Danny Blanchflower and I were speculating on twitter yesterday on how much the government should be spending on investment in the economy over the next few years given the current cost of money and the massive under-utilisation of resources in the UK.
I put in a big bid for housing. And please do not doubt that we could build many more. This is data from the House of Commons Library:
Housebuilding in the UK is a declining industry when it is glaringly obvious that we have a desperate shortage of houses.
And if in 1970 we could build more than double the number of houses we do now please let's not doubt we have the capacity to build more now.
So why aren't we. The Independent gives a clue this morning. This table compares government housing benefit and housebuilding spending:
It would seem that the government has simply given up trying to build houses.
Now wonder we are in the economic doldrums.
No wonder we have a housing crisis.
No wonder we spend so much on housing benefit.
No wonder migration has been made into an issue.
And no wonder there is no end in sight.
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Where should they be built then?
Start with brown field. There is ample
And yes, we will need some greenfield
I accept that
http://www.bbc.co.uk/news/uk-18623096
Cameron has never, ever, done detail. The triumph of presentation over content, form over function, has been his strategy. It is a workable strategy for a limited period and then the chickens begin to return. Each single, predictable, consequential consequence is exacerbated by interaction with others. Cameron constructed a huge raft of disjunctive syllogisms to justify policy that was always going to founder.
Today’s report http://www.bbc.co.uk/news/uk-35583415 is a prime example. People living in old unsuitable housing who need support for difficulties due to their age or physical or mental incapacity will not be moved to purpose built sheltered housing because of cuts to housing benefit. It does not take a big brain to confidently predict that this will increase pressure and cost on other areas such as health, social services or police for which they are poorly prepared.
Yesterday I heard a report on a BBC programme of one council paying a £1000 a month to a slum landlord in another council area to house a single mother in one room. The second council was expending large sums to police and correct abuse by rogue landlords. Hardly a joined up system.
It is way beyond calling time on the continued reliance on market forces to correct housing problems in a vain pursuit of some ideological purity. Even if Cameron cannot recognise the issues of basic humanity surely even he can see his rob Peter to pay Paul economic strategy has run its course.
In the last graph, Richard, Housing Benefit will be a function of the housing bubble itself with much of this money being ‘rentier welfare’. I think it’s not just a question of housing but of what type of housing-in my view we need plenty of energy efficient SOCIAL HOUSING. There is no chance of this with neo-liberal mind sets at work as the trend will be to destroy housing associations , especially where property values are the highest so that they can be wrung through the fictionalisation process. I think about two thirds of Tory MP’s have property interests and about a third of Labour(!) -no chance of change coming soon despite the fact that this is destroying any real chance of economic renewal, not to mention the appalling social costs.
As you say the argument has been divorced from its real cause and pegged onto the immigration issue-another neo-lib ‘victory’.
I agree
Social housing us what is needed at present
Now let me think, what do tory landowners and bankers care about most? Could it be rising land, property and rental values? Why build more houses and help ordinary folk when you really want to squeeze more blood out of them!
“Some greenfield”. Such an innocuous phrase. When you make your case for more house building, do you have any idea how much is “some” and where?
Some is hundreds of thousands a year
Where is across the UK
I’d have thought someone with delusions to be a president could have worked that out
“Where is across the UK”. And there was me thinking you were proposing we build in Maryland! Where in the UK? Which swathes of greenfield will be covered by housing estates? I do agree it’s necessary, but I have the courage and itegrity to admit what it will mean.
Oh come on
I am a political economist
Not a town planner
Personally, I would put a stop to all green field development for the next 25 years as this has become the easy option for housebuilders and encouraged many inappropriate large scale developments wherever such easybuild land has become available and planning granted.
New build should be redirected to existing urbanised land to encourage regeneration and prevent further urban sprawl. If that restricts the continued expansion of major cities and their satellite conurbations, especially London and the south east, then this will be a very positive factor for the UK as a whole.
And where would people live?
We live on a finite island in a finite world. If we don’t choose to live within our limits, some of which will have to be regulated into existence before they become forced upon us, then “growth” will become irrelevant as a concept because nature and/or war will force one almighty recession on everyone.
By imposing controlled growth restrictions sooner rather than later, in this case on land usage for urban expansion, we would very quickly adapt and start to live within these new constraints very happily. Adapting to change is after all the most prevalent of human characteristics!
Remarkably little land is built upon in the UK…see the link I put above.
