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Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications

Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications. Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University. Outline . The challenge for national housing policy

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Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications

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  1. Housing Supply, Demand and Affordability:An Overview of Current Trends and their Implications Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University

  2. Outline • The challenge for national housing policy • Different ways of tackling housing shortage • 'Affordability' 'need' and demand' • The changing profile of housing tenure • Housing demand and supply in the region • Implications for the Leeds city region WARD Networking Meeting Rawdon 24 November 2012

  3. The dilemma of housing policy WARD Networking Meeting Rawdon 24 November 2012

  4. Sounds familiar? • Two and a half years of a Conservative-led government following a period of Labour dominance • Housing shortages grow as building rates fail to keep pace with household formation rates • Difficulties in gaining access to mortgage finance • Increasing pressure on social housing • Hopes placed in revival of PRS • Market principles advocated when market at its most fragile WARD Networking Meeting Rawdon 24 November 2012

  5. The challenge..... • So, what could be done...? • in 1954? WARD Networking Meeting Rawdon 24 November 2012

  6. National housing policy in 1954 • govt. maintained large scale council house building to meet targets (224k completed in 1954 cf 90k private) • building programme geographically spread in GB • reduction in standard of materials, design and property diversity in LA sector to achieve quantity • relaxation of rent controls in the PRS designed to stimulate the sector • reintroduction of slum clearance • imminent move away (in 1956) from property-based to person-based subsidy: start of rebates WARD Networking Meeting Rawdon 24 November 2012

  7. The rationale for national policy in 1954 • a pragmatic, and time limited, embrace of the state as the only means of addressing a national emergency • but public housing would never attain the primacy of NHS or state education • always hedged with stigma: eg 'spiv' replaced by the 'Jaguar owning council tenant'... • and much relied on local innovation not national government dictat WARD Networking Meeting Rawdon 24 November 2012

  8. Local Innovation • 'hidden histories' not captured by national narrative • eg Urmston Housebuilders Association in Manchester • Self-build association of 28 households • 30 hours minimum a week commitment to build 2 schemes: 16 houses and 12 bungalows • Council provided cheap land, guaranteed 5 per cent fixed rate mortgages over 20 years (£2 per week) • £30 down payment as deposit • customised design of kitchens and bathrooms WARD Networking Meeting Rawdon 24 November 2012

  9. The outcome • price of new houses: £1,300 for 3 br semi-detached properties • average price of new houses in England in 1954 (Q1) was £2,100 • priority determined not by a points scheme...but by drawing lots • strong community ethos prevailed • the Big Society in action -before it was invented? • but not everyone was happy about it.... CWAG Conference Leeds 28 September 2012

  10. WARD Networking Meeting Rawdon 24 November 2012

  11. The lessons of 1954? • you cannot rely on private sector to meet policy targets in difficult market conditions • the planned revival of the PRS may bring with it unanticipated outcomes • affordability is a question of land values and development costs as much as household income and subsidy • the growth of home ownership requires sustained economic growth across the income spectrum • the best 'solutions' are locally created, not nationally mandated.... WARD Networking Meeting Rawdon 24 November 2012

  12. and now? WE NEED TO BUILD! but how...? • the market-based response: relieve planning restrictions through s106 revisions and presumption in favour of development • the mixed economy response: target public investment to promote 'leverage' with private sector in the lead • the state-based response: national emergencies require firm government action, if only for a limited time WARD Networking Meeting Rawdon 24 November 2012

  13. A market- based approach • remove or reduce planning restrictions • give developers far more options for sites • encourage larger sites • but how does this fit with targets....? 'If we are to plan we must have plannable instruments and the speculative builder, by his very nature , is not a plannable instrument' Aneurin Bevan 1947 • and how much encouragement do developers need? WARD Networking Meeting Rawdon 24 November 2012

  14. Recession? What Recession? • Barratts: profit increase of 159%: from £42.7m (2011) to £191.1m (2012) Revenue up 14.1 % and margins increased from 6.6 to 8.2% • Cala Group: increase in operating profit of 96% (2012) and revenue up 18% • Redrow: increase in operating profit of 55% (2012) and revenue up by 6% • Galliford Try: increase in profit before tax of 80% (2012) and revenue up by 17% • LGA: 400,000 planning permissions currently outstanding in E and Wales WARD Networking Meeting Rawdon 24 November 2012

