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Duncan Maclennan

Duncan Maclennan. University of Ottawa dcmaclennan@sympatico.ca. TAILS AND ELEPHANTS?. The Economy and the Housing Market: Modern Policy Challenges. Argument. Global, Booms: National and Local Processes Consequences: Multiple, Not just Affordability

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Duncan Maclennan

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  1. Duncan Maclennan University of Ottawa dcmaclennan@sympatico.ca

  2. TAILS AND ELEPHANTS? The Economy and the Housing Market: Modern Policy Challenges

  3. Argument • Global, Booms: National and Local Processes • Consequences: Multiple, Not just Affordability • Scope for Modernising or Remaking Housing Policies • Policy Shifts • Policy Conclusions

  4. 1. Economic Systems • Globalisation, growth and inequality • Rising real incomes • Lower real and nominal interest rates • Reduced real user cost, tax reinforced • Deregulated Housing Finance Circuits • Borrowing Rules • Mortgage equity release • Impacts Local Planning/Infrastructure systems First best and flexible impacts catallaxia systems

  5. 1. Global Challenges and Local Outcomes • Cross – national differences • Housing markets, spatial concentration • Localised land and labour • Localised booms and bubbles • Policy Issues are Housing and Cities

  6. 2. Consequences; Immediate Effects House prices • Homeowner burden, user cost down • Critical deposit capacity • Starter incomes • Parental and family wealth • Education debt • Single Person demographic • Reducing equilibrium ownership rate? • Renter burden? Rents Flat? • Buy to let • Gentrification? • Social, rental roles and queues

  7. 2. Consequences; Medium Term Medium Term • Supply increases • Faster suburban, land lower cost • Land prices and wage rates up • Developer speculation? • Macro effects • Equity withdrawal • Price expectations reinforce • Monetary policy complicated • Riskier lending and borrowing? • Migration, immigration

  8. 2. Consequences; Longer Term Longer Term • A lost legion? • Disrupted integration, soc mobility ladders • Sprawl encouraged, infra costs rise • Interest rates and inflation • Growth rates and housing? • Spending gains on existing bricks as progress? • Incentives for saving and investment by sector? Tenure outcomes, prices, burdens, rental sectors and shortages: which problem manifestation

  9. 3. Modernising Policy: Affordability - A Starting Point?? Policy uses. • Affordability, the rhetoric • Which groups, what ethical judgements • Affordability, the trigger to support Analytical roles? • For Whom, for How Long, For What? • Affordability versus Acceptability • Affordability, the explanation of choices? A muddy, ethical concept. Costs and shifting income distributions are the issues

  10. 3. Modernising Policy: Basis for Change Retrenchment after the 1980s • Income target support • Housing as residual social security/policy • Reduce social housing investment, Pub Ex • Focus on homelessness • Favour ownership ( rather than efficient market), tax breaks • Role for non-profits • Devolution, Subsidiarity, Dumping? Demoralised, delinked policies

  11. 3. Modernising Housing Policy Re-engagement Starts in 1990s Because • Costs rising, income inequalities • Homelessness • Low income renters, n’hood decline • Growth and displacement in city cores • Sprawl and quality impacts on environment • Recognition of economic role beyond income, to stability and growth

  12. 4. Policy Shifts Now? • Financial regulation, BIS etc • Monetary policy, asset prices • Macro view on housing • Taxing non-labour incomes • Prices and the environment • Housing supply • Mortgages and demand • Different sectors, levels

  13. 4. Policy Shifts: Governance of Supply Change • Recreate policy capacity – Central / Local • Improve information and evidence base • Inventory of public land • Framework / evidence to link to meta goals • Government and Governance structures Can governments rethink a better governance system for housing?

  14. 4. Policy Change: Planning • Governance, Culture & Aims of Planning System • Beyond ‘better building regulations’ • Strategic Planning • From metro-region to n’hood templates • Coherent economic and social analysis • House price aims, using pricing tools • Development and Masterplans • Speed and delivery • Delivery vehicles and affordability

  15. Policy Change: Supply cost/tax • Taxing unearned gains? • Alternatives • Strategic inclusionary zoning with capture agent • Community land in new 3rd sector vehicles • Infrastructure charging, settlement structures • Related issues • Smart growth • Construction labour shortages

  16. 4. Policy Change: Ownership Demand side • Taxation of housing: renting, owning • Recycling parental gains to children • Should sellers pay stamp duty? • Capital gains tax • Do mortgage reforms help? • Shared equity products • Equity growth shares for tenants? But is demand the issue?

  17. Policy Change: Rental Rental Markets • Buy-to-let versus REITS • Taxation, again • Security for longer term? Renting social • Case to keep • Create local housing agencies • Mix tenures and equity ladders from gains? • Low income tax credits, all sectors

  18. 5. Policy Conclusions for Moderate Modernisation? • System-wide approach and governance • Outcomes orientation • Evidence informed, strategy driven • Cross departmental, cross order • Maximise subsidiarity

  19. 5. Policy Conclusions for Moderate Modernisation? • Reshape NFP Developers • Use contestability in provision and planning • Consider tax neutrality and “economic rents” • Dynamic wealth focus • Supply side focus of support Good Luck!

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