Doing something about housing

Modern HousingWhat to do about the housing crisis? It’s a question that, should you have been so inclined, you could have focused on throughout much of yesterday’s proceedings at Liberal Democrat Spring Conference.

A motion on the reform of planning policy was passed, unamended, during the morning’s official business. The motion was particularly critical of the role of the Planning Inspectorate and the Communities Secretary in overriding local democracy and aspirations.

The programme for the conference fringe offered you a near overdose of housing. The lunchtime fringe included a session on social housing jointly organised by CentreForum, The Fabian Society and the Joseph Rowntree Foundation. On the – metaphorical – platform were Sir Michael Lyons, Tim Farron, and Kathleen Kelly of JRF. The session was packed.

The early evening fringe offered a session asking where new housing should be built, organised by the Green Liberal Democrats. Mid-evening allowed you to move on to consider private renting, in a session organised by ALDC, before finishing up with a reappearance of Tim Farron among those at a late evening session on Liberal Democrats in Housing – the future of the priced out.

I have to admit I didn’t manage to stay the course. I was feeling a bit too rough and had to have a very early night – not at all appropriate behaviour at conference, I realise, but I couldn’t do much about it.

What points would I draw from the sessions that I attended? [Read more...]

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Policy Unpacked #2 – Housing shortage and housing supply

Policy Unpacked logoThe issues of housing shortage and increasing housing supply feature prominently in current debates over how to deal with the UK housing crisis. Housing analysts often seek to place these urgent policy problems in the context of the longstanding issue of excess volatility in the UK housing market, and alongside an exploration of how we might make better use of the existing housing stock.

In this podcast I discuss a range of issues around housing supply with Ken Gibb, Professor of Housing Economics at the University of Glasgow and Director of Policy Scotland.  (Running time: 45′ 56″) [Read more...]

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Vince on “social housing”

6162309761_6e59bfde6d_nVince Cable made a substantial speech to the Royal Economic Society at the beginning of this week. The speech is worth reading in full because it represents one of the most thorough, thoughtful and wide-ranging perspectives on the economy that you are likely to hear from a front bench politician. Vince very clearly differentiates his position from that of the Conservatives on a whole host of points. He also, in my view, provides a more balanced assessment of the nature of economic policy under Coalition than you are likely to get from any member of the Quad. Vince does not pretend that the Coalition has adhered resolutely to plan A in the face of temptations to change course. Rather he acknowledges that things have not played out in the way that was anticipated in May 2010. He acknowledges that the recovery, though real, is not balanced and consequently places a welcome emphasis upon the continuing need to rebalance the economy and upon investment.

Vince identifies four major areas of policy action in pursuit of a sustainable, balanced recovery. These are “boosting the disposable income of low and middle earners; stimulating business investment (with the help of public investment); taking action, including through the industrial strategy, to tackle bottlenecks in skills, business finance, exports and UK supply chains; and building lots of new homes”. There is much that could be said about his thoughts under each of these headings, but my eye was inevitably drawn to his comments on housing. [Read more...]

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Boris’s housing plan

[This post originally appeared at The Conversation under a different (longer) title, 27/11/13]

London’s population is increasing rapidly and forecasts say this growth is set to continue over the next decade and more. However, the last time the capital had enough new houses to match this rate of population growth was the 1930s. Homes are becoming less affordable; needs and aspirations are going unfulfilled. London has a housing problem of serious dimensions.

This week, Boris Johnson gave us an indication of what he is proposing to do about the situation, with the publication of another draft housing strategy for consultation.

The strategy starts with a broadly sensible diagnosis of the nature, complexity, and consequences of the housing problem. The scale of the problem is already alarming, and it is only going to get worse.

The document is equally interesting when it moves on to proposed solutions. [Read more...]

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The political economy of Help to Buy

House front in scaffoldsWhen the Chancellor announced his two-part Help to Buy scheme in the Budget last month it was met with a chorus of disapproval. Representatives from the mortgage and construction industries – who, of course, have a financial interest in seeing the scheme implemented – were positive about it. Pretty much everyone else thought it was a pretty dumb idea.

When I reviewed the scheme at the time I noted:

Just about the only perspective from which this initiative makes sense is carrying through on an absolute determination not to add directly to the public sector deficit, but not minding too much if the guarantees get lost amongst everything else in the public debt.

So it probably makes perfect sense to the Treasury.

Otherwise, the scheme has almost nothing to commend it. The economic illiteracy it displays is remarkable. The fact that, coming from the current occupant of No 11, this is no great surprise is perhaps equally remarkable.

