The Broken Housing Market Conference, London

The Institute for Civil Engineering in Westminster hosted a one-day housing conference – ‘the broken housing market’ on June 1, 2018. The conference was organised by RICS, NIESR and CaCHE. The conference had a starry array of speakers, including David Miles, Ian Mulheirn, Kate Barker, Steven Aldridge, Paul Cheshire, Christine Whitehead and John Muellbauer, among others. I was asked to provide closing remarks which meant I had to stay honest and really concentrate throughout the four sessions, 13 speakers and discussion sessions. Short videos from several speakers can be found here.

The event was named after last year’s white paper – Fixing our Broken Housing Market – and covered different dimensions of what is conceivably wrong with housing and what needs to be done to address such shortcomings. It is important to state from the outset that different views were forcefully expressed about these problems e.g. whether they were ostensibly on the supply-side or demand side (or indeed both) or indeed were mainly about policy failure. Some of these differences reflected disciplinary or background factors but also in some cases concerned different approaches to housing economics as a sub-discipline.

The structure of the conference was in four parts. The first session was entitled housing and consumption and dealt with many of the familiar housing and macroeconomy questions – how does rising house prices feed into consumption and additional mortgage re-leverage; what role does housing collateral play; how has the UK market been changed by mortgage stress tests, lower LTVs and the macro-prudential policy context. The second session was ostensibly about affordability though it somewhat morphed into a much more fundamental discussion of how one views housing as either a consumption good or as an asset. After lunch Kate Barker reprised the housing supply question 14 years on from the review of housing supply. Stephen Aldridge provided a substantial reply. The final session involved four policy papers aiming different cases for reform and one which raised wider questions about what we actually mean by housing policy.

The main things that struck me today were the following:

• There is a lively debate between mainstream housing economists about what is going on in the housing market, how it fits together and what needs to be done.
• Mulheirn argued that the housing problem is primarily an asset issue, not a housing services question (in many places housing consumption costs are reasonable and stable). He also argued that the problem is much more a demand than a supply shortage issue. This was not accepted by many in the room who remain wedded to the need for more supply.
• There was much discussion of housing tax reform but it was strongly encouraged that promoters of housing/land tax reform invest in good policy design and careful, cautious implementation.
• Ian Mulheirn also spoke about a policy trilemma i.e. that it is possible to have one or even two but not three policy objectives simultaneously – where those objectives are financial stability, home ownership growth and pro-owner fiscal policies.
• We are still arguing about the definition of affordability but linked to this the assumptions set out in banker affordability stress tests are highly sensitive and contested i.e. they seem much more conservative than most credible independent forecasts of inflation and interest rates.
• David Miles sketched out a model that might help explain the future long-term trajectory of real house prices and argued because of the sensitivities of two key elasticities (between land and structures) and between housing and non-housing consumption, it was very difficult to confidently work out the fundamental real house price – and this matters materially for macro prudential policy if one is to have a benchmark from which to assess how far away prices are from a fundamental equilibrium. As an aside, he also argued that the tax relief reductions on private renting landlords were ill thought through.
• Christine Whitehead distinguished her interest on policy details from the grand design others had for housing and policy reform (even though she agreed with the aims). Her point was that housing policy has different governmental masters (MHCLG, DWP, Treasury, the Bank, etc), a plethora of different stakeholders and an alarming tendency to generate new policy instruments; yet little clarity on what the housing policy was really for or about – and more to the point in her view, it has always been much like this.

I particularly liked the eight stylised housing facts (i.e. that we should all agree with and take as our starting point) as laid out by Stephen Aldridge. These were:

1. Affordability pressures exist, particularly in London and the south east
2. There has been a 50% rise in the number of concealed households (alongside many more young people staying with parents)
3. Most young people who don’t currently, still want to own their own home
4. A shortage of housing supply is indicated
5. We can build more homes
6. We are building more homes than in recent previous years.
7. A sustained substantial increase in housing supply is required to impact on affordability
8. There is plenty of land in the right places for additional housing supply.

In my wrap-up, I tried to set out how CaCHE might play an ongoing role in this area. Kate Barker had indicated in her talk that the new centre was a rare opportunity to provide evidence and build conceptually. We certainly want to do just that. I also made the point that the private rented market is a complex mosaic of well-defined and largely independent segments on either side of the market. This is neither well evidenced nor conceptually understood sufficiently to allow us to have confidence that policy-makers reflect the sector’s subtleties. This led to my final comment, arising from the on-going policy transfer exemplar project we are undertaking, that we do not as housing researchers make anything like the full use of the policy studies or policy analysis literature i.e. the models that might shed light on the policy process in housing. We need to change that fact as we move on to our more empirical research.

 

Housing Studies Association Conference 2018

I am writing this during the final day of the 2018 HSA conference, for the first time taking place in its new home in Sheffield. The structure, familiar faces and the good cheer of the annual conference remain the same.

During the conference I heard several workshop papers, I also attended two plenary sessions, one of which I held the coats for. This year, I also spent a considerable amount of time talking with CaCHE colleagues from far and wide, since we were well-represented and it was too good an opportunity not to catch up with people. Oh, and there was a bit of socialising, too.

CaCHE is now a partner with the HSA and we are delighted to be supporting early career researcher streams and to support specific plenary sessions. I hope that our relationship with them will only deepen with time. We have already worked with HSA on their first annual lecture last Autumn and I hope together we will be a good fit over the coming years.