I suggest the real reason for the building slump is “lots of houses built equal lower house prices” (or at least a slower rate of rise, which is in excess of 6%/yr)
Even more worrying:
http://www.resolutionfoundation.org/media/press-releases/owning-a-home-set-to-become-a-pipe-dream-for-young-workers-on-modest-incomes/
Doesn’t your third chart say that something happened around 2009/10 which changed what looked like a strong correlation between HB spend and housing investment? You’d expect there to be such a correlation, since the prospect of rents being paid via HB will be an effective sort of demand for rented housing, both private and public sector. But when the relationship breaks down, it’s hard to argue the solution is ever more HB spending.
I think you have to look more at the supply side issues, which I accept you nod towards in saying we will need to build on some greenfield sites. But more thought is needed, because it’s in urban areas where the demand for more housing is greatest. As classified, there are some brownfield sites there, but I don’t believe enough. I suggest it has to be made easier for existing developed sites to be redeveloped to higher densities – which, given decent homes standards, means higher rise.
Richard – in your reply appearing just above my comment, you protest that you’re not a town planner, merely a political economist. I think the message coming through is that the world does not so much need political economists, but town planners – and I’d suggest ones who are prepared to engage with economics.
I think I could argue for both
Good town planners are always social geographers
And they have to do economics, well
Just so you know 2/3 of housing benefit till now goes to ‘Social’ not for profit landlords. Considering they don’t pay tax on the rent and one of the biggest housing associations made £300 million last year. Meanwhile as general rule I dont see big social housing providers put up solar panels with there vast surpluses or be known for paying staff well.
Social landlords are not for profit
You are misrepresenting matters
Yeah thats why in last 5 years social rent is up 20% (according to tories however I have not seen this disuputed)I repeat apart from odd few housing associations I dont see them putting up solar panels/wind turbines on there homes or pay a good wage. Meanwhile in my neck of the woods the YMCA is charging £200+ pw which is more than private for very little than a private landlord.
Some of this, I suspect, is because government now requires funded bodies to make a return on capital
Sam
My social housing employer (an arms length management organisation or ALMO) pays us decently AND is also fitting solar panels to our 12,500 properties with any surpluses.
But guess what? Tenants who have had PV fitted come back and tell us that the costs of their gas and electric has not gone down substantially and tell us off.
We then sit down with them and look through their bills and what do we find?
We find that they ARE using less power but the scumbag utility companies are charging them more for it!!
If anything sums up for me what Margaret Thatcher did this for this country with privatisation then this is it. And I am not telling lies. At least energy is being used more efficiently.
As for Housing Associations, in the past they regularly subsidised lowering their rents with their surpluses. However, as successive Tory and Labour governments cut Social Housing Grant rates, the HAs ended up increasingly going to the private banks to borrow to build and make up for the short fall in grant. What do you think the bankers said about using reserves to subsidise rents and making improvements to homes?
Well the banks want the HAs to hold that cash in reserve so that THEY can get paid off if the HA goes under. Otherwise the cost of borrowing goes up or they will not be able to borrow at all. HA Reserves are used to mitigate risk – for the bank! Isn’t our privately funded housing system just great?
Also, you sound to me that you are confusing turnover with profit. They are not the same.
So the figures tell us that less homes are being built – but they ARE being built nonetheless – on a recent trip to Birmingham from Derby I saw 3 decently sized building sites with houses on them on the periphery of small towns along the route.
One of the issues in the economics of house production is that it takes a long time to build/create. This delay factor probably contributes to the price?
I know that I keep banging on about this but house price inflation is not simply about the lack of numbers. We also need to address the corrupt market that prices housing for consumers.
Housing is both a good (we consume it) and an asset (it adds to our perceived wealth and ability to spend money – in fact if rented out it gives us an income stream which was I until recently I understand virtually tax free or hey – what about equity release – wonderful!). It is unique in many ways and the market exploits this.
But tell me – is housing priced by the market as a good or an asset? I feel that no matter how much more housing we produce the market would still over-price it?
Why? Because the banks and estate agents I believe are primarily pricing housing as an asset – in fact the basic assumption is how much money that property can make as a rented property or collateral for more debt and by doing so , they essentially bring forward the profits of the asset by building future income from it into the asking price. This means nice interest payments for the banks and some ever bigger fees for the estate agents. Yes – noses in the trough again for the middlemen in the ‘market’.
