New housing and land policies, and next practice for the Big Society

1. New housing and land policies,and next practicefor the Big Society Joining it all up: Co-producing a plausible policy story Professional Land Reform Group, London November 2010 Stephen Hill, Director, C2O futureplanners

2. …and they all lived happily together ever after. Please, Mister, tell me that Big Society story …again!

3. The Big Picture Story… The Big Society and Open Source Planning “Too much has been imposed from above, when experience shows that success depends on communities themselves having the power and taking the responsibility. It’s no good officials in Whitehall or even the Town Hall telling people what is needed in their street.” …. everyone has a stake based on equal rights and where they pay their dues by exercising responsibility in return, and where local communities shape their own futures.

4. Letter to the Editor Prescott’s ‘growth areas’ pull plans for thousands of homesBuilding Magazine 6/08/10 “Dear Sir, The ‘big society’ is working well, then.Up and down the land, local communities have overwhelmingly agreed they don’t want any new neighbours. Yours etc” (Disgusted of Tunbridge Wells? ) MP for Tunbridge Wells

5. “It’s a very miserable view of human nature, that people who are not told what to do, default to something that is short term, individually selfish, and unenlightened.”Greg Clark, Minister for Planning and Decentralisation, Guardian Interview 15/9/10 600 home scheme in Tunbridge Wells turned down to protect the dormice

6. Housing Policy for a Big SocietyWe need a shared visionof what housing is for in the life and economy of the country …but what housing policy?

7. Differentquestions • Osborne etc“How to manage the queue?” • Beveridge“Why is there a queue?”

8. “What would an intelligent housing market look like?” • “We need a market that’s boring”.  • “Where things are really quite predictable.”

9. More Wise words from the Housing Minister • “We’ve all forgotten what our housing market is actually for… to provide a home.” • “Buying a home shouldn’t be like playing the lottery.” • “Of course, market conditions don’t exactly match this picture at the moment”. • “The economic legacy has made things very difficult for you, and will do for sometime”.

10. A PrincipledHousing Policy Sufficient support for… • 1. Plausibility: The price of a modern home and sufficient space will be within the means of a family/household with an average income. • 2. Neutrality: There should be similarity of pricing between equivalent homes in different forms of tenure

11. 3. Social: The position of disadvantaged groups in the housing market will be strengthened. • 4. Standards: Housing consumption for all should be supported upto a certain standard. Consumption beyond the standard not to be supported through public action and funds.

12. 5. Parity: Differences of price between homes of different ages and condition will correspond with differences in their utility value. • 6. Speculation: Explicit action is needed to counteract the inflationary transfer of wealth to property owners. Courtesy Prof. Peter Ambrose

13. Land Development Study 1980-88From Prof. Peter Ambrose “Urban Process and Power” (Routledge 1994) M-Way Corridor A v. M-Way Corridor B • Output No. Homes per 1000 people: 7.3 v. 6.1 • Affordable Homes: 65% v.15% • Choice of tenure/production: 5 v. 238% LA rent- 27%Coop- 43% Owned [50% self-build] - 2% market rent. Variations reflect local political preferences85% Owned [0% self-build] 15% social rentTenure determined by central government policyAffordable dropped to 6% just after study period • Professional/managerial in ‘social’:49%v.<2%

14. E4 Corridor Stockholm-Uppsalav. M4 Corridor Berkshire • Building cost increase: 24% v. 47%Extended period of capitalisation & innovationin construction efficiency and productivity • Land price increase: <5% v. 436% • Land as % house price: +/-10% v. 60% • Market impacts on supply post-’88: +/-0% v.-60% • Land differential/hectare: E4 = M4 £301k/ha v. £1,222k/ha 4

15. The costs of complying with public policy and regulation ie. the essential basic requirements of Spatial Planning, to create sustainable places and communities: Dwelling size and quality Affordability of all housing Climate Change Adaptation and Resilience Hard, Soft and Green Infrastructure should be internalised and reflected in land price and valuation… But aren’t! Why Land Price istheissue

16. “Must do better” Tim Leunig, Dept. Economic History, LSE Full marks to: • Mr. Shapps:“Britain would be a better place if house prices did not rise in nominal terms during this parliament.”Centre Forum at the Liberal Democrat conference • Neil O’Brien, Policy Exchange:“Britain needs to build more houses, so that house prices fall.”Financial Times • ‘Rumour reaches me that some of his board choked on their claret when they read his piece, but he was right … lower house prices would be good for Britain, and they would lead to lower housing benefit bills.’

17. The Housing Business Case • Homes >30% smaller than Parker Morris • Costs of primary health care, mental health, policing, education lower in areas of better quality housing • Factor difference 5-7 times • Even if 50% wrong= big number Recognised in RICS, BRE, CABE, IDEA, and HCA guides and tools

18. The Macro-Economic Case • By updating 1980 House Purchase Debt for consumer price inflation to 2005, debt was £600bnmore than one would expect. • ‘Affordability’ became meaningless with House Price Income ratios at upto 8:1 (by 2007) House prices, consumer prices & earnings 1980-2005 from Ambrose’s Memorandum to the PMon Unaffordable Housing 2005

19. The Social Case • Inequality is bad for you… • …and countries

20. The economic causes and effectsof social inequality • Between 1963 to 2003, there is a very close correlation between increasing debt and increasing inequality in the US. The longer-term increases in debt can only be explained by the rise in inequality. Economist Matteo Iacoviello • Both short-term household debt as % of household assets, and government national debt as % of GDP are higher in more unequal countries.Organisation for Economic Co-operation and Development, • The crashes of both 1929 and 2008 happened at the two peaks of inequality in the past hundred years, after long periods of rising inequality which had led to rapid increases in debt.