To the conference. The plenary I chaired involved three very different papers: Keith Jacobs reflected on the neo-liberal housing project, not a housing crisis, but something that works for key elites (though he claimed to remain optimistic about the future); Brian Lund discussed housing politics in UK elections and argued that housing tenure and age, among others, have become key signifiers of voting patterns; Marissa Gerstein Pineau presented a socio-psychological analysis of different social policies including attitudes to homelessness in order to make a case for the importance of how we frame our arguments and communications.

Three things struck me in the plenary. First, I think it is undeniably interesting that housing cleavages have electoral significance but I could not help but want to see more granular spatial analysis, especially of high versus low pressure housing market regions (and also the Brexit remain versus vote leave areas). Second, I completely agree with Keith that it is not really helpful to talk continuously about a housing crisis. He argued this in part because the outcomes created by our housing system evidently work well for important stakeholders at the expense of others (including future generations). I would stress more that we are talking about overlapping chronic problems that periodically blow up into crises.

Third, I think the framing idea is clearly relevant and important in the world of knowledge exchange and policy influencing.  Marissa made the point that when fact finders, etc. seek to bust myths it is often found in follow up surveying that it still the myth rather than the reality that many people retain and hold to as nearer to the truth. This has obvious currency for those trying to evidence the social housing sector as different from many of the ‘legends’ it is saddled with. I also think the perpetrator of the ‘death tax’ concept for inheritance tax (and now also dusted down when discussing the funding of social care or deferring council tax payment) has produced a politically fireproof argument that is extremely resilient to counter-argument – despite evidence or sound logic to the contrary.

The final plenary about professionalism and practice involved Gavin Smart and Mary Taylor: two very good speakers both able to cross the boundaries between academia, policy and practice.  Mary provided three provocations about leadership in housing. First, leaders often focus more on policy than management. Second, unprecedented pressure to change exists in the system and  management needs to do more to embrace performance and  be more willing to change culturally. Third, the task of social housing is getting harder and resources fewer (and will be made more unpredictable by Brexit) – where are the future housing leaders  going to come from?

Gavin sketched out some of the main challenges as he sees them. First, what do we mean by a housing profession? Second,  what are the main challenges for the professions? Third, what is the  relation between professions and the academy? Like Mary, he stressed the massive opportunity (and need) to innovate, especially through new technology. The policy and practice challenge was thirty years in the making and will probably be thirty years in the fixing (and expectations to therefore manage). Too often the profession does not use evidence to support what it says. There are fertile areas where academic work informs policy and practice but there are many cases not so much. How do we change the conversation?

My own paper was about housing systems. It was really a form of thought experiment – is there a case for using housing systems ideas (interdependency, emergent properties and complexity, homeostasis, recursive processes, path dependency, non-linearity, etc.) systematically across housing research and evidence work within CaCHE? What might such a checklist look like? It would need above all to speak to different disciplines undertaking housing research across plural methodologies.  A tall order but surely not beyond us and something that might help us avoid some errors and reduce over reliance on partial analysis that does not consider the whole system.

I heard many other good papers by Rebecca Tunstall, Adriana Soaita, Yoric Irving-Clarke, David Clapham, Peter Matthews and Chris Foye, to name just six but I think my favourite paper was on children, play and spatial theory by Jenny Wood – which was just excellent, thought-provoking and well-presented. To what extent should place-making and planning take account of children’s wishes and how do we reconcile different adult and child requirements?

The conference dinner was held in the municipal splendour of the town hall. There is a regular pre-dinner talk, this year co-hosted by the Cannon & Ball of HSA, Tony Manzi and Joe Crawford. Kind words were said about CaCHE and of course a few people were the target of some harmless ribbing. I think I got away with it, though to be honest I may have missed a barb or two when lulled to sleep at one point by Joe’s mellifluous tones. I was reminded of that story about the Glasgow Empire when Mike Winters went on stage before Bernie popped his head out the curtain and someone in the audience shouted ‘Aw naw, there’s two of them!’. Eric Morecambe was once asked what he and Ernie would have been if they had not been comedians and Eric said ‘Mike and Bernie Winters’.

Roll on next year and thanks to all of the committee (especially Beth and indeed Joe and Tony) and HSA staff for their efforts to make the new home the base for such a successful conference.

 

Unpacking Rent Pressure Zones

Scotland recently broke ranks with the rest of the UK over private renting by introducing a new standard tenancy which will mandate the grounds by which a landlord can end a tenancy; otherwise they are open-ended and average tenancy lengths are expected to lengthen.  While some see this as a revolution in the rental market; others are more sceptical. It certainly has been the case in recent years that average length of tenancies had been growing under the old rules, as well as evidence that  more families are letting in the market. At the same time, others remain to be convinced by the new legislation. The new law is less than 6 months old and credible evaluation will take some time to surface and perhaps resolve these disagreements.

Alongside the tenancy reforms sit a new form of second degree rent controls in the shape of rent increase limitations in what are called local rent pressure zones, designated and applied for by local authorities. These are approved by the Scottish Government on the basis that the councils in question provide credible evidence that there is a clear case for such limitation to stop excessive rent increases. It is worth noting two or three things: the proposed limitations do not interfere with the initial rent setting that takes place at the beginning of a tenancy (they are not controlled) and any subsequent limitations will be capped but above the rate of inflation (a minimum of CPI & 1% for up to five years). These new proposals are, all in all, relatively modest.

For me, the most important issue is what the Scottish Government requires in terms of  credible and legitimate evidence from the council in question? Helpfully, the Scottish Government published a document which sets this out and I have just got round to reading it.

