Suzanne Fitzpatrick, Sarah Johnsen and Beth Watts reflect on recent recommendations to strengthen the homelessness safety net in England.
Posts tagged ‘housing shortage’
In this short film, Professor Duncan Maclennan will reflect on the role that housing research can play in mitigating the growth in inequality in many western countries.
The UK population, like in many countries, is ageing - with wide consequences for society and the economy. Almost one fifth of elderly households live in social housing. By Professor Colin Jones
There are fears 'help to buy' will artificially inflate prices, and that's at a time when early indications are that in some parts of the country at least, house prices are already on the rise. Colin Jones was a member of the discussion panel on BBC Radio 4 programme which discussed the current housing market context, the government’s “Help to Buy” initiative and the regulation of the private rented sector.
Rising house prices are not just a kind of “free money” or an alternative pension, Professor Chris Leishman warns. As Britain’s housing crisis continues to deepen due to increasingly scarce and expensive housing, he has embarked on a new research project that aims to find a way to reform property taxation fairly, and help to stabilise house prices.
This new study by the Joseph Rowntree foundation, co-authored by Professor Mark Stephens, highlights promising policies from the UK and abroad that provide innovative funding ideas to increase the supply of below-market-price housing.
Mark Stephens, Professor of Public Policy at IHURER, describes how he first became interested in the post-communist transformation of housing systems in Central and Eastern Europe.
Growing up during the cold war, “Eastern Europe,” as it was then known, was something of a mystery. In an era when travel was far less affordable than it is today and even a visit to France seemed exotic, the idea of working with people from “Eastern Europe” seemed like a remote possibility. Members of the Czechoslovak dissident group Charter 77 such as Zdena Tomin, whom I heard speak in Leeds Town Hall in 1981, seemed impossibly glamorous. But hope of liberalisation in “Eastern Europe” appeared to die when, on 13 December 1981, General Jaruzelski declared martial law in Poland and suppressed Solidarity, the independent trade union. This all changed in a few short months in 1989. I had made the decision to return to study in the hope of becoming a housing academic, and in my bedsit listened to events unfold on the radio. Most memorably, the lethal division that was the Berlin Wall, was breached on 9 November 1989. Shortly after I moved to Glasgow to begin work at the Centre for Housing Research in 1991, the Soviet Union was dissolved.
One of the pleasant surprises of my academic career has therefore been the opportunity to work with people from “Eastern Europe” and indeed to study what now became known as the “transition economies.” But of course in the early stages of my career, I was in a position only to listen and learn as the mainly US advisors promoted their vision of housing reform based on the mass privatisation of public housing and the creation of systems of property rights backed by a “risk-based” mortgage finance system. To the extent that there was a debate, it was about which mortgage finance model should be imported. Should it be something like the US system? Or should it be like the German system? My earliest attempt to enter the debate, at an OECD conference on housing finance in transition countries in 2000, suggested that the choice mortgage finance system was about more than efficiency. It would also shape what kind of housing system was created. The papers were published in this book.
I learned much from David Donnison’s 1967 book The Government of Housing, later updated with Clare Ungerson as Housing Policy. The notion of housing in the socialist system as a “dole paid with wages” is a powerful one, and has been rekindled recently in an absorbing book by Dr Mark B Smith with the evocative title Property of Communists, which I reviewed for Housing Studies. This examines the origins and charts the progress of the Khrushchev’s mass housing programme which “greatly improved the lives of tens of millions of Soviet citizens.” The truly epic scale of the housing problem – caused in part by the imperative of industrial investment in the 1930s when consumption was severely suppressed, but also of course by the destruction of the war – led to the industrial-scale building programme. This helps to explain the emphasis placed on building materials and construction techniques, which is a well-known characteristic of housing ministries across the region. On a visit to Russia in the early 1960s, David Donnison was told, “In the Soviet Union we have solved the housing problem. We have learned how to stick the big panels together.”