  15. A mixed economy approach ? • public sector role can target development more effectively, but 'leverage' assumptions are often overblown • will struggle to address geographical imbalances, brinkmanship over planning constraints and in-bred risk aversion • may insulate the development industry still further without gain in output • should infrastructure development remain the primary domain of the public sector, and not a site for profitability? (Hildyard and Heseltine) WARD Networking Meeting Rawdon 24 November 2012

  16. A state-led approach? • Tullet Prebon: Building a Road to Recovery? August 2012 • State can invest in housebuilding without sucking in imports. In the long-term, it will be self-financing (increase growth and revenue and reduce HB) • 'We would stress that this investment should be undertaken by local authorities or housing associations, not through public-private gimmicks like PFI' • 'The government and social sectors should act as owners and commissioners of new housing'. • 'A national housebuilding programme should be a national economic imperative, not thwarted by sectoral self-interest or ideology' WARD Networking Meeting Rawdon 24 November 2012

  17. Putting Policies to Boost Housing Supply to the Test Questions • are developers straining at the leash to build? • is land supply the problem ? • where are the 'new' home owners? • can leverage fill the 'production gap'? • is there any public, let alone government, support for a stronger state role? • ....and can it be afforded anyway? what spending is sacrificed elsewhere? • what evidence is there of a shortage anyway? • how much new housing needs to be 'affordable' • and what does that mean anyway? WARD Networking Meeting Rawdon 24 November 2012

  18. But who will build? • spec developers are quick to take fright • build for rent vehicles will be concerned about churn and limited security of tenure • housing associations may find it difficult to borrow when full welfare reform measures are implemented • and councils now have the freedom to build - but symbolic rather than substantial in most areas WARD Networking Meeting Rawdon 24 November 2012

  19. Demand, Need and Affordability • need to focus on 'effective' demand • risk aversion to lending will be very slow to clear • housing 'need' - now a redundant term? • be wary of any household projections!: patterns are culturally and financially shaped, as well as statistically determined • defining 'affordability' and 'affordable housing': not clear-cut • Affordable Housing Programme 80% of market rent - arbitrary but convenient ? • implications for HB spending? WARD Networking Meeting Rawdon 24 November 2012

  20. What about tenure location and type? • home ownership - the end of the affair? • blurring of private and social (HA) distinction in renting • sharper contrast between market and welfare sectors in PRS • opportunities in the PRS left vacant by students • assumed growth of REITs may be over optimistic • pressure on HMOs and hostels • increased 'sifting' in residential markets WARD Networking Meeting Rawdon 24 November 2012

  21. Moving to a more European model ? • beginnings of a corporate rented sector? • later entry into home ownership • wider acceptance of shared ownership • flexible tenure • better integrated HA sector: rationalisation is overdue • residue of public welfare housing for transient and displaced groups • ....but what about the Y and H region? WARD Networking Meeting Rawdon 24 November 2012

  22. Regional Public Enquiry 2009 • housing market will not return to pre-recession state until 2013...14 ...or 15? Barriers to growth • lack of finance for development and s106 constraints • need a new model not dependent on ever increasing land values (HBF) • lack of finance for purchasers: over-reaction by lenders • land...? (no consensus) Where to build? • Selby district as prime location for 'deflected growth' ? • Keep away from the 'golden triangle' WARD Networking Meeting Rawdon 24 November 2012

  23. The Leeds sub-region • At 2009 Public Enquiry • argument over housing supply in Leeds city • CC said developable land not in short supply • developers: being forced to use unattractive parcels of land...'quality homes in quality sites will always sell' • and now • scramble for growth (when it comes) and Leeds has high commuting in-flows at present • city centre apartment market will not expand • regeneration of more deprived areas unlikely for medium term • welcome to north east Leeds and the A65 corridor as favoured sites ! WARD Networking Meeting Rawdon 24 November 2012

  24. Some Questions and Issues • What does 'muscular localism' really mean? • Will new residential development ruin integrity/identity of places? • Is there lower grade 'green' elsewhere that might attract developers? • Will mixed communities be close to mixed employment opportunities? • Can the transport and other infrastructure sustain it? • One thing's certain.... WARD Networking Meeting Rawdon 24 November 2012

  25. self-build housing will not be enough to save the day... WARD Networking Meeting Rawdon 24 November 2012

  26. Housing Supply, Demand and Affordability:An Overview of Current Trends and their Implications Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University

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