The first thing one is struck by in the guidance is that the evidence demands on a council are substantial. The early perception that many councils would be seeking such RPZs is clearly a misjudgement.  Paragraph 7 of the document says: Evidence of rent rises alone will not be sufficient to prove that they are rising by too much. Authorities also need to prove that rent rises in the proposed RPZ are causing undue hardship to tenants; and the rises are having a detrimental effect on the local authority’s broader housing system.

The cap only applies to tenants operating under the new tenancy in the designated geography of the RPZ. The guidance says that such a zone may be at different geographies such as a street, post code sector or data zone (but not necessarily a broad rental market area, as one might have intuitively expected). The guidance argues (para 18) that the provisions are intended to be used by a local authority to deal with excessively rapidly rising rents and where the Scottish Government consider that rents are rising too much, they are causing undue hardship to tenants, and, the council is coming under increasing pressure to provide housing  or subsidise the cost of housing as a consequence of rising rents (the Scottish Government expects the council to have plans to increasing housing supply and to link these to their RPZ application).

This is expected to be a transparent process where councils must publish their case and their evidence for RPZ designation. The guidance says (para 23): ‘the evidence will be a mixture of quantitative analysis e.g. statistics which demonstrate rent increases and qualitative analysis e.g. consultation with tenants. Councils will have to gather specific/ new evidence themselves where they do not hold this information already or where national data collections do not provide the level of detail required for an application. As such, councils might consider contracting with a third party with statistical and research expertise’.

Annex 1 of the guidance (criterion 3-5) sets out what is expected: a profile of the stock, time series evidence of rent increases, sample information and clarity over analytical methods, data from existing tenants, evidence that they are experiencing hardship, evidence that this rent pressure has increased pressure to expand supply and deliver more subsidy.

It would seem likely that the extent of evidence required will deter councils from making multiple applications and so the geographies may be comparatively wide. Second, it will take time for the new tenancies to generate the evidence required so do not expect RPZ applications immediately.

So, is this a modest proposal that sends a signal that may give tenants some comfort (and indeed landlords since they would have certainty about greater than CPI rent increases and can still set market rents initially); or might it be the thin end of the wedge that opens the door to greater levels of intervention?  I think it will be some time before we can assess the impact of RPZs.  Moreover, I think we need to place these reforms in a wider context of policy change for the private rented sector which go in different directions. These would include the adverse tax changes on landlords via LBTT, capital gains taxation and the tax relief available on borrowing, as well as the ongoing welfare impacts of the LHA cap and the treatment of younger single people (i.e. the single room rate). There is also the rental income guarantee pilot to encourage build to rent in Scotland.

And of course, the rental market is actually a series of more or less separate market segments on both sides of the market. We need to think through how these policy changes affect the different segments and the sector as a whole. Returning to the overall assessment of these interventions – rigorous analysis will have to both disaggregate the combined effects of these policies over time and ascertain their impacts across the multiple segments of the modern private rented sector –prs 1). All in all, we should be cautious about early evaluations telling us conclusively that the new system works or does not work later this year or even next.

 

 

The Last Post (for 2017)

A final piece for 2017 reflecting on the year now ending.

Brexit overwhelms most everything else. Back in the Spring, Duncan Maclennan and I presented a paper at the Housing Studies Association on our thinking about Brexit’s implications for UK housing. The consequences of Brexit remain far from clear (and that is the most constructive excuse I can give for not yet finishing that paper). That said, it seems evident that there will be important housing consequences flowing through exchange rate risk, medium term fiscal pressures, construction capacity shortages and the wider changes on economic prospects and how they feed in to housing demand.

The General Election was a curious affair. It seems like a long time ago now but even in the summer of 2016 when Theresa May became prime minister, people began to speculate on when the election she said would not be called, would actually, inevitably, happen. No-one in the media questioned the election until probably the day the publication of the manifesto pushed the funding reforms for social care. Very few people felt even on the day of the election that the Conservatives would not have their majority and mandate for their form of Brexit. Key assumptions have not been borne out or are at risk: a majority with the mandate to go forward with its vision of Brexit; a pliant Commons allowing them to ‘get on with it’; and, the capacity competently to manage the domestic economic and social agenda (what has come to be called in Scotland the ‘day job’).

In Scotland, we have now had a full year of the new Scottish Parliament and have settled in to a minority government and a new domestic political agenda majoring on the new tax and social security powers, narrowing the educational attainment gap, legislating on planning system reform, delivering affordable housing supply targets and doing more to tackle homelessness. This was also the year that legislation reformed the private rented sector creating open ended tenancies and the capacity for local rent pressure zones (a form of locally designated limited rent increases).

The Grenfell Tower disaster was a human tragedy and a collective failure of policy and practice. It is still, at this distance, hard to grasp the scale and horror of what happened. It will continue for many years to have substantial repercussions, especially for social housing high flats (just last week my council, North Lanarkshire, floated long term plans to demolish and replace their entire stock of multis). The response is also in part a recognition after the fire of the wider lack of understanding of contemporary social housing, who lives in it and what they experience. The enhanced concern with fire safety is also now rightly moving beyond the nonmarket stock to the rental market too. Grenfell in the short run is about understanding what happened that caused the fire and looking after everyone affected; in the longer run it will have wider consequences for housing, neighbourhoods and landlords.

