Housing markets, housing policy and Localism in England

1. Housing markets, housing policy and Localism in England Ed Ferrari, University of Sheffield Localism, Welfare Reform and Tenure Restructuring in the UK Queen’s University Belfast 24 October 2013

2. Outline • The ‘crisis’ is not new, but has been decades in the making. • The housing market has become increasingly variegated: in terms of regional and local experience, and in terms of its participants. • Housing is inherently ‘local,’ yet, ironically, its value has been expropriated and genuine ‘localist’ apparatus has been dismantled. • There is a scalar mismatch between the key tenets of supply and demand.

3. The present ‘crisis’ • Onset of the GFC in 2007 inextricably linked to housing • Overvaluation of housing ‘bubble’ • Mortgage-backed securities • Inadequate capital adequacy and permeable ringfences • But: circumstances quite specific in place and in time: • US low income homeowners; Freddie Mac/Fanny Mae; etc. • UK market has endured several crises in recent decades. • There have been similarities and differences each time.

4. [Nationwide peaks and troughs chart] Source: adapted from Nationwide Building Society

5. UK housing market crises, 1970s to date Similarities Differences Macroeconomic circumstances, e.g. link to interest rates Institutions, e.g. pre-Building Societies Act … more greenfield land release in 70s, 80s Major emphasis on demand-side subsidies • Strong long-run demand fundamentals • Decline in council housing development, not matched by HAs • Protectionist land use planning system (but…)

6. The ‘housing problem’:key features • The system, not just the market, is in crisis • Problems pre-date the GFC significantly • By the 2000s PTI > ‘normal’ affordability thresholds in most parts of the country and for most types and sizes of housing (Barker, 2004) • Population and household growth outstripped housing construction for several decades • Changing societal attitudes towards housing consumption • Mainstreaming of investment role; ‘neighbourhood positions’ • Large (albeit shrinking and severely residualised) SRS • We tend to treat this as ‘non market’, but is it? • Small (albeit recently growing) PRS and limited tenurial flexibility

7. The ‘housing problem’:key features • In summary the market problem lies in perhaps three characteristics: • Cyclicality  volatility • (un)Affordability • Spatial divergence

8. Housing market volatility • UK housing market one of the most volatile in the world (Stephens 2011) • Supply side unresponsive (Barker 2004, 2006) • Land use planning (Cheshire & Sheppard 1989; Cheshire 2008 but cf. Quigley & Rosenthal 2005) • Housebuilder consolidation and removal from locally specific product markets (Ball 2007) • Housebuilder/developer networks and institutions: complex competition for land (Adams et al. 2011)

9. Affordability • Major concern with affordability in 2000s – London and SE (the Key Worker problem) • Spread to other parts of the UK by 2007 • Although PTI ratios have eased they remain high • The problem is more one of accessibility to mortgage finance, esp. among First Time Buyers • This has in part bolstered a resurgent PRS, where rents have risen

10. Spatial divergence Source: Ferrari & Rae (2012)

11. Spatial divergence • ‘New politics’ of mass housing (Murie & Rowlands2008) • Further loss of local control over housing through LSVT, stock transfer, HA mergers • Move away from provision to strategy • Loss of regions. HCA centralism. • Entrenched socio-spatial segregation • Long term lack of industrial or regional policy • Divergence in demand-side fundamentals • Policy acceptance of this as an inevitability

13. “By and large social housing tenants play no role in the housing market and in many cases have lived in areas for years as prices have risen around them. Similarly, many social landlords have been part of successful regeneration work that has produced rising property values. It seems harsh to penalise either for this.” (Smart, 2012)

14. Tying affordable housing to the locality • High price areas • Intense competition for land • RPs find it difficult to compete • Viability is high • But community vetoes a possibility • Low price areas • High housing need • Low competition for land but • Development viability low • Zero-grant development very difficult

15. Source: Monk & Burgess (2012)

16. Consequences for affordable housing • Less affordable housing provision as NAHP comes to an end in 2015 • New ‘Affordable Rent’ product • S106 losing its potency • Locally responsive RPs can’t develop • National/regional RPs use treasury accounting models to cross-subsidise development in high price areas • Lack of resources to de-risk development • End of major regeneration programmes (e.g. HMR)

17. Scalar mismatch

18. Prognosis • Fundamental scalar mismatch between • Housing market fundamentals, housing valuations • Supply framework • National drivers of demand, and local constraints on supply predominate • Until the local value of housing is part of the calculus, the outlook remains bleak.