Tag Archives: affordability

Who built all that housing in England?

A couple of years ago I included a chart of house building in a blog post arguing that young people shouldn’t necessarily support the removal of planning controls. The chart covered the period from 1955 to 2010, and showed that:

The only time  that the UK has seen house building match demand, and kept housing affordable, was when councils built in huge volumes from the 1950s to 1970s. If you think price bubbles are all about supply, explain the continued volatility of house prices through the 1950s, 60s and 70s.

People who want to see a massive expansion in house building can have their spirits dampened in other ways. Christopher Buckle from Savills wrote an interesting blog post suggesting that, on that house building data from the 1950s to the present day, a major boom looks very unlikely. He wrote:

If private sector housing delivery grew by 7.5% every year until 2017, a period of 7 years unbroken expansion from 2010, output would reach 133,000 new homes per year.  This would still be 10,000 new homes per year short of the average level of delivery seen over the 50 years prior to the credit crunch.  Such a sustained period of expansion has not been seen since the 1950s.

But the charts used by me and Buckle didn’t cover the 1930s, a time when private builders erected more than two million homes, almost twice as many as they managed in the 2000s and when the population was much larger.

Back to the 1930s

Those who think we need to tear up the planning system to solve our housing crisis often refer to the 1930s as a golden age. So I’ve produced a chart that goes all the way back to 1923 for homes built in England:

Who built all that housing?

I have had to combine two slightly different data sources for this. The period from 1923-1945 comes from  BR Mitchell’s Abstract of British Historical Statistics (which start in 1923), and the period from 1946-2011 from official government statistics (table 244) which also includes figures for housing associations. This is a bit naughty, but it’s the best I can do.

This shows that there was indeed an explosion of private sector house building in the 1930s, jumping from 144,505 homes in 1932 to 210,782 in the following year.

The role that councils played

But it also shows that councils were still a big force, a point made more clearly by this chart showing the proportion of the total homes built by housing associations, councils and private builders:

housing-supply-1923-2011-proportions

During the 1930s, councils still built a quarter of the homes. That rose to a whopping 73% in the 1940s (not surprising given there was a war on), 64% in the 1950s, and around 40% in the 1960s-70s. In 1997, the year Labour came back into office councils only built 0.2% of homes. Housing associations to some extent stepped into their shoes, but in the 1990s and 2000s they only built 14% of the homes.

Based on this data, and a lot of other reasons, I think there are three arguments for councils building more homes if we are to contain housing costs:

  1. These homes will be affordable to the tenants from day one, and in perpetuity, whatever happens in the market.
  2. In the twentieth century, the only periods during which we built enough homes saw a very significant role for council homes.
  3. Councils building more will expand the construction industry so introducing greater economies of scale and potentially improving skills.

A final note of caution

However, I wouldn’t want to say this is an open and shut case, nor deny I have other reasons for supporting council housing.

It is too easy to draw very simplistic conclusions, and to then make a tenuous connection in order to propose quite radical policies. This is what I think is happening with the romanticism about the 1930s suburbs.

There is a similarity between this debate and that of rent controls, in which we often make comparisons between the UK rented sector and Germany’s. It’s interesting that Germany has a very successful and highly regulated rental sector, and relevant given that Conservative, Labour and coalition governments since the 1980s have opposed those sorts of regulations. But there are many other differences between the countries. Similarly, there are many differences between the UK today and in the 1930s.

Can we have a major private housebuilding boom, as we had in the 1930s, regardless of Buckle from Savill’s gloom about the period from the 1950s to the present day? Brian Green wrote a good blog post in 2011 arguing that a 1930s housing boom seems unlikely. He wrote:

I sense a new romantic surge of interest in the notion of a private-sector-led house-building boom driving economic recovery. But… there were huge differences…

I’d recommend reading his post for his full list of reasons, I won’t quote them at length here. The gist is that in the 1930s you had a large number of new potential home buyers, plentiful cheap credit, low land costs, little demand from landlords and investors and a housing market that was very affordable. His conclusion:

It would seem that if we want a new house-building boom we will need a far more ingenious and powerful set of market prompts than promoting a greater availability of higher loan-to-value mortgages, freeing up planning and continuing to supply mortgages at low interest rates.

You can draw your own conclusions from the data I have presented, and the links to the articles by Buckle and Green.

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Two false hopes that won’t solve London’s housing crisis

Darren Johnson has issued a report arguing that building new homes can’t solve London’s housing crisis alone. He suggests the Mayor should consider other solutions including smart regulations for the private rented sector, taxing land values and setting up land auctions.

But there are two policies you won’t see in his list. Two policies that Greens often bring up in discussions about housing. I wanted to take some time this evening to explain why I think we should talk about them a little less, and in a very different light.