The year for me, professionally, has been transformative. We established the UK Collaborative Centre for Housing Evidence, which started business in August in the Olympia Building in Bridgeton. After the best part of 10 years as a head of department and then directing Policy Scotland, I can now focus on housing research and have the privilege of working with an excellent team of co-investigators, staff and partners across the UK and beyond. It is all-encompassing and immensely enjoyable. However, we are now moving beyond set-up stage and into implementation and I look forward to delivering our projects and activities, and in playing a constructive role bringing evidence to housing policy across the UK.

Next year will see the Brexit story continue into its critical trade discussions. How will the key battlegrounds fare?  Domestic politics will be surely driven by Brexit and the capacity to manage domestic politics and policy as well as the complex realities of minority government and parliamentary tactics (i.e. shades of the late 1970s). Will Scottish politics remain primarily on the ‘day job’ next year?

In 2018, we will see a new green paper on English social housing, concerted work in different parts of the UK is now promoting good practice and evidencing innovations both to end rough sleeping and to consider effective homelessness prevention. I am involved in CiH’s new project on rethinking social housing, which will contribute evidence around the big themes in the green paper. I am also delighted to be on the shadow management board of the fascinating new evidence-focused homelessness impact centre, led by Ligia Teixeira (and is partnered with CaCHE). Next year will also undoubtedly see the first evidence of the impacts of the 2016 rental market legislation in Scotland, as well as the recent stamp duty changes for first time buyers. Hopefully, there will also be further work by groups like CaCHE, to make more sense of the housing system as a whole, how it interacts and how actions in one tenure or place have repercussions on others. Duncan and I also need to finish that Brexit paper.

Thinking about the Budget, Housing and Scotland

I have long felt that making sense of the Budget each year requires a few days and the lifting of at least some of the immediate confusion, argument and data fog that descends. There was considerable anticipation that the Budget would mark an important staging point in the apparent prioritisation of housing by the UK Government for England – something that goes back at least to the Fixing the Broken Housing Market white paper and now continues with the preparations for the social housing green paper. Alongside these developments, it was anticipated that more plans to achieve ambitious housebuilding targets would be set out and that this would include a major commitment to more affordable supply.

I will come back to housing and also some specifically Scottish dimensions of the budget below. The Sunday papers this morning, at least those to the right, have columnists suggesting that, politically, the budget went well. But this seems to be about not compounding ongoing political problems for the government and surviving the immediate period so as to be able to fight on.  However, the troika of the IFS, the OBR and indeed the HMT’s Red Book itself sforecast low productivity growth, difficult public finances and continuing stagnant real earnings. This is a grave context and yet of course it is all too often buried by the understandable but overwhelming Brexit steamroller.

There were many housing announcements, though some were better defined, costed and designed than others. Inside Housing summarised the intended housing changes:

• £125 million over two years’ increase in targeted affordability fund for LHA claimants finding it difficult to pay rent
• Changes to universal credit worth £1.5 billion including allowing HB claimants to continue claiming for another 2 weeks after a new claim
• Committing to achieve the 300,000 net additions to housing supply by the middle of the next decade and to support this through £15.3 billion of a mix of capital funding, guarantees and loan funding which would in part support the unlocking of strategic sites and estate regenerations – although the majority of the money appears to be for private development (though the Treasury say that part of the new financial guarantees ‘could’ be used for affordable housing as well – Inside Housing, 24 November 2017, p.2).
• £1 billion of extra borrowing capacity for councils to build affordable homes in areas of high demand.
• Pilots will be carried out in the West Midlands for the new HA right to buy.
• Councils given the ability to charge 100% council tax on empty properties.
• On the planning side pledges were made to invest in five new garden towns and also an ‘urgent review’ of how to close the gap between planning permissions and house building.
• Homelessness initiatives will include three new housing first pilots .
• Fiscally, stamp duty will be ended for all first time buyers in England, Wales and Northern Ireland purchasing homes worth up to £300,000 (and on the first £300,000 if the property is less than £500,000).

While there has been general recognition of the scale of the supply measures (which also include continued help for SME builders) and the direction of travel on homelessness, there has been less enthusiasm for the perceived limited additional support for affordable housing supply and a sense that they signal incremental rather than fundamental change (as suggested by David Orr).  Even the FT commentary after the Budget suggested that it was time to just end the English councils’ ceiling on housing borrowing altogether. Further valuable commentary from the housing sector on the Budget announcements can be found from various sources can be found here (CiH, Jules Birch, Shelter and NHF).

I want to say a little more about the stamp duty change.  Many economists are rightly critical of transactions taxes in terms of inefficiency compared to recurrent property taxes. The changes announced this week are the latest demand-side housing market interventions which, while targeted to first time buyers, will in all likelihood put upward pressure on house prices to the benefit of existing owners of housing assets and reducing the benefits to the formal beneficiaries. Both IFS and OBR have made this point, as have many commentators elsewhere. The evidence will out on the actual effects (insofar as models can actually, credibly, separate out the effects of the fiscal change on house prices and activity) but there is a wider question.

A slightly perverse outcome of greater fiscal devolution to Scotland has been fiscal competition between rUK and Scotland. So far, this has been exemplified by housing taxation: the tax rates competition between the two parliaments over stamp duty (land building transactions tax in Scotland) and the decision of Scotland to follow the 3% tax hike on second properties and buy to let landlords purchases. Now, the Scottish government has to consider how it will respond to a sizeable reduction in stamp duty in the rest of the UK.