For example, my mother in law recently sold her 2 bed house in York to come down to Derbyshire and live near us and her estate agent fees were £3500 – and they did very little for that believe you me!! They even lost her keys!!
So I remain distinctly sceptical that house prices are being driven by a shortage alone. If we just accept without question that it is about house building numbers then we will walk blindly into trap that will result in plenty of high end builders rendering once treasured communal or heritage green belt land into private property. And they will!
As for brownfield sites – the private sector are notorious at purchasing buildings, land etc., and then leaving them looking like a mess. In the city I work in we have an old LMS warehouse in the city centre standing there screaming for redevelopment but nothing is happening because the developer wants to sit back and watch the price go up or just wants to get rich quick. Another scheme on ex-industrial land has ground to a halt because the ex-industrialist is basically rejecting the cost of remediation on land that they have poisoned over the years with THEIR industrial use.
The answer? More powers for local authorities to Compulsory Purchase (CPO) such land and put it to use for new homes. PQE could finance that.
As for the planning system, I think that we can now forget about any more large scale super store development – yet the likes of Tesco and Sainsburys et al will still have sites lying dormant around the country which should be released for housing development.
But having said that, I have little faith in the market being able to price housing properly as long as it treats it primarily as an asset which is what I believe it does. And that is wrong.
Three tax answers:
a) Tax empty properties highly – a multiple of normal council tax
b) Tax sites with planning permission not developed at very high rates
c) Compulsorily repurchase sites not developed after three years at unapproved siteb worth if not developed in three years
I’m right behind you Richard.
PSR – between 1997 and 2008 bank lending for mortgages increased 370% and now we have Help To Buy (Help To Bubble). The sweating of housing as an asset in chains of debt/securitisation has been going on for years and will be connected to land banking.
James Galbraith has pointed out (in his book: ‘End of Normal’) that banks realised back in 1975 that housing was becoming one of the only things left to sweat to death. IF you look at graphs of house prices you will see the bubble patterns starting around 1976.
I live in a Housing Assoc. house in an area where housing is higher than average prices and expect that the Tories (especially if they are in again) will apply pressure to get these houses ‘financilaised’ probably forcing me to move. In fact a large landowner in the are has been selling off land and houses causing people to have to leave their homes.
The whole thing is a catastrophe. Nothing from (Blue)Labour who should be megaphoning this message to the public!
Thomas if you take a short train journey from Clapham Junction to Waterloo and care to look out of the window you will see that new inner city of apartments and dwellings has sprung up over the last couple of years so there does not appear to be problem with the where if there is the will. The problem is that these constructions are not in the main homes for the vast majority of our people but are instead investments and trophies for the World’s wealthy. That is the way that we do things now in our country.
Oh comemon yourself. One doesn’t need to be a town planner to acknowledge that building hundreds of thousands of homes a year will mean greenfield building over much of South East England. Choices and consequences. I think you’re evading the issue.
First, that’s not true. You clearly do not understand housing density
Second, we do not only need houses in the south east
Please do not waste my time again
If you say we don’t only need houses in the south east, doesn’t that make you a bit of a town planner?
I think saying there is need across the UK is more like stating the bleedin’ obvious
Sam
Richard is right about the return issue.
Social rents have gone up not just because HA s have put them up willy-nilly but because Governments (Tory and Labour) have been proactive at raising them anyway and letting the HB bill take the strain especially for new properties.
Around about 2002 a thing called the ‘target rent’ was brought along which supposedly reflected the local private house values and incomes in an area. In 2010, it was realised that this was causing problems so the 80% of market rent (the ‘Affordable Rent’) was introduced. In some cases the 80% of market rent can be higher than the target figure – it all depends on where these housing and employment markets are at work. But note their values are tied to private markets – and not to social need. Social landlords did not impose these.
Even the rents we charge are more likely to be 80% of full market rent for new properties. And if you ask for Government subsidy to build you will not get it unless the new properties work out at the Target or Affordable rent or which ever is the lower.
Why?
Because successive Governments or either persuasion want the private banking sector to get more involved to fund social building so that politicians can compete with each other to cut taxes in order to win elections. So the investment that would have been raised by government borrowing or tax raising is done off the Governments books. It also helps the private banks expand their business portfolios and of course pass on the bill in terms of higher rents onto the tenants who do not qualify for HB or onto the Government’s HB bill. Lovely eh?
And the 80% of market rents and target rents? Well that is the cost of getting the banks involved. Older social rents assume long pay back times for building houses. Higher Affordable Rents and Target rents are more attractive to the private banks’ investors and the quicker returns these investors want to see before taking their money elsewhere.
