local councils incentives. The central government would have to pay enormous amounts to build the infrastructure for its new garden cities. In the previous generation much of this planned infrastructure never actually got built, as Natalie Elphicke mentions in her January 11 Conservative Home piece. Far better to use that money to persuade local councils to accelerate their building programs, and to change their local planning permissions in favour of higher densities.

    So embrace NIMBYism, embrace denser cities, and create a new granting system which will reconcile local sensibilities with our national need for extra housing.

  2. @Matthew – Thanks for your comment.

    I’m not sure it’s necessarily either/or. Personally I agree that we shouldn’t lose the importance of brownfield redevelopment. But I’m not sure that it will deliver the level of new supply necessary, unless it is accompanied by densification. But it seems to me that raises more more profound questions about culture and expectations around housing consumption/housing aspirations/household trajectories.

    I’m not sure that it is entirely fair to write off garden cities (or new towns) as a whole. It seems to me that they have taken different trajectories. Some of them have ‘worked’ as communities and some of them haven’t worked so well, for the reasons you identify. The only new towns I know at all are Cwmbran and Bracknell. They have very different trajectories, and that is partly related to the regional economies within which they are embedded.

    (ps. Your comment reminded me that I haven’t responded to your email from a few weeks ago. I meant to, but it slipped my mind. Apologies)

    • You seem to be pessimistic about densification on cultural grounds. As an economist who runs a housing markets information web site, I tend to be skeptical when “culture” is adduced as a cause. “This is different in Germany from the UK, it must be culture, after all we all know the Germans are different from us”. Why do they rent, rather than buy? Culture!

      Not so fast. If you compare housing buy-sell transaction costs across countries, you’ll find an increase in these buy-sell transaction costs (along with other financial/structural aspects of the housing market) tends to increase the proportion of renters, and a decrease in buy-sell costs tends to increase ownership rates. In addition when mortgage markets are predominantly floating rate, making housing prices liable to boom-bust cycles, the pressure to buy is increased because people fear “missing the boat”.

      Similarly, if housing patterns are different on the continent than here I would tend to look to incentives, structures, laws, and of course to an extent environment, not only culture.

      Vienna is a conglomeration of large blocks of flats, mostly the same height, which has the incidentally marvelous effect that hardly anyone uses cars in Vienna, people walk or take the (very frequent) trams and buses. Going to my apartment in Vienna from the Ring, I get out of the underground and have a choice of tram or bus, each of which typically arrives in around 3 minutes. London is much more like Los Angeles, spread out in endless rows of houses or semis, less efficient in space terms, and its public transport is consequently worse, because it simply can’t be funded to a similar level in a lower density environment, though it is not as bad as the (even more spread out) LA. Why the difference in density between London and Vienna? Before running to culture, I would certainly like to know if comparative studies of planning, taxation and incentive structures have been made, though I’d be willing to bet not, the job is just too complex.

      But until they have, we can’t rush to the “culture” explanation, and give up hope of densification. Get the incentives right, and the result will follow.

  3. I can’t help reflecting on the position of the centre of Bristol. I wonder if Broadmead would have fewer empty shops if more housing was built above them as has been done above the Harvey Nicholls store.

    • Very good example. Brilliant. Exactly the sort of location which could benefit from densification.