There is an interesting reversal of classic oligopoly theory going on here. Traditionally, it is argued that where a small number of suppliers dominate a market, one firm raises prices and no-one follows; but if one cuts prices, they all follow and reduce their prices too. With fiscal competition in this devolved duopoly of the UK there is a different asymmetry.  Tax increases are followed in this case by Scotland because economic revenue benefits trump political costs (e.g. buy to let landlords are the main losers from higher stamp duty/LBTT rates) but where taxes are cut in the present UK budget for political reasons (and they arguably trump economic arguments in this case) how should or can Scotland respond given its public finance constraints (the opportunity cost is larger because of the smaller budget Scotland manages).

Housing is more prominent now as a domestic policy priority and is much higher on the political agenda. It is complex and multi-faceted and that is represented by the breadth of housing-relevant announcements last week. Policy to move us beyond an incremental change, however, will require sustained commitment over at least a decade. To return to the microeconomics of housing, we need a permanent, structural, change in the shape of the supply curve (so that it is more elastic), not a short term shift, welcome though that may be in its own terms.

 

Towards a Housing Solutions Platform

This week I had my first trip to Brussels and participated in a roundtable established by the Friends of Europe to discuss pan-European steps to deliver more affordable housing supply and in particular discuss examples of genuine financing innovative housing solutions found in different member states. This is happening not long after Housing Europe published their 2017 State of Housing in the EU.

This may not sound exactly riveting but it was actually a fascinating day on many levels – how the EU and its different cogs and gears work; how such meetings are organised and conducted; who says what; and, what can one derive from the substance of the discussion. The roundtable was set up as a large square table in classic style with more than 40 folk assembled around it. No break-out sessions or smaller conversations but instead a series of short and some even briefer contributions marshalled by the chair for the best part of 4 hours.

I was one of the first speakers talking about evidence influenced housing policy, what works and the potential value and risks of housing policy transfer or mobility given national institutional differences, contexts and the like. After my bit was over I was able to just sit and listen. There were several very interesting themes running through the day:

• Housing First was a recurring cross-national motif. There was an excellent presentation by Finland’s Y-Foundation and also by Tom Bennett who runs the Housing First Transition Fund in Glasgow. The Finnish contribution, by Juha Kaakinen, included the nice point that rough sleeping was tackled so effectively in Finland for two reasons – Housing First but also additional affordable/social supply.
• From the chair in particular, but also around the table, there was much made of the need and potential utility from rigorous economic evaluation of the wider net benefits of preventative housing interventions regarding homelessness and affordable housing supply – critical to making the social, economic, public finance and infrastructure arguments for the wider benefits attached to more and better housing. I thought this also spoke to evaluability assessments which brings stakeholders together before an intervention begins, work through a shared theory of change and decide collectively an agreed evaluation process.
• Many cities face problems with short term ‘touristic’ letting most notably through Air BnB. There are clearly lessons to learn and share from the experiences of cities like Barcelona and Paris.
• The growing importance of partnership by public and private sectors with foundations, endowments and philanthropy especially with regard to filling gaps, providing patient capital and supporting the gathering of rigorous evidence.
• The difference in size, scale and opportunity is of course very important across EU members but this led to an interesting line of discussion that smaller countries like Finland and Scotland were better placed in some respects to experiment and innovate with new and interesting delivery models. The focus on smallness also raises the question of spread and scale of successful projects – this is a challenge colleagues wrestled with in What Works Scotland.

My own wider reflections on the day were threefold: first, finance and subsidy are part of an irreconcilable, irreducible conundrum for low cost housing (its cost can only be reduced via different more or less novel ways of providing and subsidising – equity, land, construction and finance). My Canadian colleague Derek Ballantyne argues that in reality there are few genuine innovations, merely different ways of assembling and packaging these elements but they all involve different ways of subsidising, taxing and profiting from elements of the delivery of new housing and how it is subsequently operated. Ballantyne also concludes that it all comes down in large to political commitment to resource the subsidy, in whatever form it comes.

Second, and related, there are really two choices – first, the size of the macro resource commitment by governments to housing (made up of capital and other finding subsidy, tax breaks, guarantees and personal housing subsidy). Cut the programme and less is possible:  it may force states to divvy up what is left in different ways – spreading shallower subsidy further or focusing on fewer units but with deeper subsidy. Alongside the macro challenge are, second,  the myriad micro housing delivery models which are more or less efficient, cost-effective and/or prone to perversities, unintended consequences and other problems. There was much talk about using public finance devices to lever in private equity participation, though we must watch out for possible moral hazard.

Finally, I was struck listening to the discussion of public funding and subsidy how much of our housing subsidy is actually lost through home owner tax breaks and also inefficient taxation such as transaction taxes rather than, for instance, more efficient recurring taxes on land. I was reminded of Hernando De Soto’s phrase ‘dead capital’ concept that he applied to unused property-based collateral. I wondered if there might be mileage in a new phrase, ‘dead subsidy’ referring to wasted, and often capitalised, housing tax breaks (and of course ‘dead tax’ might also apply to those transaction taxes and their own micro-allocative inefficiencies)?

A little unexpectedly, I found the platform format and discussion rewarding and thought-provoking. This was in no small part down to the efforts of the chair (Dharmedra Kanani) and also the choice of discussants put before us.  I have only mentioned a few of the big ideas circulating yesterday. I am sure we will hear much more from this group in the months and years to come.