That to me is the policy context of rent rises in the social sector.
I have also worked alongside the YMCA. The reason why their rents are so expensive is because they have on average a very high turn around and many of their properties get trashed by the very difficult and troubled people they try to cater for. YMCA management and repair costs make us in the mainstream social sector blanche. The YMCA has a very difficult job made worse by less money being made to help them from our wonderful Tory government.
http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10787462/Landlords-9bn-housing-benefit-fuelling-bubble.html
And the figure for social/private division for benefits seems to be 60/40…but since private lets are about 25% more costly than social housing (some areas 100% more costly)(in London, 100% tends to be subject to a multiplier…with garages costing more per month there than houses cost 50 miles north)
At least with social housing you tend to get a decent property. With any gas device serviced every year. Not so with private landlords, some of who tend to try to get the tenant to pay. Uninsulated properties abound, poor conditions are quite common. High rents are the norm, and then there’s the “letting agent”, with many charging several hundreds of pounds to give people access to properties.
In case you have not gone through the adverts…one phrase keeps appearing on the lets adverts “no housing benefit”, which has replaced the “no dss”……..
Oddly there’s no mention in this Tory toilet paper article that it is excessive debt based finance that is actually fueling the housing bubble (as it fuels all other bubbles).
The increase in housing benefit to private landlords is an inevitable symptom unless people are to be thrown out onto the streets, but it is not the cause of the problem.
Enough people have said it. If we had more affordable homes instead of the market flooded buy to let high rent homes the HB bill would come down. All the Austerity driven economic policy crazy Osborne need do then is invest in businesses (with some of the money from all those corporate tax dodgers he HASN’T yet gone after) and wages would go up and even fewer people would be claiming HB. Building houses would see people in work, merchants sales up and a good deal more in taxes going to the exchequer. £4 billion over the next four years(less than this irresponsible war in Syria will cost UK taxpayer) would be a healthy start.
There is a blogsite(sorry Richard but it is relevant) that specialises in Housing. SP Eye JoeWelfarwrites:https://speye.wordpress.com/2016/02/16/lha-maxima-outrageous-bbc-reporting-and-orr-as-the-enemy-within/(todays).
I recently found a site showing just how much of what used to be “common land” being fenced off to the public by the government being sold off for profit to “executive homes” building contracts. It was a massive amount of acreage most within easy reach of rail and road routes. One of the petition sites is currently looking for signatures to combat this. It does rather make certain arguments on this comments page moot and others bang on since I don’t like our green spaces being used for the wealthy and “for profit” schemes. Will post link if I can find site revealing green scapes being grabbed up by govt.
I like your blog and the rationality of your proposed ‘chancellor’s speech’ in the Joy of Tax impressed me. And yet … none of those who have commented on your housing blog have referred in a compelling way to environmental issues even though they will all have realised that the climate has changed here in the UK and on every continent. Though you occasionally pop in the word ‘sustainable’, you do not appear to have grasped the enormity of the environmental dangers which threaten us — and then our children and grandchildren: 1) Our burning — wood, coal, oil, gas — has turned our seas more acid with awful consequences for sea-life. If humanity had any sense, for this reason alone, it would reduce burning of all kinds to an absolute minimum immediately. 2) Biological destruction — of mammals and many, many types of creature and plants — is horrendous. If we destroy much more wildlife our own species will suffer greatly (leaving aside the callousness of such destruction). 3) Nitrogen pollution. 4) Chemical pollution. 5) Phosphorus pollution. 6) Soot, sulphur, nitrogen oxides and water vapour put into the upper atmosphere by aircraft. 7) Continued threats to the ozone layer. 8) Careless use of fresh water resources … I could go on, before we even get to climate change — and yet you and most economists persist in talking about ‘growth’ as if there was little or no connection with any of this.
“It is difficult to envisage anything other than a planned economic recession being compatible with stabilisation of atmospheric carbon dioxide lower than 650 parts per million (ppm)” in the hope that this can be achieved without a runaway rise because, for instance, of methane release as Siberian ice melts. “To avoid 650ppm implies a period of prolonged austerity for developed nations and a rapid transition away from existing development patterns within all other nations,” says Professor Kevin Anderson, Deputy Director of the Tyndall Centre for Climate Change Research, even though the chances of “exceeding 2 degrees” of warming above pre-industrial levels are “99.9%”. However, let’s have a go — we might get a huge volcanic eruption which would give us a bit of extra time.
