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The perversity of the politics of housing

admin / May 31, 2013 / Housing / Permalink

The abject failure of housing policy is among the biggest challenges facing this country yet it barely gets a mention on the hustings or in any political debate.

(Anthony Hilton, Evening Standard, 28/05/13)

There was a time when the stance taken by the major political parties on housing issues was a key General Election battleground. But that was half a century ago. With high costs and insecurity pervasive, the UK housing market is evidently very sick at the moment. This has significant short- and long-term consequences for the broader macroeconomy and significant impacts on households’ well-being. Yet, housing policy has so far failed to gain real political traction.

When the Government does propose to intervene on a substantial scale – in the form of Help to Buy – the policy is all about political calculation and very little about doing what needs doing to get the housing system into better shape. Indeed, beyond the Treasury and the industry interest groups that stand to benefit directly from the policy, commentators across the spectrum – including the IMF and the OECD – display near unity in condemning the policy as extremely unwise. I have had words about Help to Buy on a couple of previous occasions (here and here). Continue Reading →

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Bungalow build

admin / April 23, 2013 / Housing / Permalink

Over the last few years Policy Exchange has been a prolific contributor to the debate over the direction of housing policy. As regular readers will know, I have not always been entirely complimentary about those contributions. In particular the PX regularly exhibits an unhealthy fixation with the planning system as the source of Britain’s housing supply woes. I’m not aware of anyone who thinks the planning system is perfect, but to lay the blame entirely at its doorstep is too simplistic. I suspect PX knows that full well: its work on other aspects of housing supply shows a more sophisticated understanding of the interlocking problems that have led the system to its current parlous state. I can only assume that it is somehow constitutionally obliged to have a dig at “top down, centralised planning” in all housing-related publications.

Planning is again the bogeyman in the most recent brief PX publication on Housing and Intergenerational Fairness, produced for Hanover. But its invocation is rather incidental and a little half-hearted. The discussion treats planning as both more inflexible and less contextualised than it is. That is the case regarding the discussion of density. Planning systems may well have specified (re)development at higher densities. But that is not a timeless given. It is part of a broader agenda driven by concerns for sustainable, compact cities rather than sprawl and long-term energy dependence. It is not simply caprice on the part of planners.

Anyway, the critique of the planning system is not really central to the contribution the new publication makes to the debate.

On my reading the piece makes three useful contributions. Continue Reading →

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The political economy of Help to Buy

admin / April 20, 2013 / Housing, Politics / Permalink

When 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. Continue Reading →

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Help to Buy?

admin / March 20, 2013 / Economics, Housing, Politics / Permalink

The objections to George Osborne’s latest wheeze to assist the housing market are hardly worth discussing. They are almost too obvious. And they have been rehearsed at length in relation to similar, smaller scale initiatives that have already been tried.

The new “Help to Buy” scheme, announced in today’s Budget, aims to provide equity loans of up to 20% of the value of new properties worth less than £600,000. Households have to come up with a 5% deposit to participate. The Chancellor is proposing that the scheme be backed up with government guarantees sufficient to support £130 billion of mortgages. The guarantee scheme will start in 2014 for a period of three years.

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. Continue Reading →

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In a pickle over planning

admin / December 28, 2012 / Housing / Permalink

One of the Coalition government’s first acts was to signal the intention to get rid of Regional Spatial Strategies (RSSs). They were seen as the embodiment of Labour’s centralising, top-down approach. In their stead we were to enter a new era of localism. Or, possibly, Localism. Spatial planning would have a much stronger bottom-up component. Local people would have a greater say in shaping the way their area developed, including levels of new housing construction locally. The rhetoric may have been of the removal of the dead hand of the State and of local people warmly embracing housebuilding in their neighbourhood, enticed by financial initiatives such as the New Homes Bonus. The reality was never going to be quite like that. And the claims that power is being localised have become ever harder to sustain. Mr Pickles seems to be placing ever more weight on the role of the Planning Inspectorate in overruling and overriding local plans that he doesn’t consider to be acceptable.

