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NEIER: Land Markets

NEIER: Land Markets. Henry G. Overman (LSE & SERC). Background. Bring own perspective on key themes within the review Challenge the Evidence Base and opinions from stakeholders within the region. Context. NELEP economy relatively weak headline economic indicators

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NEIER: Land Markets

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  1. NEIER: Land Markets Henry G. Overman (LSE & SERC)

  2. Background • Bring own perspective on key themes within the review • Challenge the Evidence Base and opinions from stakeholders within the region.

  3. Context • NELEP economy relatively weak headline economic indicators • Long run challenges from structural change exacerbated by recession • High public sector employment and transfers make area vulnerable to cuts

  4. Problems in local land markets • Contaminated industrial sites needing remediation • Weak demand -> low rental values -> lack of private sector development (short and long run) • Residential stock of low quality and limited range • Despite relatively low residential prices an affordability problem (income & employment)

  5. Policy interventions • Public sector investment to decontaminate sites and get development ready • Direct investment (in partnership) in commercial/residential • Schemes to subsides private sector • Use of planning restrictions to achieve long term policy objectives (brownfield, tenure and quality mix)

  6. Stakeholders assessment • Widespread feeling that substantial progress • Broad support for long term objectives • Downturn causing severe problems • Funding constraints limit use of existing policy mix (£££) to tackle problems • Rents ‘too low’ which has helped create employment but in low value added activities • EZ a major opportunity to attract high VA • Continued concerns about affordability and quality/range of existing stock

  7. More of the same? • Why have transformative projects not lead to substantial improvement in economy? • More needs to be done or … • Supply side (regeneration) responses not very effective?

  8. The regeneration problem • Structural weaknesses • Demand relatively inelastic (i.e. not responsive to price) • High vacancy rates and availability make supply relatively elastic • Further expansions in supply -> area wide falls in prices rather than increased occupancy • Avoiding this requires demand to be v. responsive • Improvements in quality of stock • Improvements in general built environment

  9. ‘But it worked so far’ • At small spatial scales demand can be quite responsive as a result of displacement from lower quality sites • But at regional scale such displacement is ‘zero-sum’ • Regional wide supply increases • Decrease regional prices • Reshuffle employment from existing to improved sites [high deadweight costs] • Disguised by use of occupancy rates to assess success of supported developments

  10. Policy implications • Need to recognise problems • Supply led responses to current demand side problems will exacerbate long term issues • Need careful coordination at regional level to limit deadweight (RDA didn’t manage this according to legacy documents) • No reason why EZ should help address this problem unless strong coordination mech

  11. Residential development • Similar problems exist for higher end residential development (shuffling round existing stock of households) • But do care about quality of residential stock per se • If private sector development still feasible in this part of market might be only short run response consistent with long run objectives

  12. Wider planning issues • Policies that raise cost of private sector development • Brownfield • Mixed use • Cheshire and Hilber cost of offices in Birmingham similar to San Francisco (mostly driven by planning constraints)

  13. Wider planning issues (cont) • General lack of responsiveness of planning system to price signals especially when run counter to long term objectives • E.g. call centre versus town centre • Relative prices of different types of space

  14. Policy implications • Limitations of existing supply side policy interventions • (Much) greater cross LA-coordination needed • Aggressive intervention insufficient to offset costs imposed by planning system • Demand side (particularly improved skills) far more important than more supply side

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