Transcript RENTAL INTERVENTIONS - Policy Scotland

SHAPING FUTURE HOUSING POLICY: A NEW
POLITICAL ECONOMY.
Source: vnhs.ca 2015
DUNCAN MACLENNAN, CHAIR OF PUBLIC POLICY,
UNIVERSITY OF GLASGOW; CHAIR OF STRATEGIC
URBAN MANAGEMENT UNIVERSITY OF ST ANDREWS.
[email protected]
OUTLINE
1. Rethinking Housing, Systems and
Outcomes
2. Changing Context and Consequences
3. The New Context
4. Principles for Policies
1. Housing Policies, Big
Outcomes
POLICIES FOR HOUSING ACROSS THE OECD NOW
• Expenditures cut
• Taxation unreformed
• Planning critiqued
• Downloading to provinces, states and national withdrawal
• Cut down scope to homelessness and the poorest
AT A TIME WHEN
• Housing needs estimates rising, affordability falling
AND EXACERBATING POOR BIG ’OUTCOMES’
• Environmental footprints rising
• Inequality increasing
• Productivity flat/ Falling and instability Issues
WE NEED A NEW PERSPECTIVE, NEW EMPHASIS, THAT IS MORE THAN
POVERTY, SHELTER AND POVERTY
PRODUCTIVITY, WELLBEING FLAT
1. Housing: a Key Economic
System
• A geographically fixed, durable asset with multiple
attributes that shape different ‘housing services’.
• These includes shelter and space to live
• Shapes access to employment and sites the family uses
• Neighbourhood, locus for services, amenities, social
contact
• The home is an asset and a source of debt
• Homes connect us to our past and shape paths to future
• The home becoming a wired hub for household activities
well beyond the neighbourhood into the global.
ECONOMIC, SOCIAL AND ENVIRONMENTAL
INFRASTRUCTURE
1. Housing Outcomes
Understanding housing system significance: housing
outcomes
• Comprise significant share of household budgets (macro)
• Housing loan/asset, finance (macro) roles
• Housing (size, quality) impacts human/business capital
• Location choices have spillover effects (metro, emergent)
• neighbourhood choices impact human/business capital
• Prices/rents ( net wealth) impact mobility, wealth,
savings, investment, welfare and social mobility.
AND HOUSING PROCESSES MATTER TOO
• Planning and Design, Construction, Financing, Selling etc
1. Nature of Housing Leads to
Policy Neglect
1.
2.
3.
4.
Capital intensive, often wish to postpone support
Multiple small joint effects
Extensive spillovers.
Micro, metro, macro impacts and interests: multiperspective
5. Multiple levels of Government as well as multiple portfolios:
Local, metropolitan becoming critical level.
SHAPES A COMPLEX POLITICAL ECONOMY OF BUREAUCRACIES,
LOBBIES, MULTIPLE INTERESTS NOW FAILING TO GET
TRACTION. HOW DIS WE GET HERE? HOW, WHY SHOULD WE
CHANGE THIS
2. POLICY CONTEXT: OECD AFTER 1995
After 1995, two different decades, Long boom (until 2007)
• Rising real middle/ upper incomes, grows ownership
• Facilitated by mortgage market deregulation; overall rate boosted by ageing
population (important e.g Canada, UK)
• Wage inequality increases rental pressure for poor and young: origins of
Generation Rent (housing, pensions, education and environment)
Housing Policy communalities (Washington consensus)
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Public housing hits the wall: Selling,Transferring, reduced investing
Promotion of different approaches to affordable (owning, non-profit)
Emphasis on ownership growth but age specific rates already falling
Public capital on housing, and sometimes supporting infrastructure reduced
Switch from dwelling to person subsidies,new concerns about welfare budgets
Value of implicit tax subsidies rises:Inattention to supply side policies
HOUSING POLICIES LOST TRACTION
(EXCEPTIONS)
2. HOUSING POLICY, GLOBAL
CONSEQUENCES
Broad (Housing Policy) Shifts of Long Boom
• Increased domestic cyclical instabilities
• Underpinned, directly, the GFC and
• The immediate downturn
• The subsequent recessions
• New austerity anti-public debt culture
• Increase income and wealth inequality (Generation Austerity)
• Facilitated rentier economies (Generation Rentier)
Created a political economy dominated by home
owners, elderly, suburbs rather than city cores,
renters and the poor.
