Housing Policy under the Coalition: glancing back, looking forward

1. Housing Policy under the Coalition: glancing back, looking forward Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University

2. 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 CWAG Conference Leeds 28 September 2012

3. The challenge..... • So, what could be done...? • in 1954? CWAG Conference Leeds 28 September 2012

4. National housing policy in 1954 • maintained large scale council house building to meet targets (224k completed in1954 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 • move away (in 1956) from property-based subsidy to person-based subsidy: start of rebates CWAG Conference Leeds 28 September 2012

5. 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 • as in the replacement of the 'spiv' by the 'Jaguar owning council tenant'... CWAG Conference Leeds 28 September 2012

6. 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 CWAG Conference Leeds 28 September 2012

7. The participants CWAG Conference Leeds 28 September 2012

8. 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 • an oasis of communitarian suburbia! CWAG Conference Leeds 28 September 2012

9. The lessons of 1954? • you cannot rely on private sector to meet policy targets in poor 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 well as household income • the growth of home ownership presupposes a widespread belief in (and some evidence of) sustained economic growth across the income spectrum • those in the public sector risk demonisation, even when they do not receive subsidies from others • the best 'solutions' are locally created, not nationally mandated.... CWAG Conference Leeds 28 September 2012

10. The Key Challenge for the Housing Strategy WE NEED TO BUILD! • the market-based response: relieve planning restrictions through s106 revisions and presumption in favour of development • the mixed economy response: targeted public investment to promote 'leverage' • the state-based response: national emergencies require government action, if only for a limited time CWAG Conference Leeds 28 September 2012

11. Putting Housing Policies 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? CWAG Conference Leeds 28 September 2012

12. A market- based approach • remove s106 obligations on affordability and other planning restrictions • adopt mantle of 'fairness' to deal with latter day Jaguar owners • press ahead with dislodging poorer households from more affluent areas • turn 'welfare dependents' into choice-making consumers: landlords and tenants! • create a new cohort of home owners CWAG Conference Leeds 28 September 2012

13. but...... '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 CWAG Conference Leeds 28 September 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% and revenue up 18% • Redrow: increase in operating profit of 55%: revenue up by 6% • Galliford Try: increase in profit before tax of 80%: 17% increase in revenue • LGA: 400,000 planning permissions currently outstanding CWAG Conference Leeds 28 September 2012

15. A mixed economy approach ? • can target more effectively, but leverage assumptions often overblown (eg HMR) • will not address geographical imbalances, brinkmanship over planning constraints and risk aversion • but may risk insulating the development industry still further • infrastructure development must remain the domain of the public sector if it is not to be captured (Hildyard) • PAC report on £1.4billion RGF: only £60m so far to front-line projects: 2,442 jobs created; 2,762 protected • original RGF aim- to create 36,800 jobs CWAG Conference Leeds 28 September 2012

16. A state-led approach? • Read Mariana Mazzacuto's The Entrepreneurial State or.. • 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' CWAG Conference Leeds 28 September 2012

17. A few political obstacles to embracing the state ... • 150 years of history....and.... • how to deliver the 'age of aspiration' by reversing the potentially long-term decline in home ownership • Previous means of achieving this : • The ‘newly affluent society’ (60/70s)....but now we have the 'stretched middle' • The right to buy (80s/90s)...but limited impact of recent incentives • The deregulation of financial markets and acceptance of high level of consumer debt (90s/00s)....but caution over lending to marginal income groups will prevail CWAG Conference Leeds 28 September 2012

18. Second order challenges for the Housing Strategy mark 3 • How to keep housing associations ‘market responsive’ but not ‘market damaged’ • What to do with those lodged in the 'waiting room sector • How to grow an institutional PRS through REITs etc - in a hurry! • The future of student markets and 1 bed flats • The uncertain housing impacts of benefit reform - 'stickiness' of claimants • How to achieve substantive rather than just symbolic impacts through social housing reforms • Whether NewBuy will herald more creative alliances between supply, loan finance and unrealised demand CWAG Conference Leeds 28 September 2012

19. Hazards ahead? • Markets do not obey strategies: caution will prevail • Will developers deliver ? • Homelessness and overcrowding are lagged indicators of economic recession • Spatial segmentation will increase : inter- and intra -regionally • The geographical locus of private sector-led growth • Housing market sustainability ... in much of the North of England, Scotland and Wales. Can places be 'written off'? • Direct payments to tenants (and then UC) and response of providers • Risks to social cohesion ? CWAG Conference Leeds 28 September 2012

20. The limits of national housing strategies • Housing strategies have an indirect relationship with housing outcomes at best • Macro-economic forces, demographic changes and socio-cultural attitudes interact to exert a stronger influence. • In other words.... • 'Life is what happens to you when you're busy making other plans' CWAG Conference Leeds 28 September 2012

21. Is there an upside? Go local! • local innovation can achieve positive gains rather than centrally driven templates replete with unintended consequences • so over to you...ALMOs can be critical to new thinking about retaining core principles of a housing service.... despite everything • The creation of a mutual housing company from Rochdale Boroughwide Homes - an example of positive action, even if not a panacea or a template for others • Housing strategies have an indirect relationship with housing outcomes at best • ......and remember Urmston! CWAG Conference Leeds 28 September 2012

22. CWAG Conference Leeds 28 September 2012

23. Housing Policy under the Coalition: glancing back, looking forward Professor Ian Cole Centre for Regional Economic and Social Research Sheffield Hallam University