 

Disruptive Ideas for Housing Land & Infrastructure

I chaired a panel session this week at the annual Homes for Scotland conference in Edinburgh. The idea was that our four speakers would consider land and infrastructure challenges around the risks and opportunities created by disruptive changes. These disruptions are novel ways of delivering housing, changing how funding and infrastructure is done in order to deliver more housing that is less expensive and can, arguably, and to different degrees, alter the way our housing system functions.

The populariser of the disruptive innovation concept, Clayton Christiansen, argued that small scale innovators take root and outcompete incumbents. They are, in other words, a silent but growing threat to business as usual. In this context innovations aimed at either using land value uplift capture through planning law reform to fund new infrastructure (rather than from scarce public finances); or, separating out land and infrastructure (into a common good fund underpinned by a state guarantee) and a separate element for the build cost – serves to offer a threat to the status quo business model of land oriented speculative housing developers.

The planning reform proposal, from Thomas Aubrey at the Centre for Progressive Capitalism, and the plan to separate out land & infrastructure from bricks & mortar (Matthew Benson from Rettie and Co) were the central examples provided of disruptive challenge in the panel session.

They entered this lion’s den this morning on the premise that the current housing system is broken – new housing needs to be affordable or at least considerably less costly, there needs to be much more of it and infrastructure critically needs to be funded upfront to facilitate new home development. Typically, in the UK, unlike much of continental Europe, this is funded by central government in different ways and from a range of government departments. It is typically not, and despite initiatives like community infrastructure levy, in the form of capturing (part of) land value uplift on the granting of planning permission.

There is thus a public finance argument in favour of such a shift – a charge or tax could in principle reduce the requirements on public revenues to pay for new infrastructure. Second, lower priced housing costs and the development of the long term funded investment in a common future fund – could reduce the cost of housing over time and again reduce important aspects of the housing budget (ie by reducing unit costs). As my colleague Christine Whitehead has often said, one measure of good housing policy is its capacity to reduce the cost of housing to households and the tax payer.

Our first speaker, Nicola Woodward (Lichfields), went further and argued that new housing and an efficient housing stock, are essential economic infrastructure, vital to growth and productivity. My colleague Duncan Maclennan has been making this argument for some time and indeed goes on to argue that benefit-cost ratio metrics that propose large productivity impacts for things like transport investment are often mis-specified and overstate value relative to housing investments and which in turn are often understated. This is partly about attribution i.e. increased densities attribute to transport rather than housing social returns, but also due to a failure to properly consider the counterfactual i.e. the cost to the economy of not investing in housing. Duncan’s argument, till now at least, seem to have been more positively received in other places like Canada and Australia than here.

What about the critical responses? One interesting response from the panel was that those who might feel that these sorts of new models or reforms to planning would damage the interests of the existing players – were essentially missing the point in that the objective is to improve the working of the housing system. There will be losers and they will typically be loud while winners will probably only whisper at best. So, the political economy of pursuing this credibly is both interesting and challenging. Two possibilities suggested were, one, to set up demonstration pilots; or, second, to attempt forms of innovation in planned new towns.

It might be pointed out second that using funds from value uplift for new infrastructure for roads, schools, water, etc. means those funds cannot be used for S75 affordable housing. On the other hand, as Matthew Benson pointed out, his model could be applied to any tenure mix including social housing and it would all be cheaper than the current new supply status quo. A worry was also expressed that this class of reforms might impact on house prices, though the direction of impact was not completely clear to me. Benson argued in any case that house prices are dominated by the existing stock and the proposals suggested would not in reality be big enough to affect the overall housing market.

Will these or other similar ideas actually disrupt land and planning to support more, less costly, housing supply work? How will they relate to wider community plans, the work of the new Scottish Land Commission and the upcoming planning legislation coming in Scotland? Some of these ideas are not unlike more traditional disruptive ideas like land community truss. Perhaps we therefore need a suite of ideas that can be used at different times across our range of market contexts. I am sure the debate will continue.

 

 

 

Trends and change in Scottish Housing

This week the Scottish Government published the new trends summary for annual housing statistics across Scotland. There is always something interesting or surprising to be found here and I thought would briefly identify and comment on a few things that struck me (all figures from the new trends summary).

Level of completions

• In 2016-17, there were 18,539 total completions, the biggest total since 2008-09 but still well below pre-recession levels. Looking at the composition of the total, private completions were down a few hundred at 13,187, housing associations built 2,748 units (428 units greater than 2015-16) and councils built 1,143, much the same as the previous year. However, rehabilitation and conversions accounted for more than 1450 units
• Within specific council area patterns vary significantly. In our largest cities, for instance, 76% of new supply in Edinburgh is private sector but only 32% is in Glasgow (fully 42% was housing association development).
• Long term trends suggest private housebuilding, while on an upward trajectory, is still well below the average over the last 20 years.
• The first diagram show very long trends back to 1920 for the share of housebuilding completions between private and social sectors.

 

 

Level of affordable supply programme completions and its composition

• Scotland is spending more than £3 billion of public funds in order to build 50,000 affordable units in the current Parliament, 35,000 of which are to be social. In the first year of this programme, 7,336 units were completed, below the averaged target of 10,000 but 13% up on the year before. Just under 2/3 of these were new build and the rest were either rehabilitations or off the shelf purchases.