It was pretty obvious to anyone who knew anything about planning that removing the RSSs was going to lead to a reduction in housebuilding targets. Local authorities didn’t like the strategies precisely because they imposed higher housebuilding targets than those preferred locally. So removing the RSSs was going to see targets adjusted downwards in many areas. It seemed equally obvious that the sorts of incentives on offer through the New Homes Bonus or other mechanisms – such as the Community Infrastructure Levy – were not going to be sufficiently powerful to counteract this.

Anecdotally we’ve been hearing that this is precisely what has been happening across the country. Today the Policy Exchange produced a brief note, based on research by Tetlow King, that provides some more systematic evidence. It reports that as at mid-2012 some 57% of responding local authorities had reduced their house building targets. And that since 2010 local authorities in England have reduced the number of new homes they were planning by 272,720. Continue Reading →

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Housing at half-time

admin / November 21, 2012 / Housing / Permalink

There isn’t a great deal of disagreement about the key problems facing the British housing market.

The main issues are high housing costs in both the owner occupied and private rented sectors, with correspondingly high bills for housing allowances. Many households have difficulties in accessing appropriate accommodation, particularly given the limited flow of lettings in the social rented sector. And the market is subject to high volatility by international standards, which has negative ramifications for the macroeconomy. The root cause of this is the failure of housing supply – over a period measured in decades rather than years – to keep pace with the increase in the number of households.

The disagreements start to emerge when we move on to discuss what we should do about it. And, more specifically, to consider whether the Government is currently doing enough to address the problems identified. The Government has provided a perfectly sensible diagnosis of the problem. There has been quite a bit of policy pronouncement and promise. Much of the early bustle was brought together in last year’s strategy, Laying the foundations.

But does all this add up to a policy response that is appropriately targeted and on sufficient scale to make a dent in the problem? Continue Reading →

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The missing ingredient …

admin / November 1, 2012 / Housing, Politics / Permalink

What’s missing from the story of Britain’s ongoing housing crisis?

From the Government we’ve had the usual market fundamentalist refrain that the root of the problem is planning and regulation. So we’re presented with various proposals to deal with the problem. First, the Government invited representatives of the development industry to assist in rewriting planning guidance to their benefit as part of the process of drawing up the new National Planning Policy Framework. Then we had the proposal to relax planning regulations on house extensions and conservatories in order to allow households to expand in situ. The Growth and Infrastructure Bill has now emerged to cut localism off at the knees by proposing to take power away from local planning authorities and centralise it whenever the Secretary of State deems local decision making not to be to his liking.

Finally, the Government is now reviewing building regulations to see what can be discarded. Because, as anyone who has ever visited one will know, recently constructed properties in the UK at all price points are built to an unreasonably high standard.

Short term expediency and boosting profitability for the Conservatives’ friends in the construction industry are key.

The fact that properties being built or modified now are likely to have an effective life of over a century, so it might be a good idea to build them well, is clearly the sort of theoretical concern only someone in an ivory tower would raise.

But Government’s perspective is only one among several. Continue Reading →

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Housing and the economy

admin / September 12, 2012 / Housing / Permalink

[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. Continue Reading →

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Restructuring to reduce market volatility

admin / September 11, 2012 / Housing / Permalink

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? Continue Reading →

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Desperate times call for …

admin / September 7, 2012 / Housing / Permalink

It’s hard to know what to make of yesterday’s slew of policy initiatives in the housing field. It is clear that they are directed primarily at boosting the economy, rather than being any sort of considered response to the problems of the housing market. You get the sense that the Government has pretty much run out of ideas and it just so happens that doing something with housing investment might help. It’s incidental that it is housing. It’s the only lever left to pull.

There has already been a healthy debate in the mainstream and social media as to whether any of the Government’s initiatives will have much impact upon either growth or the housing market.

Much of the media attention has been directed at the relaxation of planning permission on extensions and conservatories. I think it is a safe bet that this is going to make negligible difference to economic activity in the aggregate. Continue Reading →

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