Ken Gibb's 'Brick by Brick'

Housing, academia, the economy, culture and public policy

Month: February, 2016

Housing, Incentives and Work

This week, the Joseph Rowntree Foundation published our research on housing and work incentives [note]. This project was funded in 2013 and stretched over 2014 and all of 2015. It was a great team effort and I am very grateful to my collaborators – Mark Stephens, Darja Reuschke and Sharon Wright as well as the fantastic efforts of our researchers, Filip Sosenko and Kirstin Besemer.

The project involved an international evidence review, quantitative longitudinal analysis of the BHPS and Understanding Society and 5 qualitative case studies of different labour market and housing situations featuring in-depth interviews with more than 50 people at the margins of work.

The project was part of the funder’s housing and poverty programme and asked what we know about whether housing enables or acts as a barrier to both entering work and if in work to progressing within one’s job. Our approach considered the key distinguishing features of housing such as its heterogeneity, spatial fixity, financial incentives, tenure and neighbourhood, housing quality and an increasingly dynamic policy context. These features were set against alongside key channels by which we believed housing processes and outcomes might impact on the labour decisions of those at the margin: 

– Housing in relation to place

– Jobs, housing and mobility

– Tenure-based housing costs

– Housing as business collateral 

– Housing deprivation. 

Our reading of the existing evidence was that while economic evidence suggests particularly women respond positively in labour supply terms to higher earnings, the evidence is less clear and more nuanced concerning the impacts of welfare reform and other welfare to work programmes. We also found mixed evidence that deprived neighbourhoods negatively impacted on working and that mixed neighbourhoods have positive impacts on employment. However, the importance of support networks especially child care was confirmed (as well as the wider gendered nature of the labour market more broadly). The evidence also stressed the continuing long term effects of economic restructuring on job opportunities in specific places. Commuting issues were found to be critical as are the costs and feasibility of relocation to be closer to work. Self-employment has grown in recent years but is risky and often an involuntary response to the wider employment situation.The early evidence from welfare reform suggests that it may be unfavourable for  the labour market situation facing the sick and disabled.

We used panel data to examine the pathways in and out of poverty and found that it is for one thing a little misleading to adopt a standard three years continuous episode of poverty as ‘chronic’ poverty’ – our evidence is just too messy and varied to adopt such a measure. Rather we found all manner of poverty experiences – some short-lived, some enduring, others with periods in and out of poverty of different durations. Only 7% remained in poverty throughout 2000-2008. Moreover, we found important correlations with housing tenure, employment status, household or family type and the gender of individuals in/free of poverty. Examining exits from poverty it is clear that employment may not guarantee being free of poverty but few escape it without work. While social tenants had a high rate of poverty they also exited poverty frequently. Taking 2008 as a snapshot, 70% of those in poverty were actually owners with a mortgage. In our report further econometric work was undertaken to try to better understand the processes underlying these and other findings.

Our five case studies were located in the London Borough of Lewisham, Oldham, Merthyr Tydfil, Scottish Borders and Larne in Northern Ireland. There was considerable rich material gleaned from the interviews but they can perhaps be boiled down to the following key messages:

– Neighbourhoods can act as informal recruitment hubs as well as offering affordable child care. These advantages are lost to new comers and outsiders. 

– Poor quality housing and neighbourhoods may either dissuade or instead motivate individuals to progress and seek work.

– Many were unwilling to relocate because of insecure housing which compounded the part time and short hours working opportunities they often faced. On the other hand available social housing seems to encourage labour mobility.

– The quality and cost of transport is a key constraint and several noted the lack of public transport to support shift and part time working schedules.

– Especially in rural areas, there is much dependence on car transport. The cost of owning and running a private car is often a major barrier to work.

– The level of rents especially in the private rented sector is an important constraint on the reservation wage (but also possibly important to social renting in London) because of the tapered removal of HB as people enter work and their measured income rises.

– Those with low skilled are often most effected by housing constraints on labour market opportunities and this often compounded by age discrimination and the lack of opportunities for the sick and disabled. 

