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…]

Policy unpacked #8 – Giving away social housing

Policy Unpacked 5In this podcast I discuss proposals emanating from the Conservative party for new ways to dispose of social housing. At the moment IDS’s proposal to give properties to previously unemployed tenants who manage to secure a job for a year is the one gaining the most media attention.

At the end of the podcast I speculate on how the incentives facing housing associations may change in the face of conflicting imperatives.

(Running time: 22′ 18″) [Read more…]

Articulating problems, finding solutions

I’m not sure whether anyone is tracking the frequency with which stories about the UK’s problems appear in the media, but intuitively you get the sense that it is increasing. Barely a day seems to pass now without something appearing prominently somewhere. Housing is not just on the agenda but moving up the agenda.

Quite a lot of this something is someone identifying a problem or an injustice. The arguments here are now becoming relatively well-rehearsed. The increased frequency with which this situation is being articulated and reported is more about turning up the volume, sharpening the focus and broadening understanding than it is about adding significant new dimensions to the story.

It is about moving concern for these issues into the mainstream. Housing is a major public policy concern, not just a problem for a minority perceived to be directly affected or a fascination for the community of housing policy wonks. [Read more…]

The political classes lagging not leading on housing

The signs of housing stress accumulate. On top of established problems of affordability among young people living independently we are seeing increasing numbers of households sharing and a rise in multigenerational households as children find it more and more difficult to leave the parental home.

A sense of injustice about the state of the housing market sits just below the surface of many conversations across generations. It doesn’t take much to trigger some heated words from those who feel they have been shut out of the housing market by the selfish actions of their elders. Something I experienced again the other day.

Allister Heath has a comment piece in today’s Telegraph in which he highlights what he describes as Westminster’s deafening conspiracy of silence over the major policy challenges facing the UK. He highlights three policy areas. The first two are funding the NHS and dealing with the public spending deficit.

The third is the dysfunction of the housing market. Here he argues: [Read more…]

Social housing futures

[First posted at the SPS blog: Comment and Analysis, 21/01/15]

The housing problems facing the UK are multifaceted. They include the failure to build sufficient new dwellings to keep pace with population growth; significant market volatility; problems of affordability for both owners and renters; and problems of insecurity in the private rented sector.

The Coalition government has been quite strong on rhetoric and has announced a succession of new policies and initiatives. In the social housing sector these have included changes to subsidy, tenancy security, regulation, and rent levels. The Coalition has had rather less success in bringing affordable, secure accommodation within reach of a greater proportion of households. Indeed, housing circumstances have become more precarious for many.

In the run up to the General Election, the Chartered Institute of Housing has published a series of policy essays looking at various aspects of the housing challenge and the policy responses not only in housing, but also in related areas such as welfare reform.

In the most recent essay in the series I have provided a perspective on the future of social housing, focusing on housing associations in England. The essay covers four broad areas: the squeeze; looking beyond housing; narratives; and marginal voices. [Read more…]

The bedroom tax saga, Part … I’ve lost count

8610361700_dea8d85350_mIt is as predictable as the changing of the seasons. Last week Labour used an Opposition Day Motion to bring forward another motion against the bedroom tax. The proposal was simple and broad – immediate abolition.

As with previous instances of using this strategy, a key aim was to make the Liberal Democrats look either stupidly inconsistent or cravenly unwilling to vote against the Conservatives. And Labour, presumably, hoped they’d get both. The run up to the vote was accompanied by high profile articles in the Mirror pointing to the distress caused by the policy and calling for the Labour motion to be supported.

When Liberal Democrat support for the motion, rather predictably, failed to materialise it opened up space for further negative headlines in certain parts of the press. The Liberal Democrats’ inconsistency was highlighted – after all it wasn’t that long ago that Nick Clegg publicly withdrew the party’s support from the policy – as was their complicity in supporting the Conservative party – sorry, “Government” – amendment which took an overtly tribal position on the issue.

Over at Liberal Democrat Voice on Thursday Caron offered a three part defence of the Liberal Democrat voting strategy on the Labour motion.  It has generated a fairly extensive comment thread, including some incisive comments highlighting the key criticisms. Most of these criticisms are not new, but they are worth revisiting. [Read more…]

Policy unpacked #7 – What will make the housing market work?

Policy Unpacked 5Yesterday I took part in a panel discussion on the housing market as part of the Festival of Economics 2014. The panel was chaired by Julia Unwin of JRF; it comprised Kate Barker, Michael Ball, Diane Coyle and me.

It was an enjoyable event, with plenty of questions and comments from an informed and concerned audience.

I had arrived with rather more to say than could sensibly fit into my allotted time. So I ended up speaking rather fast, as a number of audience members pointed out to me after the session. I’m usually not too bad at timing these sorts of things, but clearly I was all over the place yesterday. [Read more…]

Pathways to housing-related poverty

Affordable housing concept.The JRF report What will the housing market look like in 2040?, released yesterday, provided an eye-catching and headline-grabbing answer to the question that acts as its title. Presumably grabbing the headlines was the point.

The answer is that under plausible assumptions about future trajectories on tenure, costs and incomes we are looking at a future of higher housing costs, more private renting, and a substantially increased incidence of poverty. The authors, from Heriot Watt and Sheffield Universities, forecast that private renting will accommodate 20% of the population by 2040 and half of them will be living in poverty.

The authors argue that four factors, all to an extent under policy control, could combine to prevent this unhappy outcome. We need to see housebuilding in England rise to 200,000 homes a year by the 2020s and 220,000 by the 2030s. We need the decline in the proportion of households living in social renting to be halted. We need social rents to remain indexed as they are at the moment to prices. And housing benefit needs to continue to meet the same share of housing costs as it does at present. If the stars align favourably in this way then the unpleasant future sketched out might be avoided. [Read more…]

Making the case for housing

case in collina#housingday will be marked for the second time on 12th November 2014. It is an opportunity for people in the UK to make the case for housing, and for social housing in particular. Social housing organisations and tenants will be sharing experiences and stories of the difference housing makes. You can find out more here.

My blogposts only rarely deal with housing at the frontline. The focus is more often on policy, politics and principles than on the detail of the difference good housing makes to people’s lives. Nonetheless, #housingday feels like a good opportunity to draw some thoughts together. I have therefore assembled a collection of blogposts – the first one I’ve done in nearly a year. This collection comprises a selection of nine posts since early 2013 on issues relating to the direction of housing policy and the importance of good quality housing.

I hope some readers might find it an interesting complement to the more grounded discussions and activities of the day. [Read more…]

Defining the challenge of UK housing policy

immobilier parisienYesterday I was back up in that London to attend an event exploring UK housing policy. Many, of not most, of the luminaries of UK housing research made the same journey. The event covered quite a lot of ground, but at the same time the agenda was relatively narrow – focusing as it did on the macro, credit, housing supply, planning nexus. The discussion left me with plenty to think about and there is no way that it could be meaningfully summarised in a blog post. So here are a few quick reflections – not all of which flow from what was actually discussed on the day.

Three of the biggest challenges we currently face in housing are not technical policy challenges. They are perspective, purpose, and politics. [Read more…]