There is something of an oddity in the debate over the nature of the problems facing the UK housing system, and therefore by implication where the focus of policy attention is best directed. I’ve remarked on it before but it struck me forcefully this week when reading Christian Hilber’s new briefing, prepared with the aim of informing the election debate, UK housing and planning policies: the evidence from economic research. This was reinforced by Andrew Lilico’s contrarian post at CapX yesterday, which argues that there is no housing crisis and never was one. I don’t agree with Lilico’s overarching argument, but in the course of his discussion he makes a very important point. [Read more…]
Mervyn King’s stint on the Today programme yesterday was curious. It was much anticipated in some quarters. The reality then proved to be less revelatory than some might have hoped. I’m not sure what people were expecting – after years of buttoned-up discretion it was unlikely he was suddenly going to let all hang out. But some of the interpretation of King’s comments has been intriguingly partisan.
We are now only too familiar with the Coalition’s inclination to pin the blame for the financial crisis of 2007-08 on the last Labour government. But asked directly yesterday whether he thought Labour were to blame he stated:
I am not going to talk about individual parties’ culpability because I think the real problem was a shared intellectual view right across the entire political spectrum and shared across the financial markets that things were going pretty well.
There were imbalances – we knew things were unsustainable – but it was not entirely obvious where it would come unstuck – and I think that is something everyone shared, and the right thing is to make it better for the future.
Yesterday evening the Festival of Economics 2014 kicked off with the author John Lanchester in conversation with Izabella Kaminska of the FT. Lanchester, who is promoting his book How to speak money, had some very interesting and important things to say about the language of finance.
His key point was that the fact most people don’t understand or engage with the language and practices of finance has consequences. It means that bankers and economists are able to get away with obfuscation and mystification in order to hide their own ignorance or render opaque activities of very questionable social value. Because most people don’t really understand what is going on in finance they do not appreciate the risks that are being run or the ethics of some dubious practices. This lack of knowledge reduces public demands for greater regulation of the financial system, to the great benefit of the financiers.
But it is not simply the bankers and the public who are in the dark. Lanchester noted that last month the US bond market witnessed a seven sigma event – in terms of the volatility of short term interest rate movements. This is something which, if the models commonly used to analyze financial markets are right, is near impossible. The most obvious conclusion to draw, therefore, is that the models are wrong. So the analysts are in the dark as well. [Read more…]
Labour offered a number of proposals. Some of them had been announced previously. Many of them were rather vague and aspirational. Some of them looked kind of familiar – the Mansion Tax proposal most specifically. However, the proposal that many were hoping for – the big prize – relaxing the fiscal rules so that local authorities were allowed greater freedom to borrow for new development – was squashed by Ed Balls. Labour housing colleagues are now looking towards the Lyons Review – which is alleged to be emerging soon – to add a bit of ballast to the policy position.
The Conservative conference was rather short on specific housing policy announcements. Most of the announcements relevant to housing were focused on curtailing benefits to various groups deemed undeserving. I imagine one or two social landlord CEOs will be having sleepless nights worrying about their cashflows should the Conservatives be elected to govern alone come May 2015.
The eye catching announcement at the Conservative conference was the proposal to deliver 100,000 homes to first time buyers under the age of 40 at a 20% discount, with the homes to be cheaper because they’re built on brownfield industrial land. [Read more…]
Over the weekend the CIH and the Resolution Foundation released a useful briefing called More than a roof. The focus is largely on the way in which financial incentives could be used to improve standards in the private rented sector.
The briefing provides a brief overview of the rapid growth of the private rented sector over the last few years. It then provides a decent summary of the key problems facing the sector, particularly the bottom end of the market where unscrupulous landlords lurk.
When the briefing moves on to policy it reviews what is currently being doing about standards under four headings – statutory obligations, licensing schemes, accreditation schemes, encouraging competition – before going on to look at what more could be done. Here there is an argument that modest and targeted increases in regulation are justified – in particular there is seen to be a strong case for creating greater transparency and uniformity in the standards that form the basis for licensing/accreditation schemes, more effective enforcement targeted at the worst landlords, and the greater regulation of letting agents.
However, despite noting the growth of direct regulatory intervention – notably in the devolved administrations and some London boroughs – the general tone of the report is rather sceptical. Greater regulatory intervention is not seen as the key to solving the problem. [Read more…]
Mark Carney’s importation of the forward guidance approach has been all over the mainstream and social media. But how significant is the announcement that the Bank of England is planning on keeping nominal interest rates as they are until after the next General Election? The comment it has attracted has covered the spectrum: positive, negative, and a bit meh. Commentators have picked up on a number of more specific issues, such as Frances Coppola’s post yesterday on the prospects for savers and Jules Birch rightly pointing out that the commitment to keeping interest rates low, combined with the Government’s Funding for Lending scheme, is going to give the revival of Buy to Let further momentum.
It is the housing dimension that, you might be surprised to discover, I wanted to comment on further.
Carney’s intervention comes shortly after several other housing–related snippets of news. [Read more…]
I made a brief, somewhat speculative, presentation around the regulation of private renting, in the light of current debates about behaviour change and behavioural economics. Some of the ideas need plenty more thought and working through in more detail.
You can find the text to accompany my presentation below the fold. [Read more…]