The research found a well entrenched and completely normal work ethic among people who could only command modest wages. It is just that for different reasons they are not competitive in their local labour market. We also found a consistent story of working age poverty closely intertwined with low wages, weak labour market positioning and housing insecurity and affordability risks. These are compounded by the other key constraints relating to commuting costs and availability and also for accessible and affordable child care. On this basis we suggested six key policy recommendations:

1. Invest in neighbourhoods – local 3rd sector organisations if supported can do much to develop skills, employability and create sustainable jobs. Our case studies found much evidence of such good practice. This may allow specific neighbourhoods to build on the positives they possess that were outlined above.

2. Support affordable transport policies and those better linked to the actual working practices of those currently under-provided for.

3. Go further to prioritise affordable child care targeted at those currently most at the critical margins of affordable work.

4. More not less tenure security would reduce the double insecurity presently identified above (this is in effect a restatement of the case for social rented housing).

5. Paradoxically, the qualitative evidence suggests that greater tenure security (including longer private tenancy lengths) would increase labour mobility.

6. The way HB and Universal Credit are administered should not be designed so that they discourage employment as seemed to be the case in some of our interviewees’ experience.

Much of this research project was exploratory and confirmed our thinking and expectations – we have to bring together work opportunities and decisions with housing/neighbourhood questions, transport and child care issues. But looking at the project in the round now it also suggests that while in work poverty is both important and a challenge for policy, passing the problem on to employers through a mandatory living wage, as proposed by the Chancellor, is not without risks. How will employers respond in terms of the contracts and hours they will ask those we are most interested in to work; and how will it plays out for this group in terms of classic economic concerns about the unemployment effects of minimum wages? These are empirical questions but should not be ignored.

Note: Report and findings available at:  

The Song Remains the Same

While it is as far away from the UK as it is just about possible to be, it is remarkable that the housing problems and the lenses that academics use to interpret them in New Zealand and Australia are essentially the same as what you find in Britain. Of course there are cultural, institutional and contextual differences but it was the similarities not the differences that struck me during the University of Auckland’s hosting this week of the Australasian Housing Research Conference.

This was a good sized conference over two and a half days with more than 120 scheduled papers and two keynotes. The audience was predominantly from the region and I found the whole event very friendly, supportive and welcoming. While I did know maybe a dozen colleagues at the conference, I made many new friends. In particular I should thank Larry Murphy who organised the conference and invited me in the first place. He did a great job in a good humoured way throughout. I particularly liked the way he asked the conference administrator, Aimee, to go and purchase the kind of flowers she would like to be given as a gift, especially so, as it turned out at the conference dinner, that they were for her anyway!

The themes at the conference via the papers I heard and the discussions I was involved in, were familiar ones. Housing affordability problems making home ownership less accessible in high cost cities like Auckland, problems with the large rental market e.g. interesting post-doc work on the provision of elderly care for older private tenants closely linked to pension policy assumptions about seniors owning their homes. Insufficient social housing supply was also stressed by several speakers. There was much interest also in homelessness, understanding it by modelling or deconstructing structural and individual characteristics, and assessing policies like housing first. At the same time, critical analysis of policies like those on affordability, new supply and income-related housing allowances – stressed neo-liberal discourses as well as conducting the research from a range of disciplines including public policy and economics.

In the end I had a few reflections on what I heard. First, there is a lot of really excellent research coming out of Australia and New Zealand. Second, there is a growing appetite for more sophisticated and critical policy analysis of housing. Third, there must be space to debate and articulate different conceptual approaches to understanding and situating housing, be it applied economics, in-depth qualitative interviews, discourse analysis or policy studies.

Finally, having done my plenary talk on the first morning about policy divergence between Scotland and the UK, I had a lot of positive feedback, though one rather direct Australian said to me that ‘your slides sucked’. Interesting. Part of me recognises that doing a talk with text-based slides can be hard work for the audience because they have to listen to the speaker at the same time as taking in the material on the slides. I do plan to move much more to simple images and less if any text and this will only encourage me to go down this road a little quicker in future presentations. So that directness was welcome, honest (even if I liked the slides in question).