This was the period when the Soviet Union aspired to overtake the western standards of living. The rivalry was captured in this video clip from the so-called “Kitchen Debates” between Khruschev and Nixon at the American trade fair in Moscow in 1959. “You Americans expect that the Soviet people will be amazed. It is not so. We have all these things in our new flats,” said Kruschev. The optimism that surrounded the Soviet economy in the 1950s and early 1960s is superbly captured in Francis Spufford’s extraordinarily well researched and brilliantly crafted set of vignettes, Red Plenty.
Ironically there is more than a hint of “He who controls the past controls the future. He who controls the present controls the past” in common-place views of the Soviet system. To understand the transformation of housing systems in Central and Eastern Europe since the collapse of communism, we need to have a firmer grasp of how they operated under socialism. I have gained much from a long-standing collaboration with Martin Lux of the Academy of Sciences in Prague. This collaboration arose from the year he spent in Glasgow as a Marie Curie Fellow in 2002-03. We have been working on a paper for more than a year now, which critiques common approaches to understanding transition. The work of Smith – and Donnison before him – provides insights into the nature of socialist tenure. The “personal” ownership that existed after “private” ownership was abolished is often labelled “owner occupied” when in fact it lacked the essential attributes of the tenure as understood in the capitalist systems. Similarly “socialist property” – and it sub-tenures – provided such high levels of security that they assumed some of the characteristics of western “ownership.”
Combine this with the way in which state and state-enterprise housing was used as a reward system within a very flat wage structure, then – in western terms – the world really is turned upside down. In it, “decommodified” housing is a source of inequality and the unskilled workforce is more likely to be in “home-ownership.” Only then can we begin to understand what mass privatization meant.
Meanwhile we might reflect on how the development of mortgage systems is coming along. Jane R Zavisca’s book Housing the New Russia examines how and why the attempt to import American-style housing finance institutions failed in a system she characterises as “property without markets.” What is strikingly refreshing about this book is the injection of sociology into a debate – and in international terms and agenda – that has been dominated by economists. Zaviska highlights the legacy of socialist tenures as one reason for a strong cultural resistance to western-style mortgages, and this helps to explain why the “transition” country that has attempted to adopt the American system most closely has ended up with possibly the smallest mortgage market of any of these countries.
Martin and I have concluded that more than 20 years from the collapse of political communism in “Eastern Europe” these countries are more accurately characterised as being in “transformation” rather than in “transition.” “Transformation” might equally apply to academic understanding and policy formation.
In November 2011, David Cameron promised a package of policies to “get Britain building again”. Colin Jones, Professor of Estate Management at the IHURER research institute explains why housebuilding in the UK still fails to keep pace with population growth.
A UK government report in 2007 noted, “For a generation, the supply of new homes has not kept up with rising demand.” The veracity of this statement is reinforced by the 2011 Census that reported a 7% increase in the population of England and Wales and 5% in Scotland over the previous decade. An increase that was much higher than expected. Meanwhile 2007 turned out to be the peak year for UK house building and annual completions fell by 43% by 2010-11 following the credit crunch.
New house building in the UK was 146,460 units in 2011-12 which was the second lowest total (the previous year was the lowest) since 1924. The quarterly statistics on completions for 2012 published so far suggest that this financial year is on course to be even lower than 2010-11. In other words a new low. House building is simply not responding to demand in the short or long term.
The essential direction of the balance between house building and demographic change has been acknowledged in the policy pronouncements of the Coalition. The government offers all the right sound bites. In November 2011 David Cameron said, ”We are determined…to get the market moving” and “get Britain building again”. The policy package that accompanied these statements became live in April 2012:
- A stimulus to the Right to Buy in England by increasing discounts to a maximum of £75,000 was designed to generate funding new funding for affordable housing. (The government calculates that for every council house sold the funds will be sufficient to build a new affordable home).
- A mortgage indemnity scheme enables buyers of new homes to borrow up to 95% of their value. The government underwrites part of the associated risk. (The previous government’s policy of exempting first-time buyers from paying stamp duty on homes valued up to a £250,000 threshold lapsed at the end of March 2012.)