2. Wider Policy Outcomes
POLICY AIMED AT MAXIMISING OWNERSHIP RATHER THAN
EFFICIENCY. OUTCOMES? AN ARGUMENT:
• Financial deregulation, unreconstructed planning ystems
• Demand not supply emphasis raises real house prices, taxes
capitalised
• Increased cyclical instability (boom and bust)
• Subsidy inequality raises housing wealth inequalities and
disposable income inequality: intergenerational issues
• Has arguably lowered productivity and facilitated a rentier
economy (Piketty)
2. CORE ISSUE
PROPOSITION
WE ARE DEALING WITH REAL HOUSE PRICE INCREASES
UNRELATED TO PRODUCTIVITY GAINS. THIS IS A CENTRAL POLICY
PROBLEM OF THE OECD ECONOMIES SIMILAR TO THE WAGE
INFLATION CRISES OF THE 1970’S. GOVERNMENTS FIDDLE WITH
AFFORDABILITY AND HOMELESSNESS SYMPTOMS WHEN THIS
HOUSE PRICES ARE THE CRITICAL, DIFFICULT ISSUE OF THE
TIMES. KEY HOUSING MARKET OUTCOME DISTORTS THE
ECONOMY REDUCING PRODUCTIVITY AND INCREASING
INEQUALITY.
HOUSING POLICIES SHOULD BE ABOUT REDUCING INEQUALITIES
AND RAISING PRODUCTIVITY, NOT VICE VERSA.
LET US ASSESS, IN CANADIAN CONTEXT.
HOW SHOULD WE THINK ABOUT HOUSING CAPITAL?
st
3. Housing Capital in the 21
Century
Piketty (2014) a starting point
• Empirical, rising income and wealth inequalities
• Conceptual, returns to capital exceed productivity growth
• Approach, Political Economy.
• Policy: poorest part of work
• Contrast Stiglitz, Atkinson (focus of labour markets, education)
• Recognises key role of housing wealth in raising inequality
• Also raises income inequality by rising rents
• Drives a rentier rather than creative entrepreneurial economy
PIKETTY NEEDS HOUSING IN HIS STORY, AND WE NEED HIS
INEQUALITY-GROWTH PERSPECTIVE IN OUR POLICY LOBBYING
AND DESIGN
3.CHANGING HOUSING CAPITAL CANADA
3. CANADA AND HOUSING
WEALTH
3. OWNERSHIP RATES,
PRICES, INCOMES.
Average house prices in Halifax have increased, since 2007, at an average
increase of 3.7% pa compared to the consumer price index which shows an
average increase of 1.7% from. Average market rents have been steadily
increasing from 2001 to 2014; increasing by 48.6% in 2001 to $936 in 2014.
3. Canadian Wealth Changes 19992012 (Statscan)
• Average net worth of Canadian families increased by 73% in constant 2012 dollars.
• 80% increase among families in the top income quintile, and by 38% among families in the
bottom quintile
• In 2012, families in the top income quintile held 47% of the total wealth, compared with
45% in 1999.
• Families in the bottom income quintile held 4% of the overall net worth in 2012, compared
with 5% in 1999.
• Families in the top income quintile gained $2.02 trillion, largely because of increases in the
value of employer pension plans and other non-real estate assets.
• Real estate assets as a proportion of total assets rose from 34% to 40% among families in
the top income quintile, and from 46% to 57% among families in the bottom income
quintile.
• In both 2012 and 1999, between 3% and 4% of Canadian families had low income and no
wealth. Younger families, the recently immigrated, lone-parent families and unattached
individuals were more llkely to be in this situation
INCREASES INEQUALITIES OF WEALTH VERSUS RENTERS,
AND INCRESES INCOME INEQUALITIES FOR RENTERS TOO
3. INCOME INEQUALITIES
3. RISING PRICES, FALLING
AFFORDABILITY
In 2011, 25.3% of households in Halifax spending 30% or more of their
household income on housing costs and 11.8% were spending 50% or more.
A greater proportion of renters were facing housing affordability issues
compared to owners (42.7% vs. 15.0%).
4.HOUSING AND ECONOMY
Angel-Gurria, OECD SecretaryGeneral, 2015.
• Nearly 40 per cent of Canadians now live in cities where house
prices are “seriously or severely unaffordable,” based on
international comparisons
• 40 pc of renters and 20pc of owners spend over 30pc of pretax
income
• Vancouver now more unaffordable than all except Hong Kong.
• Toronto is pricier than New York and Tokyo, and just narrowly
behind London.
• A shock to even one segment could have spill-over effects to
the broader economy if banks respond by tightening credit
significantly, or if negative wealth effects depress consumption
• Taxpayer exposure to the costs of mortgage insurance are high
4. IMF ESTIMATES OF OVER-VALUATION PRICES
4. Housing and Economy
ECONOMIC EFFECTS MEAN Housing policy
spending is not simply ‘displacement’
• Short run multiplier effects
• Instability and equity withdrawal (BTL)
• bubbles (OECD, IMF) fear
• need this at metro, Province and macro scales
Macro-monetary response becomes adverse for
less pressured regions: BOC position problematic.
BUT THIS NOT THE END OF THE ECONOMIC
STORY…..