In Defence of Buy to Let?

A few months ago I was speaking at a Scottish housing policy conference and I struggled to articulate a point about UK government policy on private renting. The essence of the idea was to question how the initial unfavourable tax changes to the private renting sector proposed by HM Treasury in the 2015 summer budget and then reinforced in the Autumn Statement actually helped deliver more housing supply and expansion in home ownership.

Mark Stephens recently pointed me to the February 2016 report by the House of Commons Treasury Committee on the Spending Review and Autumn Statement 2015 [1]. The report contains a chapter on housing, which has much to recommend it. Here, I want to focus just on what they say about Buy to Let.

The broader argument is contextualised by a belief stated by OBR that the private rented sector is expected to continue to grow, in part because of continuing affordability problems shutting young would-be purchasers out of home ownership. A critical question therefore is whether sufficient rental housing opportunities that are affordable exist for these and other households unable or unwilling to own. 

The Committee also stresses support for the idea promoted by the Bank of England’s Financial Policy Committee that they should have the power over direction of the BTL sector. The FPC note that in the year to September 2015, BTL lending grow by 10% compared to just 0.4% for owner-occupier lending. The worry is that BTL lending could threaten or risk wider financial stability. However, for reasons that the Treasury Committee terms ‘inexplicable’, the Government’s continues to delay granting this power of direction. Moreover, the Treasury Committee, rightly, also wants more detail on what the power of direction over BTL leading would mean, what tools would be used to achieve impact and how would the effects of such intervention be analysed.

The point of course is that there is a world of difference between promoting the case for greater financial scrutiny by the independent Bank of England and its Financial Policy Committee, as compared to using Bank concerns about BTL to warrant two examples of crude tax measures aimed at curtailing BTL investment. So, my concern is first that these are the wrong measures and have been introduced prior to realising the more sensitive and flexible regulatory role potentially to be played by the Bank. Second, there are grounds to argue that these are poorly specified policies in terms of what they are set out to do.

The decision to reduce mortgage tax relief to the basic rate for BTL landlords, to be introduced over 4 years from 2017 is justified by the HM Treasury analysis on the basis that the taxation of private renting is lighter than home ownership. As Paul Johnson of the IFS said in evidence: ‘this line of argument is plain wrong’ (section 101). Private landlords pay more in tax and in addition allowances for wear and tear depreciation (worth 10% of rents before tax) have also been removed.

Second, the decision to add a surcharge to all rates of stamp duty (repeated in Scotland’s land and building transactions tax) in the Autumn Statement was criticised by those giving evidence to the committee in terms of further increasing the tax disadvantage confronting private landlords and doing so via a ‘bad tax’ i.e. one on transactions which reduces mobility and will inevitably be passed on to tenants in the form of higher rents – reducing affordability. Peter Spencer from York University also made the point that the delayed implementation of this announcement, like in 1988 when double MIRAS was abolished several months after the announcement, would lead to a rush by investors to complete sales before the surcharge came into effect, followed by a dearth of sales thereafter (Section 111).

The point is that you do not need to be an opponent of bad private renting to see that these kinds of poorly constructed policies damage the housing system as a whole, reduce affordability and do little if anything to expand housing supply. We need a larger scale quality private renting sector if we accept the fundamental difficulties of developing a more balanced housing system. If in our hearts, we do not think that home ownership is going to be rendered much more affordable any time soon, there needs to be a sensible rental market alternative. It should be monitored and regulated as suggested by the Treasury Committee through the FPC (subject to the caveats raised by them), and we need of course need proper quality control and standards enforcements, But, it seems to me, the Chancellor’s policies as presently constituted, simply do not help.

1. House of Commons Treasury Committee, 6th report 2015-16, February 2016 Spending Review and Autumn Statement 2015. HC 638.

Accelerating Divergence? Housing in Scotland and England

I write this on a long-haul flight on a Saturday night. After 6 weeks of long hours to clear the decks, much teaching and many deadlines, we are on our way to a family wedding and a conference (, both taking place coincidently a week apart in New Zealand. As a result of front-end loading work for the last wee while I have not been writing much but I hope that will now change.

