Transcript Document
Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University Outline The challenge for national housing policy Different ways of tackling housing shortage 'Affordability' 'need' and demand' The changing profile of housing tenure Housing demand and supply in the region Implications for the Leeds city region WARD Networking Meeting Rawdon 24 November 2012 The dilemma of housing policy Factors making for inertia Housing as long term asset Spatially fixed Factors making for change Household composition High cost Changing aspirations The weight of history Economic opportunities Migration patterns WARD Networking Meeting Rawdon 24 November 2012 Sounds familiar? Two and a half years of a Conservative-led government following a period of Labour dominance Housing shortages grow as building rates fail to keep pace with household formation rates Difficulties in gaining access to mortgage finance Increasing pressure on social housing Hopes placed in revival of PRS Market principles advocated when market at its most fragile WARD Networking Meeting Rawdon 24 November 2012 The challenge..... So, what could be done...? in 1954? WARD Networking Meeting Rawdon 24 November 2012 National housing policy in 1954 govt. maintained large scale council house building to meet targets (224k completed in 1954 cf 90k private) building programme geographically spread in GB reduction in standard of materials, design and property diversity in LA sector to achieve quantity relaxation of rent controls in the PRS designed to stimulate the sector reintroduction of slum clearance imminent move away (in 1956) from property-based to person-based subsidy: start of rebates WARD Networking Meeting Rawdon 24 November 2012 The rationale for national policy in 1954 a pragmatic, and time limited, embrace of the state as the only means of addressing a national emergency but public housing would never attain the primacy of NHS or state education always hedged with stigma: eg 'spiv' replaced by the 'Jaguar owning council tenant'... and much relied on local innovation not national government dictat WARD Networking Meeting Rawdon 24 November 2012 Local Innovation 'hidden histories' not captured by national narrative eg Urmston Housebuilders Association in Manchester Self-build association of 28 households 30 hours minimum a week commitment to build 2 schemes: 16 houses and 12 bungalows Council provided cheap land, guaranteed 5 per cent fixed rate mortgages over 20 years (£2 per week) £30 down payment as deposit customised design of kitchens and bathrooms WARD Networking Meeting Rawdon 24 November 2012 The outcome price of new houses: £1,300 for 3 br semi-detached properties average price of new houses in England in 1954 (Q1) was £2,100 priority determined not by a points scheme...but by drawing lots strong community ethos prevailed the Big Society in action -before it was invented? but not everyone was happy about it.... CWAG Conference Leeds 28 September 2012 WARD Networking Meeting Rawdon 24 November 2012 The lessons of 1954? you cannot rely on private sector to meet policy targets in difficult market conditions the planned revival of the PRS may bring with it unanticipated outcomes affordability is a question of land values and development costs as much as household income and subsidy the growth of home ownership requires sustained economic growth across the income spectrum the best 'solutions' are locally created, not nationally mandated.... WARD Networking Meeting Rawdon 24 November 2012 and now? WE NEED TO BUILD! but how...? the market-based response: relieve planning restrictions through s106 revisions and presumption in favour of development the mixed economy response: target public investment to promote 'leverage' with private sector in the lead the state-based response: national emergencies require firm government action, if only for a limited time WARD Networking Meeting Rawdon 24 November 2012 A market- based approach remove or reduce planning restrictions give developers far more options for sites encourage larger sites but how does this fit with targets....? 'If we are to plan we must have plannable instruments and the speculative builder, by his very nature , is not a plannable instrument' Aneurin Bevan 1947 and how much encouragement do developers need? WARD Networking Meeting Rawdon 24 November 2012 Recession? What Recession? Barratts: profit increase of 159%: from £42.7m (2011) to £191.1m (2012) Revenue up 14.1 % and margins increased from 6.6 to 8.2% Cala Group: increase in operating profit of 96% (2012) and revenue up 18% Redrow: increase in operating profit of 55% (2012) and revenue up by 6% Galliford Try: increase in profit before tax of 80% (2012) and revenue up by 17% LGA: 400,000 planning permissions currently outstanding in E and Wales WARD Networking Meeting Rawdon 24 November 2012 A mixed economy approach ? public sector role can target