Tenure shares and tenure change

• Tenure change in Scotland continues to be noteworthy. The bulletin points out that in 1981, 40% of the Scottish dwelling stock was owner-occupied, rising to a peak of 63% but then fell back over the last 6 years to just 58% in 2015. Alongside this has been the remarkable growth of the private rented sector, trebling as a share of all units since 1999 and increasing from 10% to 15% between 2008 and 2015.
• The second chart shows the movement on absolute numbers of the three main renting tenures between 2001 and 2015. The PRS is now comfortably the largest of the three.
• Locally, home ownership varies from 83% in East Renfrewshire (2015) to 44% in Glasgow (2015). Private renting (also in 2015) varies from 4% in East Renfrewshire to 27% in Edinburgh. For social housing shares, and always the outlier, East Renfrewshire has 12% of its stock in social renting tenures compared to 37% in West Dunbartonshire.

 

 

Local authority evictions

• The data indicates that for 2016-17, there were 1,421 evictions or abandonments associated with council tenancies. This equates to 15% of court actions initiated, 5% of all proceedings issued and 0.5% of all lettable stock.

Trend in LA lettings

• A long term decline in local authority lettings has stabilised. In 2016-17, there were 25,788 lettings, slightly down form the previous year, and 40% of lettings were to homeless households  as against 38% the year before. At the beginning of the previous decade, there were more than 50,000 lettings a year, though much of the reduction is due to stock transfer in general and Glasgow’s transfer, in particular.
• Only an incomplete proxy for social need or demand, local authority housing lists (and common registers) were standing at, as of 31 March 2017, just over 162,000 households, a 3% decrease on the previous year and the 9^th successive annual decrease.

The arc of the RTB in Scotland

• Just under half a million public sector (and stock transfer) homes were sold under the council house sales right to buy scheme, now ended in Scotland. The third chart shows the rise and fall of annual sales.
• In 2016-17, RTB sales totalled 3,510, up 38% from the previous year. Locally sales were highest in absolute terms in Fife, North Lanarkshire, South Lanarkshire and Glasgow.

Lots to think about in this data but it would be nice to join this up with private market data (via the Centre for Housing Market Analysis) and housing association data from the Scottish Housing Regulator, Maybe one day? I am working with colleagues at the Urban Big Data Centre at the University of Glasgow on monitoring the private rented sector through letting and adverts data – that might help to further close the data loop.

 

 

Exploring the Scottish Economy

My last official act with Policy Scotland is to participate today in a launch for our edited book ‘The Scottish Economy: A Living Book’. I edited this new overview with Duncan Maclennan, Des McNulty and Michael Comerford. We are immensely grateful to all of those who contributed to the book’s 19 substantial chapters. We think it is a genuinely useful and serious contribution to an empirical understanding of both the state of key sectors and the economic challenges the country faces.

Of course, Scotland is a place for different kinds of economic debates – those that mirror wider conceptual and empirical debates elsewhere about macroeconomic policy, government intervention, national strategies and what works. But is also, rightly or wrongly, where so much of the constitutional debate about Scotland turns. Just in the last week, both aspects of these debates have surfaced as a result of the Scottish Government’s publication of the new GERS data on Scotland’s public finances and in the anticipated economic strategy content of the new Programme for Government to be launched next week.

This book has a unique history. Sir Alec Cairncross established the Department of Social and Economic Research at the University of Glasgow after the 2^nd world war as an empirical research–intensive group of social scientists. In the mid 1950s, he edited a book entitled ‘The Scottish Economy’, featuring an empirical account of all the major Scottish sectors, which involved wrestling with often quite primitive data, but as was characteristic of the diagnostic investigative approach, often featuring remarkable forensic analysis of what was available. Of course, post war Scotland is in some respects now barely recognizable but many root issues and characteristics like inequality, spatial variation, the problems confronting Glasgow and the debates over strategy, productivity and growth still to the fore.

The Department of Social and Economic Research begat the Department of Urban Studies in the 1990s and now Urban Studies is a successful subject area in the School of Social and Political Sciences. The ESRC Centre for Housing Research, led by Duncan Maclennan, was located within S&ER, where, for a couple of years, Sir Alec’s daughter, Liz, was a researcher with us. We thought that as a commemoration of that excellent path breaking empirical study, we should seek to re-create its essence 60 years on. Although the subject material has changed (we don’t, for instance, have a chapter on the church in Scotland), we have, we hope, produced a significant substantial volume that should add value for academics, students, political and commentariat classes across many domains in Scotland. Retaining the link to the history of the book, we were delighted that Frances Cairncross could offer a foreword and Laurie Hunter, long term head of the department of Social and Economic Research, could add an afterword, too.

The book has a series of five chapters at the beginning of the book that are broad-based about the history of the Scottish economy since the 1950s, including one on the development of economic policy, alongside chapters on fiscal matters, the contemporary landscape and the Scottish population. We then move on to a series of sector or more topic-specific chapters concerned with issues as diverse as: oil and gas, infrastructure, rural Scotland, education, health, housing, the environment and renewables, the financial sector, urban Scotland, women in the labour force, local government finance, inequality and poverty, and government’s place in economic strategy. Chapters combine careful analysis of descriptive material with reflection on current and future challenges.

The main strength of the book is that we have assembled many of the key writers academic and non-academic who can write with authority on these matters (and they have done so). Second, a distinctive feature is the ‘living book’ element, by which we mean the updatable accompanying website which visualises much of the data contained in these chapters. The empirical focus is a drect legacy of the original Cairncross volume and we hope readers will find it useful. We also intend to use the website to provide periodic additional content, perhaps through blogs and author/editor notes.