The debate has now been joined by the Treasury Select Committee in its report on the 2013 Budget. What comes through clearly from the paragraphs of the Select Committee’s report is that they are not hugely impressed with the Help to Buy scheme. But it is perhaps even more clear is that the Committee is not at all impressed with the quality of thought – or lack of it – that underpins the scheme. They finish their discussion of the scheme with a list of 17 questions they would like the Treasury to answer (para 182). These questions address topics of an absolutely fundamental nature. They are the basics that need to be in place before it is possible to conduct a sensible appraisal of the wisdom of spending more than £15 billion under the Help to Buy scheme. You get the unmistakeable sense that the Select Committee is frustrated, and not a little alarmed, that the Treasury is as yet unable to provide clear answers to even the simplest of questions (Para 177: “As far as can be understood from the Chancellor’s evidence, …”).

Most of the issues covered by the Select Committee report have already been discussed. And the pattern of industry support for the scheme contrasted with scepticism elsewhere repeats itself.

One important further dimension the Select Committee adds to the debate – apart from further weight behind the criticism – is a form of the slippery slope argument. [Read more...]

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Putting the brakes on housing booms

Home buying processProperty markets are frequently implicated in economic booms. It isn’t always residential property. But often it is. The last boom, which eventually triggered the Global Financial Crisis, had a strong housing market component.

A while ago the Bank of England created the new Financial Policy Committee (FPC) with responsibility for macro-prudential regulation. Within its regulatory remit is action to stop the development of housing booms and bubbles. The FPC favours using so-called “sectoral capital requirements” (SCR) to take the froth off the market, rather than setting out rigid rules for loan-to-value (LTV) or loan-to-income (LTI) ratios to restrain borrowing. This approach was restated earlier this week.

The FPC’s proposed approach has been reported differently by different newspapers. While some are billing it as the arrival of strong new powers, others are rather more critical. The critics argue that while there is evidence from other countries that regulating LTV or LTI directly can be effective in restraining house price inflation, the performance of regulating capital requirements in the aggregate is rather more uncertain.

This is quite an interesting regulatory question. We can all agree that avoiding run away housing booms would be good, not just for the housing market but for the broader macroeconomy. But how to achieve that? All regulatory interventions have strengths and weaknesses, they all carry downside risks. Might the blunter instrument of direct LTV or LTI regulation be better? There several possible issues. [Read more...]

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Potty proposals

[Originally posted at Dale&Co, 24/09/12]

There’s a joke going around at the moment: Did you hear that Nick Clegg has joined a boyband? It’s called No Direction.

This came to mind when I read of Clegg’s announcement on Sunday’s Andrew Marr Show that the Liberal Democrats are proposing a “pensions for property” policy. The party is starting the process of sounding out the various financial institutions that would need to get on side for the policy to work. [Read more...]

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Housing and the economy

[This text was prepared to accompany my presentation to the All Party Parliamentary Group on Housing, 10/09/12]

Many people appear to be coming round to the idea that investment in housing could be the way forward in attempting to revive the economy. There are good reasons for thinking that housing investment is a promising avenue to pursue. Even though the estimates differ somewhat in magnitude, the direct impacts of investment in terms of increasing employment and taxation and reduced unemployment benefits are now relatively clear. And import leakage is low. The multipliers and indirect impacts of housing investment compare very favourably with those for other types of investment.

Intersections

It is very welcome that greater policy attention has focused upon housing, but we should recognise that we face intersecting issues here. There is the urgent need to identify an effective macroeconomic lever. House building may well do the job.

But there are longstanding concerns about the housing supply system in the UK. [Read more...]

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Restructuring to reduce market volatility

Last May the Joseph Rowntree Foundation Housing Market Taskforce produced a major report which touched on a wide range of housing market issues, with the main concern being how to reduce the substantial and dysfunctional volatility that plagues the market. Four issues were identified: increasing housing supply in the long run, implementing policy instruments to deal with short run price volatility, developing innovative and effective mechanisms for protecting consumers from the consequences of market volatility, and fostering alternatives to home ownership that will provide households with long term secure accommodation.

Two of the academics involved in the work of the Taskforce – Mark Stephens and Peter Williams – have returned to provide an update, published today, on policy developments under the Coalition. Has the Government taken the sort of steps that will move the housing market on to a more stable footing? [Read more...]

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Housing and the global financial crisis

One of most interesting dimensions of current developments in the housing market is the way in which global economic events are being refracted through housing policy: how a problem created in the private sector is being used to reconfigure the social rented sector and advance some long-standing objectives for the political right. In this respect it is a microcosm of the broader austerity agenda.

I have a paper forthcoming in the journal Housing, Theory and Society that has just become available on iFirst. It’s called The global economic crisis and the reshaping of housing opportunities. The paper is coauthored with my colleagues Patricia Kennett and Ray Forrest. We’ve worked together for 16 years and, after discussing a lot of possibilities, this is the first paper we’ve managed to coauthor. It’s in a special issue on the housing fallout from the global financial crisis. [Read more...]

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