Before I launch in, I would heartily recommend this blog entry by Liz Emerson as an overview of the sources of our housing crisis, to give an idea of why we need to act. The Green Party’s policy platform is chock-full of good ideas to rectify this, but when it comes to building new homes I think Greens sometimes find themselves on the wrong side of the argument, and sometimes put forward two ideas that frankly aren’t good enough.

I have to make clear – while I worked with Darren on his report I am writing this blog entry in a personal capacity, and this should in no way be taken as reflecting Darren’s views, those of my employer the GLA or of the Green Party.

I also have to make clear that this blog is about London. The national picture is bound to be quite different, but I think many of the basic points still hold.

We should use empty homes before building new ones

The claim runs as follows: there are lots of empty homes in London, we should be making better use of them before building new homes.

Thr problem: It’s true that there are lots of empty homes in London, and that it would be good if we could make use of them. But there aren’t nearly enough to make new housebuilding unnecessary. Not even close.

The latest figures from Empty Homes show that there were 74,811 empty homes in November 2011. But of those, only 29,540 were empty for more than six months. A home empty for a shorter period of time could well be in the middle of renovation or waiting for tenants. So fewer than 1% of homes in London are empty for long periods of time – not very many, is it?

Empty homes are also often quite hard to bring into use. They can be in a bad way, on housing estates awaiting demolition, or owned by some grumpy absentee landlord. Councils, the Mayor and the Government all try to solve these problems, and they could definitely try harder. Our 2012 manifesto pledged to:

Set up a clearing house to offer all publicly owned derelict land to Community Land Trusts and to make all suitable publicly-owned empty homes available to self-help co-operatives to bring them back into short-life or permanent use.

But it would be a tall order to bring every last empty home into use, and to stop any more becoming empty for more than six months.

What’s more, the experts who advised the Government and the Mayor on housing need recommended that we need between 33,100 and 44,700 homes every year for twenty years just to deal with overcrowding and stabilise house prices. So those 29,540 long-term empty homes would deliver at most one year’s supply, leaving at least another 630,000 homes to build over the following nineteen years.

We should re-balance the UK away from London

The policy claim: there are another 250,000 long-term empty homes elsewhere in the UK, and if prices in London are so overcooked because it’s where all the jobs are, then we should give other regions a big economic boost to re-balance the nation.  This way lots of people would move away to Plymouth, Preston and Perth, the market would settle down in London and the south east and we could make better use of the housing stock elsewhere.

The first problem with this argument is that there is already quite a large net flow of people out of London. This diagram from the GLA’s strategic housing market assessment neatly illustrates the point:

The need for housing isn’t coming from job-hungry Yorkshiremen, but from Londoners having lots of babies at a faster rate than people are dying, and from a large net migration from outside the UK. This has changed slightly during the recession for various interesting reasons, but the basic direction of movement remains. A lot of those people leaving are retired, or moving out to commuter towns to raise families. So in fact we would need to persuade even more people to leave London to seek work elsewhere, persuade Londoners not to have so many children, and persuade far more international migrants to settle elsewhere.

The second problem is that these very big changes are far beyond the wit of the Mayor of London and local councils. We can certainly talk about these big trends and our ideas for the national Government. But when the Conservative or Labour government continues to fail to grapple with these trends, we have to be ready to say what we would do if elected in Camden, Lewisham and Bromley. It’s not good enough to throw up our hands and complain about the Government’s economic strategy.

Sticking to the facts

We can definitely say we should do more to bring empty homes back into use, and to re-balance the UK’s economy to boost the north, west, Wales and Scotland. I don’t agree with those who tend to write these ideas off because they are so fixed on new housing supply being the silver bullet. There is no silver bullet, Darren’s work shows that in no uncertain terms. We need every good idea we can get.

But we cannot pretend that they would be sufficient to meet London’s chronic housing need and that they are therefore a reason not to build new homes. Doing so makes us as guilty as those who pretend we can solve climate change and carry on flying more and more if we just build some nuclear power stations and insulate our lofts. We know that the facts don’t support the waffly half-hearted policies of other parties on climate change, so we should be sure that the facts support our policies on housing.

There are often issues with new housing developments. They can be on unsuitable land that should be protected for farming (or they can be on useless pony fields for little princesses); they can be low density car-dependent suburbs (or smart extensions with good transport links); they can feature too little affordable housing (or at least get some built in areas that desperately need it). But we must build housing in parts of the country where the need for housing is greater than the stock available. The social and economic costs are so severe that it should be one of our highest priorities to ensure this happens.

We needn’t be slaves to the market – we can advocate building council and co-operative housing for example – but we also cannot be the party of wealthy elderly councillors blocking housing needed by younger constituents as the Integenerational Foundation has warned.