In this way, and short of further editions (which we hope there will be an appetite for in time), we hope to overcome the classic problems such volumes face (subsequent events overtake the book). Our main such example, which only features in the introduction, is Brexit. Several of our authors (and indeed one editor) are thoroughly versed in the economic debates around leaving the European Union but our timescales precluded adding a further chapter late in the day. I hope the website will be able to host a series of contributions on that pivotal topic.

It is a nice way to sign off from Policy Scotland and I would like to thank my editorial colleagues, all the 33 contributors, the publisher and Policy Scotland staff and interns and for doing such a great job throughout the project. I wish the new director Chris Chapman well and Policy Scotland continued success. The new housing evidence centre, CacHE, will be working directly with Policy Scotland and we will have many continuing overlapping strands.

 

 

 

 

 

 

 

Starting Again

This week, I have begun a new job. I am still at the University but the UK Collaborative Centre for Housing Evidence (CaCHE) opens its doors for business. We are still recruiting and setting up systems, policies and procedures but it is finally underway.

CaCHE has been the best part of two years in the making and reflects a long gestation period as ESRC wrestled with how to deliver on its decision to prioritise housing alongside the increased focus on evidence and what works in policy terms more broadly. Eventually, the decision was taken to go for a broad-based multidisciplinary approach, one that should encompass a consortium of universities and non HEI partners. It was also clear (to us) that it needed to encompass the whole housing system and all that features within it, and that the new centre should be genuinely-UK wide and embrace the devolved UK and the different types of markets and housing contexts found across the UK.

Our consortium building process was premised on early sign–up of partners, seeking to do justice to the scope of what we thought would emerge. We embraced the housing system approach and also a pluralist basis by which to assess and review evidence about housing. Importantly, we also decided to fully commit to a co-produced mode of priority-setting. We will set our evidencing and research priorities according to what representative knowledge exchange groups up and down the country tell us are the key priorities.  More so than ever I am convinced this is the right way to go, not just to get buy-in from the wider housing policy and practice world but because it confers legitimacy and a sense of genuine collaboration. It also shapes the way we have to write, report and communicate.

Last May, the ESRC and other funding partners, Joseph Rowntree Foundation and the AHRC, published their call specification incorporating six research themes (housing and the economy; understanding the housing market; choice and aspirations; housing and health education, employment, etc.; place, design and neighbourhoods; and, multi-level governance). Each theme had a lengthy shopping list of possible research projects. We decided to ‘announce’ a dozen exemplar/learning projects either evidence reviews or secondary data analyses which would help us refine our approach to evidence reviews, alongside up to ten PhDs co-funded by the partner Universities. Beyond that our collaborative knowledge exchange model would generate our priorities.

We constructed a large team based around contributions from the universities of Glasgow, Sheffield, Reading, Heriot-Watt, Cardiff, Sheffield Hallam, Ulster, Bristol and St Andrews, plus non-HEIs: the Chartered Institute of Housing, the Royal Town Planning Institute and the Royal Institution of Chartered Surveyors. The National Institute of Economic and Social Research also made a major input into our bid. Subsequently, the University of Adelaide has also come on board. More than 200 individual collaborators supported out bid with an interest in working with us, as did more than 20 other partners. The submission date was in October, interviews in January 2017 and we were publically announced as the successful consortium in April and due to start at the beginning of August 2017.

And it is a large team – 30 co-investigators spread across 6 themes and 5 sub-national geographies, plus a data navigator hub, secondment programmes, early career researchers, as well  as research, knowledge exchange and administrative staff. The centre is a distributed across the UK but administered form Glasgow. Even our leadership team is spread far and wide based in Glasgow, Sheffield, London and Cardiff. As many have said, directing and leading this new initiative will be challenging but I am sure also very rewarding. I am very fortunate to have been able to work closely with Craig Watkins from the very beginning of this project and we are doubly fortunate to have so many other excellent positive colleagues to work with and to that end I would include the international advisory board we have assembled, chaired by Lord Kerslake. As is often the way with new collaborative ventures, it is great to work with new people and to see them and our practices in a different and new light.

I decided that the new centre should be a break with the past in a different way too. We are locating off the Gilmorehill campus and shifting eastward to the social sciences research hub in the east end of Glasgow at the Olympia building in Bridgeton. We will share our space with the Glasgow Centre for Population Health and other Glasgow University social scientists. I think this will bring both focus to our work and allow us to contribute to the city civically and in partnership with those we share the research hub with, as the University intends.

I will be nearly full-time in the new role so I am giving up directing Policy Scotland, something I have done since 2013. I am also standing back from What Works Scotland which I helped develop and then co-directed for three years. Both roles have been tremendously rewarding and have re-energised me. Lessons from these two entities made important contributions to what became the CaCHE model. Policy Scotland allowed me to work with policymakers, Parliament and practice and to hopefully learn a little about how to do so more effectively.  What Works Scotland has taken me into new academic areas, forced me to think much harder about collaboration, co-production and evidence. Ideas about pluralism, dialogical approaches, multi-disciplinarity and a much more open attitude to evidence has been a great tonic for someone hitherto steeped in economics methodologies (admittedly a bit more plural and heterodox than some). I am therefore very grateful to colleagues in both institutes and wish them both well in the future. Both will be working with the new housing evidence centre.

It will be a few months before we are fully operational; indeed, we are not formally launching till October. But from August 1, it will be live and I for one cannot wait to get started.  It is a new start (and feels like one) but it is also great to be forging ahead with an ESRC funded housing research centre – exactly the same type of organisation where I started my career in Glasgow in the 1980s.