My conference paper is concerned with what we should make of the evident accelerating divergence between housing policies and approaches in England and Scotland? Is it a source of evidence of innovation, does it suggest differences which might provide lessons or ideas, or if not, what we can learn about both the state of housing policy in each country and indeed about devolution?

What are the grounds for saying that there is accelerating divergence? Prior to 2007, there were important legislative distinctions such as the 2003 homelessness legislation in Scotland and the earlier decision not to consider, for public funding reasons, arms-length management ‘solutions’ to social housing (as favoured in England). There was also long-standing examples of divergence by degree, such as the long standing and cumulative effects of higher rates of per unit grants for social housing in Scotland. Much of the rest of the respective housing systems, nonetheless, looked much the same.

The big changes started when electoral results meant that different parties governed north and south of the border. In 2007, the new SNP minority government signalled its intention to end the Right to Buy for new council homes so as to encourage councils to build for general needs (later supported by capital grants on a similar basis to housing associations). The RTB was later abolished altogether by the majority SNP Government elected in 2011. The election of a UK Coalition government heralded the deficit reduction strategy which impacted on the housing sector through deep departmental spending cuts and new low subsidy programmes in CLG and, of course, welfare reform and Housing Benefit cuts. The Scottish Government produced impact assessments on the effects of these cuts completely at odds for those produced at DWP.

More recently, the furore over the present housing and planning legislation in England (and their substance) concerning the raft of social renting reforms and the direction of new build initiatives, looks increasingly alien in a Scotland where the main parties are largely signed up to expanding social and affordable housing supply to come close to meeting (or meet) the estimated levels of national affordable housing need of 12,000 per annum using deeper levels of grant per unit £72,000).

But it is not all divergence. Sometimes, the different governments happily follow each other even if they tailor initiatives. For instance, Scotland adopted the Help to Buy model though it was targeted to new build that was supposed to be aimed at first time buyers (though average realised prices were high if they were to do this). At the same time we have had unquestionably inefficient and unhelpful policy competition such as with the devolution of stamp duty – The Chancellor responded to the new Scottish progressive tax rates by trumping the rates, leaving the Scottish finance secretary obliged to come up with an even more progressive structure of tax rates. The Scottish housing market faced three tax systems in a year and, not surprisingly, the tax revenues raised were less than predicted. Most recently, when the Chancellor announced the decision to increase stamp duty by 3% at all these new tax rates aimed at buy to let investors, the Scottish finance secretary chose to do the same.

Policy competition can be wasteful but it does remain at least conceivable that there may be functional benefits, and useful things to learn from policy experimentation and divergence. The simultaneous development of multiple local community housing associations in Glasgow was a test bed for all manner of housing and neighbourhood innovation. Why, if there was a will could it not be the case that policy innovation or divergence in housing, as much as any other area of devolved policy competence, could not and indeed should not be systematically studied in order to make progress for citizens living in all parts of the U.K.?

What are the barriers to useful transfer and lesson-learning? One is political – certainly between the UK and Scottish governments, policy based collaboration appears to be vanishingly rare. Second, for the same way two parties, the incentives to share and learn seem disappointingly weak, in part because the ends of their respective housing policies and the means willing to be adopted e.g. on the composition of new supply and tenure – are so different. Not fertile ground and probably also not helped by less and less institutional policy development dialogue from civil servants. Unlike national comparisons (also not without methodological and empirical problems), there seems to be less glue sub-nationally in a system such as that of the UK to let us share and learn. While one may see how this can happen between the Conservatives and the SNP in 2016, it does not really explain a trend between Scottish and U.K. Governments that began to be discernible arguably  when Labour was in power in both places. Neither does it explain the lack of deeper relationships between the non-England parts of the U.K. All the odder in this era supposedly dominated by policy networks. For many of the same reasons  as above, we should not be confident, however, that a wider comparative policy transfer analysis role can be played by think tanks and other similar specialist policy commentators.

I don’t know if this unintended failure of devolution is unique to housing but I very much doubt it.