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Green doesn’t need to mean gentrification

Jim Gleeson has an interesting blog entry about the consequences of making a city more liveable. In short, there is a danger that making an area more liveable can price out lower income people. By reducing air pollution and generally improving the local environment in more deprived areas,  richer people will start to move in displacing the people who should have benefitted.

His prescription is more housing supply to accompany environmental improvements. But we need to think a bit more carefully about this to get the medicine right for places like London.

As he points out, the economic benefits of making an area more desirable will largely go to existing home owners and landlords as the value of the land, and therefore the rent they can charge, increases. Lower income people will be forced to move, presumably (according to Jim’s argument) to less liveable areas. Council and housing association tenants who are secure in their homes gain a nicer environment, but they have no direct stake in the increased value of the land their homes sit on.

Building more homes as Jim suggests could help to keep prices down, meaning less of a windfall gain for land owners and possibly more stable rents. But in practice, due to London’s policy of “mixed and balanced communities”, deprived areas tend to see council housing demolished and replaced overwhelmingly with housing for sale in order to “balance out” the social “mix” of people in the area. There’s no way anyone with an average income and average wealth would be able to buy a new flat in most areas of London on the open market.

The flats will be bought by wealthier-than-average people, and probably many then let on the private market, with a good number of those subsidised by housing benefit. So while more supply might dampen the economic consequences of making an area more liveable, and while it might spread the wealth a little more widely, the economic benefits will still mostly go to wealthier people.

You would need to increase house building across London to 50% higher than Boris Johnson’s aspirational target just to stabilise prices. It would be interesting to know whether there is enough spare land and available development finance to raise supply levels high enough in order to gradually reduce prices so that the benefits of new homes would be principally accrued by ordinary Londoners.

But there are other ways in which we can reduce unequal access to nice local environments while maintaining or reducing levels of economic inequality. Housing supply is undoubtedly part of the picture, but policies need to be a bit more sophisticated to achieve this aim.

One simple policy would be to try to build lots more council housing in wealthier areas that already enjoy high environmental quality. That would require a government to reinstate an adequate housing capital budget; the new budget for London in 2011-15 is two-thirds lower than than the budget for 2008-11!

Another would be to ensure all the new housing is put into the control of a Community Land Trust, which owns the land and so can keep homes permanently affordable. Members of the Trust, usually a co-operative, use any rise in land values to benefit the local community and not private individuals. To date, there is only one example of this in London – Coin Street. Despite valiant efforts and credible plans from various other communities, the HCA, GLA and government have done little to make this concept happen.

A third more radical solution – radical as in dealing with the root of the problem (from radix, Latin for ‘root’) – would be to bring back taxation on land. Winston Churchill and Lloyd George both tried, and failed, to do this at the turn of the 20th century. They were blocked by wealthy landowners in the Lords, whose ancestors got rid of them as the power of the Crown diminished.

We have a tax system that raises income off hard work and consumer goods, and that leaves people to rake in huge gains from increases in land values and capital gains with comparatively little or no tax. If we brought back “schedule A” taxes, land values wouldn’t rise so much, the benefits could be clawed back for investment in affordable housing, all local residents could therefore benefit including council tenants, and people might be encouraged to invest their savings in productive stocks and shares rather than dead bricks and mortar.

These solutions have all been applied in the not-too-distant past. But as with the debate over the National Planning Policy Framework, they seem to get overlooked in simplistic debates over false choices like “housing supply vs. conservation”.

Jim’s post is much more sophisticated, looking at the relationship between environmental improvements and the housing market. But his prescription – more supply – needs to be equally sophisticated to ensure that we deliver environmental and social justice side by side.

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Why so concerned about tax?

The chart below shows a breakdown of where my monthly gross income goes. I’m earning in the region of £30k/year, above the London average but not exactly an enormous sum.

One of my favourite adages is that British people want Scandinavian public services with American tax levels.  Raising taxes to tackle the deficit is treated as something approaching political suicide. But do we pay all that much in tax?

Put aside the fact that at 36% of the UK’s GDP, the current tax level is lower than under Margaret Thatcher (when it dipped to 40%) and much lower than the Swedish level of around 50%.

How does tax affect me? Well my income tax and council tax, which pay for all the basic public services, the roads, waste collection, public transport investment, welfare for people in harder circumstances and much more account for less than my rent, which pays for my half of a flat with my fiancee. My national insurance and pension contributions that are hopefully securing my retirement add up to much less than my rent as well. Since I don’t spend a great deal on clothes, cars, TVs and the like, I’m not too affected by indirect taxes like VAT either.

After all those taxes and basic life expenses, I still have 35% of my gross income left over for fun, holidays, personal savings and the like.