Both these schemes are attractive because they effectively cost the government nothing in the short term. There have also been changes to the planning system to stimulate new building.
The government has high hopes for these policies and they were trumpheted in the list of achievements in its Mid-Term Report. At the announcement of the indemnity scheme it was billed as potentially helping 100,000 people in England. However, in the first three months it supported only 250 new house buyers. It was anticipated by the government that the changes to the Right to Buy would stimulate an additional 20,000 sales over its first three years. Given that there were only 3720 such sales in 2010-11 and that the number had been broadly unchanged for the previous three years too this forecast appeared to be wishful thinking. Indeed actual sales in the first half of the latest financial year were only 1487 so the numbers are falling not rising. The government appears at best optimistic about these policies in the short term. And of course it will be some time before receipts from sales can be translated into new affordable housing. This also applies to the planning changes designed to stimulate new building.
But the problem is not just about the low numbers of new houses and the associated nimbyism and planning regulations. The picture is worse than it appears because of the types of houses being built. Look first at the private sector. In the late 1970s and 1980s the private house building industry focussed on starter homes offering small cheap flats and houses, but the house building industry working model is now generally high price, high mark up and low output of family homes and ‘luxury’ city centre flats. The average price of a new terraced or semi-detached house is £200,000, beyond the reach of most households even with just a 5% deposit.
Meanwhile with public sector expenditure reductions there has been an invigorated effort to make public sector subsidies (and now right to buy receipts) go further by reducing state support for new housing built by housing associations. In effect this has meant a redefinition of affordable housing provided by this sector. The result is that this publicly supported housing will need to charge much higher rents than traditionally for social housing, the order of 80 to 90% of market rents. Whilst ostensibly aimed at ‘areas where there is a demand for affordable housing’ the new schemes need to be in localities where they are viable, and these are not necessarily be those that have the greatest need. These new properties also attract professionals currently housed in the main stream private rented sector at rents that are equivalent to mortgage repayments. Indeed the advertisements for completed schemes note priority is given to applicants on high incomes that do not require housing benefit, and households do not have to be an existing social tenant or even on the waiting list.
The consequence is that new housing supply is offering an increasingly narrow menu – the dominant private sector is building for sale primarily at the top end of the market for high income families and the state is supporting housing at rents just below market levels to households who until recently would have bought. The policy language is all about helping households on to the housing ‘ladder’, and is implicitly a trickle down solution to the housing problem. Within this perspective new houses built at the top end of the market are bought by the rich who then vacate houses that are smaller/lower priced for the next lower income group to move into, and so on down the housing market chain. So the new affordable housing for rent at near market rents reduces the pressure on social housing indirectly by building housing for richer households.
Unfortunately there are a number of spanners in the argument. The mythical housing ‘ladder’ has first time purchasers buying a cheap starter home and gradually progressing by trading up. Yet the ladder is something of a mirage as many two income professional households start well up the ‘ladder’ and trading down can be a reality for many households. Family wealth is also an important influence on demand via mum and dad helping with the deposit or from inheritances. Any housing market chains created by these new government policies are likely to be very short, at best simply creating more space in the private rented sector for the squeezed middle, “Generation Rent”.
Many of the young people who are struggling to afford a home of their own will not be able to afford the mortgage payments on an expensive new home, even with a 5% deposit. The trickle, and a lagged trickle at that, of new houses generated by these policies will not keep pace with demographic growth and have only a marginal direct benefit to “Generation Rent”, and most importantly offer no indirect help to housing the poor. These trickle down policies may cost very little but they also achieve very little. They will not get the ‘housing market moving’ or ‘Britain building’.
Colin Jones is professor of estate management. His publications most directly linked to this blog are:
“The UK Housing Market Cycle and the Role of Planning: the Policy Challenge following the Financial Crisis” chapter in C Jones, M White and N Dunse (editors) Challenges of the Housing Economy: An International Perspective, Wiley-Blackwell, Oxford, 2012.