Ten Years After

by Ken Gibb

Earlier today I was sent a thought-provoking paper from the Home Builders Federation. Entitled ‘Barker Review: A Decade On’, it is a sobering account of the housing supply-side and a Review dubbed the most significant review since the 1977 Housing Policy green paper. I would definitely recommend reading this new paper. Here, I am just going to concentrate on the introduction (pages 2 to 3), which effectively makes the killer points. There is also a handy summary of the Barker recommendations and how they have fared since the review.

The first point is that the decade since 2004 has been a lost decade, a ‘social and economic disaster’ and that the ‘ housing crisis facing the country in 2014 is far greater than that discussed by Barker in 2004’. While it is of course important to recognise that the housing supply delivery system was decimated by the aftermath of the 2007-08 financial and economic crisis or post 2010 policy change by the Coalition Government, the HBF argues that it is ‘difficult to see’ how the step-change in production proposed in 2004 would have happened.

Second, the delivery of housing supply against the targets set by Barker ‘paints a bleak picture’, as a result of the combination of the post 2007 environment but also the limited ambition of the targets and mechanisms proposed. The most optimistic Barker targets proposed annual private starts of 260,000 units per year. Given what was actually built since 2004, the cumulative deficit is now of the order of 1.45 million units. The evidence also suggests that household formation has been 40,000 per annum higher than Barker forecast. Even taking into account the effects of rising non-affordability of the owner-occupied market pricing people out of home ownership, slowing down the decline in affordability would require 200,000 private starts per year and actually improving the housing market (Barker’s more ambitious goal) would require a vertiginous 320,000 units started per annum (and sustained at that level for years to come). This gives a real measure of the depth of the affordability problem.

More than three-quarters of the 36 Barker recommendations were implemented by Government or by the building industry. These ranged across the planning system, regional affordability, planning gain, social housing, private renting and evidence and monitoring. What happened to many of them is instructive, for instance:

1. Government should establish a market affordability goal. This was a public service agreement target (increase long term housing supply and affordability). It was abolished along with the others PSAs by the Coalition Government.
2. Further research to increase the evidence base, led to the setting-up (recommendation 3 and 7) of the National Housing and Planning Advice Unit. This was abolished with the incoming Coalition Government.
3. Recommendations 5 and 6 (regional affordability monitoring and regional) planning bodies delivering the regional affordability target – regional housing boards and regional planning bodies merged in 2008 and abolished in 2011.
4. Recommendation 23 – greater use of UDCs and developing new towns – a process that has carried on in fits and starts but is still relevant right up to the recent Budget announcements.

The HBF report goes through all of the recommendations and what happened to them – not all negative by any means, but more a case of entropy and disorder winning out over the original coherence of the Barker proposals.

This is not to say that the Coalition has not retained or come round to many of the proposals, they have. It is also reasonable to note that times change and new priorities emerge. I could even say that elements of the localism agenda are reasonable and sensible. However, the bleak conclusion from the HBF informed by an assessment of subsequent policy interventions remains a pessimistic one.

As the HBF report implies, Barker probably did not go far enough; it certainly could have focused more on the industrial organisation of the building industry which, to me, remains an important unexplained element of supply inelasticity (i.e. it is not just the planning system). A colleague of mine, a genuine expert on planning and housing supply, once said to me that the problem with the Barker review was that it would provide a rightward shift in the supply curve (and this might be one-off) rather than a permanent increase in the supply elasticity ( i.e. a flattening of the curve). Unfortunately, recent years have provided a leftward shift in the supply curve and certainly not much evidence of greater elasticity.

One of the recurring mantras of this website in recent months has been the need to recognise the long term nature of policy responses to deep seated housing policy problems. This is as true of rent-setting in the social sector as it is of progressive housing benefit reform or tackling local taxation. There needs to be genuine political consensus if long term worthwhile policies are going to have any chance of being fully implemented. This is all the more so the case with attempts to tackle the housing supply problem. The evidence in the HBF paper (and not only there) does not provide grounds for much optimism.