If I were to get pissed off about someone taking all my money, my first target would be the property market. Look how much money I have to spend just to afford a reasonable flat in an area I like! Then there’s my inability to afford to buy a home making my future less secure, low interest rates on my ISA bond and in the short term the likely rises in bus and train fares due to spending cuts.

Yep, all things considered I think tax is the least of my financial worries.

Anyone on similar or higher incomes who crows about tax levels should stop for a moment and think about the majority who earn less and stand to lose a great deal from public spending cuts.

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The cost of housing doubles in London

Halifax have published a great little fact sheet on some key housing trends over the last 50 years. The most dramatic is that the cost of buying a home has risen 273% above incomes over that period, with the sharpest rise during the 2000s when they rose by 63%.

This is the increasing cost of housing adjusted for increases in income; or adjusting for inflation to state rises in real terms, for economists. Imagine if food or heating bills rose that quickly compared to incomes!

Whilst the property-owning journalists hail this rise in house prices, more and more people are squeezed out of the market, or forced to sacrifice huge chunks of their salary to repay mortgages.

Jenny Jones published a report on the housing crisis in London recently. She shows that over the past decade the cost of buying a home doubled in London, well above the national rise of 63%. This makes the misleading boasts of our Tory Mayor – as he fails to even meet his own modest housing targets – all the more sickening.

Unless we double the number of homes we build, which is pretty unlikely, or we make a radical shift away from home ownership, this trend is set to continue for another decade. But our Labour government and this Tory Mayor are both  committed to mostly building homes we have to buy, with a very small minority available for affordable rent, almost no land being held by communities to keep it affordable, and pretty much no support for alternative models like co-operatives.

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God bless you, lucky home owners

You don’t often see national newspapers celebrating a drop in house prices, despite the fact that they rose twice as fast as average incomes in the past decade. It’s much like the coverage of any strike that might affect a journalist’s holidays plans.

Most journalists and commentators are wealthy middle class home owners, so they are heavily invested in maintaining this trend of above-income-inflation house price rises. There are two main reasons for this trend: first, house building supply never came close to meeting demand; second, cheap credit created a bubble that massively over-inflated the value of homes.

Here in London, households with incomes up to an incredible £74,000 are soon to become eligible for “affordable housing”, which you can buy up bit by bit. Us paupers on a mere £74k are no longer able to buy a home otherwise.

In the past year this trend has very slightly eased, with falling demand matching a slight recovery of housing building numbers after the recession kicked them off a cliff. That’s Labour’s reaction to the recession – not a Green fiscal stimulus, but at least not cuts followed by a depression. Still, this slight reversal doesn’t please Geoffrey Dicks, chief economist of Novus Capital Markets, who warned in The Times that recent trends are “exacerbating an emerging supply-demand imbalance”. Cripes!

But just before you got too upset, Dicks evokes Tiny Tim to cheer on the possible return of above-income-inflation house price rises. God bless us, every one! Perhaps after being adopted by Scrooge, Tim would have reason to cheer on the rise of grossly unfair home ownership.

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Getting a home we can afford

Dave Hill writes in his Guardian blog about Boris Johnson’s housing plans for London. What could be more important to Londoners than housing that is affordable for all, of a decent quality, energy efficient and in the place they want to live? He has done great work on this topic, but he misses some basic facts and figures that expose just what Boris’ priorities are.

SH_MK_compare

All the evidence shows that London needs a mix of new social, intermediate and market (private) housing that is evenly spread around the city – much like this photo, which I took in south Camberwell. The most pressing need is for social housing, and to end “segregation by tenure”, where your income determines which ghettoised community you can live in. Thankfully my patch is pretty integrated, but go down into Dulwich or up to Elephant & Castle and you quickly enter predominantly rich and poor areas.

But Boris’ plans only deliver around half the needed social housing in the next ten years. His  Strategic Housing Market Assessment, partly based on central government research, says we need roughly 18,200 new affordable homes every year, and that 80% of these should be social housing. But Boris’ Housing Strategy and his London Plan set targets for only 13,200 new affordable homes, of which only 60% will be social. Market and intermediate housing for middle class and rich people will exceed targets, whilst social housing falls disastrously short. We won’t even meet growing demand, let alone deal with the backlog of families in overcrowded homes, B&Bs and temporary accommodation.

That’s not all. Alongside the lack of supply, parts of London suffer from terrible segregation by income. Rich people live in one area, poor people in another. Dave Hill has exposed the contemporary vanguard of this old Tory policy in Hammersmith and Fulham. Boris has removed the requirement to build affordable housing into every new development, and his London Plan only recommends that more private housing is built in predominantly social housing areas. No word on building social housing in wealthy areas.

Until Boris delivers a strategy that meets the demands thrown up by his own analysis, London is just going to keep getting less affordable for the average Londoner.

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