development more effectively, but 'leverage' assumptions are often overblown will struggle to address geographical imbalances, brinkmanship over planning constraints and in-bred risk aversion may insulate the development industry still further without gain in output should infrastructure development remain the primary domain of the public sector, and not a site for profitability? (Hildyard and Heseltine) WARD Networking Meeting Rawdon 24 November 2012 A state-led approach? Tullet Prebon: Building a Road to Recovery? August 2012 State can invest in housebuilding without sucking in imports. In the long-term, it will be self-financing (increase growth and revenue and reduce HB) 'We would stress that this investment should be undertaken by local authorities or housing associations, not through public-private gimmicks like PFI' 'The government and social sectors should act as owners and commissioners of new housing'. 'A national housebuilding programme should be a national economic imperative, not thwarted by sectoral self-interest or ideology' WARD Networking Meeting Rawdon 24 November 2012 Putting Policies to Boost Housing Supply to the Test Questions are developers straining at the leash to build? is land supply the problem ? where are the 'new' home owners? can leverage fill the 'production gap'? is there any public, let alone government, support for a stronger state role? ....and can it be afforded anyway? what spending is sacrificed elsewhere? what evidence is there of a shortage anyway? how much new housing needs to be 'affordable' and what does that mean anyway? WARD Networking Meeting Rawdon 24 November 2012 But who will build? spec developers are quick to take fright build for rent vehicles will be concerned about churn and limited security of tenure housing associations may find it difficult to borrow when full welfare reform measures are implemented and councils now have the freedom to build - but symbolic rather than substantial in most areas WARD Networking Meeting Rawdon 24 November 2012 Demand, Need and Affordability need to focus on 'effective' demand risk aversion to lending will be very slow to clear housing 'need' - now a redundant term? be wary of any household projections!: patterns are culturally and financially shaped, as well as statistically determined defining 'affordability' and 'affordable housing': not clearcut Affordable Housing Programme 80% of market rent arbitrary but convenient ? implications for HB spending? WARD Networking Meeting Rawdon 24 November 2012 What about tenure location and type? home ownership - the end of the affair? blurring of private and social (HA) distinction in renting sharper contrast between market and welfare sectors in PRS opportunities in the PRS left vacant by students assumed growth of REITs may be over optimistic pressure on HMOs and hostels increased 'sifting' in residential markets WARD Networking Meeting Rawdon 24 November 2012 Moving to a more European model ? beginnings of a corporate rented sector? later entry into home ownership wider acceptance of shared ownership flexible tenure better integrated HA sector: rationalisation is overdue residue of public welfare housing for transient and displaced groups ....but what about the Y and H region? WARD Networking Meeting Rawdon 24 November 2012 Regional Public Enquiry 2009 housing market will not return to pre-recession state until 2013...14 ...or 15? Barriers to growth lack of finance for development and s106 constraints need a new model not dependent on ever increasing land values (HBF) lack of finance for purchasers: over-reaction by lenders land...? (no consensus) Where to build? Selby district as prime location for 'deflected growth' ? Keep away from the 'golden triangle' WARD Networking Meeting Rawdon 24 November 2012 The Leeds sub-region At 2009 Public Enquiry argument over housing supply in Leeds city CC said developable land not in short supply developers: being forced to use unattractive parcels of land...'quality homes in quality sites will always sell' and now scramble for growth (when it comes) and Leeds has high commuting in-flows at present city centre apartment market will not expand regeneration of more deprived areas unlikely for medium term welcome to north east Leeds and the A65 corridor as favoured sites ! WARD Networking Meeting Rawdon 24 November 2012 Some Questions and Issues What does 'muscular localism' really mean? Will new residential development ruin integrity/identity of places? Is there lower grade 'green' elsewhere that might attract developers? Will mixed communities be close to mixed employment opportunities? Can the transport and other infrastructure sustain it? One thing's certain.... WARD Networking Meeting Rawdon 24 November 2012 self-build housing will not be enough to save the day... WARD Networking Meeting Rawdon 24 November 2012 Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University