It’s not just Anderson. Professor Sir Bob Watson, when he was chief scientist at the Department for Food and Rural Affairs said, “To be quite candid the idea of a 2C target is largely out of the window. I would say to George Osborne: ‘Work with the public sector. Work with the public on behaviour change. Let’s demonstrate to the rest of the world that we can make significant progress here’ … If we carry on the way we are there is a 50-50 chance that we will get to a three-degree rise … I wouldn’t rule out a five-degree world and that would be quite serious for the people of the world, especially the poorest.” (August 2012 http://www.bbc.co.uk/news/science-environment-19359020). Professor Watson is one of the most respected scientists in the world on climate change. The view of Professor Kevin Anderson is, “There is a widespread view that a 4°C future is: incompatible with an organised global community; likely to be beyond ‘adaptation’; devastating to the majority of eco-systems; has a high probability of not being stable (i.e. 4°C would be an interim temperature on the way to a much higher equilibrium level). Consequently, 4°C SHOULD BE AVOIDED AT ALL COSTS”.
Research published in the Guardian (8 Feb 2016) predicts that “Sea-level rise ‘could last twice as long as human history’ “… even with climate change limited to 2C by tough emissions cuts, sea level would rise by 25 metres over the next 2,000 years or so and remain there for at least 10,000 years … If today’s burning of coal, oil and gas is not curbed, the sea would rise by 50m, … Drowned areas will include New York, London, Rio de Janeiro, Cairo, Calcutta, Jakarta and Shanghai” as well East Anglia where you live and Bridport, Dorset where I am.
And yet you advocate massive house building when there are 750,000 empty properties, about 750,000 second homes and the largest 250,000 houses in Britain have eight or more rooms per person (Dr Helen Mercer of the University of Greenwich, Business School The Observer 16 Sep 2012.) Cement is a major source of carbon dioxide — and at present there is no alternative. Steel requires lots of energy. Copper — the Peruvian government is intent on destroying swathes of rain-forest to provide ore for copper wires and pipes. In war-time there was rationing — and the situation we face is much more serious than war. Anderson also points out that building power generators on a big scale takes decades. Yet the reduction of a single unit of electricity saves 13 units of energy — and thus carbon dioxide and other pollutants. We can make immediate and massive savings as soon as we commit ourselves to recognising that the laws of physics, chemistry and biology are paramount, while neoliberal economics is … mystical(?)
Is there any possibility that you could take this on board and propose economic measures which would increase the chances of the survival of civilised life.
“When I look at this [CO2] data, the trend is perfectly in line with a temperature increase of 6 degrees Celsius, which would have devastating consequences for the planet.”(Fatih Birol — chief economist of the International Energy Agency.) … and according to Jim Yong Kim, president World Bank, at just 4°C “There will be water and food fights everywhere.”
Would you consider inviting Kevin Anderson to write a guest blog?
I heard of your work from a Friend who was at the Salter Lecture.
I am not quite as pessimistic as you
But I am a principle author of the Green New Deal and talk to the likes of Rupert Read, often
So I recgonise the issues and addressed many in The Courageous State
But I also recognise the near impossibility of moving from one state to another without a transitional period
I hope we are in that period
Past CO2 levels (100 million years ago) were @2000PPMV.
In case you have not noticed, we are currently in a warm period in the middle of an ice age.
And their predictions of temperature V CO2 have been wrong since the start.
The oceans are not getting more acid. They may be slowly becoming less alkaline, but that is not the same. And adding CO2 to seawater does not make it acid….
Methane?
You may have a point…but return to that warm bit in the middle of an ice age…
“”If you want to think about reducing future climate change, you also have to be aware of greenhouse gases other than carbon dioxide, like methane and chlorofluorocarbons,” said Schmidt. “It gives a more rounded view, and in the short-term, it may end up being more cost-efficient to reduce methane in the atmosphere than it is to reduce carbon dioxide.”
http://pubs.giss.nasa.gov/abs/sc00100w.html
The world will still be here long after homo sapiens has departed…….now have a look at homo sapiens rate of reproduction. Falling below replacement levels in practically all modern societies. The UK has to import people to try to correct the working-retired balance.
People, some, are right: The next Great Extinction has probably started: Us.
I think that faux science
And I think when global population is increasing rapidly your claim on extinction shows a decidedly parochial view