4…… And Productivity
Long term effects on growth and productivity
• Housing quality: child learning adult health and absence
• Housing space, connectivity: home business
• Neighbourhood: small business, creativity, teenager peer
groups
• Wider structures: travel cost, labour market mismatch
• Price and rent effects
• Disposable incomes and other consumption
• Investment in education and small business
WELL DESIGNED, LOCATED AND PRICED
HOUSING IS ESSENTIAL ECONOMIC
INFRASTRUCTURE
5. NOW A NEW HOUSING CONTEXT
A short renaissance of housing investment as
stability policy (2008-2011) followed by
• Redefinitions of affordability; scrutiny of new
mortgages (LTV, LTP)
• Tax and guarantee schemes for owners, silent
second mortgages: equity sharing
• Drove rental market investment to smaller
investors, expanding, changing rental sectors
• Reduced social investment, new roles NFP’s
• Trimming of welfare payments
• Policy neglect of growing market rental sectors
WHERE ARE THEY NOW HEADED. ?
5. AGE SPECIFIC OWNERSHIP RATES FALL FOR UNDER
45’S FROM 1981 OWNWARDS
FALL FOR ALL AFTER 2006, SHARPLY FOR UNDER 55’S
5. NOT JUST AUSTRALIA: USA
TD STUDY 2015
5. WELCOME HOME KIDS! USA
(TD STUDY 2015)
6.
NEW ZEALAND
5. Market rental; Who are Landlords
Majority landlords in Australia ( and UK, Norway), cf Canada, US
• Small, 1 and 2 properties (some quite poor)
• Buy-to-let, extension of house price booms (price rises important
in overall returns)
• Savings and retirement strategies, alternatives
• Need liquid investments: controls problematic
• Larger, Professional (compete with non profits)
• Better management, lower cost of finance
• Focus on rental income certainties (more stable)
• Growing non-profit subsidiaries interest
A COMPLEX SERIES OF NICHES, SUBSIDY AND TAX ISSUES IMPORTANT
BUT AN EXTENSION OF SPECULATION PROCESSES RATHER THAN
MARKET EFFICIENCIES (MAKING A PROFESSIONAL SECTOR?)
5. RENTAL MOSAICS: CONSUMERS
Tenure Choice Models (often cross-sectional) shows rental choice
reflects
• Mobility needs, transaction costs, uncertain jobs and relationships
• Immigrants, and refugees
• Lower disposable incomes (cannot afford capital repayment: creditworthiness; family deposit capacity; lower quality, filtered down)
• Age-career stage (uncertainty job trajectories, relationships etc)
• Equity extractors (elderly)
• Short term expected price and interest rate changes (bears)
• Policies (tax, tenure based income supports etc)
CONTEST DIFFERENT SUBMARKETS WITH TIGHTENING SUPPLIES
TO 2014 THE BURDENS OF SHORTAGE FALL
DISPROPORTIONATELY ON THE POOREST HOUSEHOLDS
5. Supporting owners
Continuing commitments to ownmership growth. Question of
balance; despite more ‘secure’ lending rules
• Unreformed tax systems
• Hidden second loans
• UK loan garuntees for new buyers (and social)
• Equity sharing products
• Using land supports
• Social security extended to homebuyers
• Disposal of public housing at discounts (see JRF report)
• Reform of planning, new ‘new towns’
5. Social Sectors
• New management incentives, audits, contestability in
contracts
• Getting investment off balance sheets
• Redirecting new investment to non-profits
• Selling to tenants
• Selling to the market ( vacant possession, almost always)
• Non-profits with wider housing and neighbourhood roles
• Non-profits with for profit activities
REALLY CHALLENGES THE ORGANISATIONAL STRUCTURES,
SCALES AND ORGANISATIONAL CAPACITIES OF NON-PROFIT
PROVIDERS.
6. WHAT PRINCIPLES FOR
INTERVENTION
• Strongly ideological, both support and opposition: conflates views on
’good thing’ and ‘good system’.
• Near absence of economic thinking in planning
• Lack of evidence re renting, attention in housing and strategic land
use planning
• Little real sense of what sector is, how it functions and how it is
changing: this remains the case in the ‘Generation Rent’ debate
• Attention to distributional ‘social mobility consequences
• Need informed, nuanced approach
• Need to act fast as urgent pressures impact poorest
RECOGNISE LIMITATIONS of INTERVENING IN A DIVERSE,
CHANGING SECTOR UNLESS WELL EVIDENCED, NUANCED
AND MULTIPLE INSTRUMENTS
6. POLICY APPROACHES: NATIONAL
OR FEDERAL ROLES
National Policy Requirements
• Housing assets and regional perspectives in macro policy
• Pre-eminent attention to an efficient housing system and
rental role within it (not simply more ownership)
• Housing as critical infrastructure ms
• Tax reforms
• Cross tenure income related supports
• Cross sectoral subsidy contestability
• Accelerate change in the public housing system (driven by
state producer interests)
• Active , secure, mortgage market regulation
6. A Metropolitan/State Housing
Sector Strategy
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Coalitions of consideration
Real, economic, housing, strategic plans
Appropriate owner-renter balance
Balance of social, mid-market and private market (allowances)
support;
Contestability of subsidy for non and for profit sectors
Positive role, inclusionary zoning and masterplan renewal
Metropolitan rental investment fund: REITS, SRS, Federal and
provincial
Policy linkage to exit routes to long term choices