21. The economic causes and effects of social inequality • Leading upto the 2008 crash, about $1.5trn per year was being siphoned from the bottom 90% of the US population to the top 10%. • Both for speculators and householders, rising property prices made investment in property look like a bandwagon everyone had to get on, entering the housing market wherever they could and remortgaging precariously as prices rose. • As a result, the richest people had more and more money to invest and to lend, but people outside the very wealthiest category found it increasingly difficult to maintain relative incomes or realise life aspirations • The financial sector handling and speculating on these debts found its share of all US corporate profits rising from 15% in 1980 to 40% in 2003.

22. Blame it on the bankers? • “Bankers worse than the IRA”Irish Daily Mail 29/10/10 • “…the extensive and visible larceny of the commercial banks.”JK Galbraith The Culture of Contentment1992

23. Difficult questions If the structure of existing land and housing markets embeds social and economic inequality in the economy: • Is ring fencing the NHS budget, a plausible policy proposition? • What would the Office of Budgetary Responsibility have to say about it?

24. Which politician said what? • "I do believe this country is too unequal and the gap between rich and poor doesn't just harm the poor, it harms us all . . ." • The book shows "that among the richest countries, it's the more unequal ones that do worse according to almost every quality-of-life indicator".

25. 2005…Didn’t anyone see it coming? On reading Ambrose’s Memorandum on Unaffordable Housing • “We are now making real progress to delivering our goal: that everyone should have the opportunity of a decent home at a price they can afford.”T. Blair PM • “Using this definition (of Unaffordability) would undermine everything we are trying to do. The difference is merely semantic.”Dr. Phyllis Starkey, Chair ODPM Select Committee Inquiry into Affordability • “It (the expansion of house price debt) is not a problem, as long as the market is working.”Treasury Official

26. 2005 – A good year for clear thinking • “There is some sense in seeking to understand the causes and consequences of house price bubbles before, rather than after, they have unwound. • Any major correction is likely to focus attention on:- the tightening of lending requirements, - the strengthening of financial surveillance, - the causes and consequences of household debt, - the creation of a richer set of mortgage contracts, and - the extent and desirability of implicit, and even explicit, guarantees of mortgage debt. • Many of these require a great deal of coordination across diverse economies…The problem is that such difficult thinking does not appeal, especially to politicians, in the good times of house price bubbles.” Andrew Farlow, Dept of Economics, Oxford University ‘UK house prices, consumption and GDP, in a global context’ (OUP 2005)

27. The case for reducing debt • Financial sector: £3.4trn 245% GDP • Non-financial companies: £1.7trn 122% GDP • Households: £1.5trn 110% GDP • General government: £0.9trn 67% GDP • Total UK debt 2009: £7.5trn 543% GDP PwC State of the Economy November 2010

28. Some heavier weight views • “Annual house price increases are equivalent to a government current account deficit of 4.4% of GDP, or £50bn a year.” Dr.Martin Weale, Director, National Institute of Economic and Social Research [Now member of Bank of England Monetary Policy Committee] 2007 • "There is a time bomb effect from the huge amount of debt built up across all sectors of the economy. Sooner or later, this will have to be addressed either through debt being run down sharply, which would risk triggering another recession, or… through a persistently heavy debt service burden that could dampen economic growth for decades to come. • Either way, deleveraging…goes well beyond the immediate challenge of getting the public finances under control.“John Hawksworth, PwC Chief Economist 2010

29. The need forCreative Destruction? • Property debt and land price are central to regular 18 year cycles of ‘boom and bust’, since 1800. • How can we avoid this happening again? • Wrong question: Sorry, Gordon and George… We can’t. • Public debt is a second order problem. • Restructuring property debt and land markets as long term equity investment is the main task • How can we adapt to the new era? • Right question:Eric, Greg, Grant & Co…We must. The Debt Busters!

30. Changing land and housing markets RICS Land Journal Jan 2009 • “It is probably no longer safe to presume that planning permissions create an automatic and significant bankable uplift in land value for the owner. • S106 and tariffs not fit for purpose in global capital markets” Savills Research Sept 2010 • Future market uncertainty heavily factored into valuations. • Two-speed land market…oven ready sites and strategic land • Servicing the pension provision of an ageing population will require a shift to cash-flow investment… in purpose-built residential property. • … and infrastructure and commissioned housing “For the first time in my career, people are offering me land for nothing.”

31. P r o p e r t y M a r k e t A n a l y s i s The next long cycle eraAll-property real capital values • Shift to domestic realm • Low carbon economy • Reregulation • Return to equity • City centre revival • Internet services • Globalization • Leveraging & derivatives • Out-of-town development • Service economy • Deregulation • Equity investment • City centre reconstruction • Consumer goods industries • Demand management • Mortgage finance Limits to growth?

32. Grant is right… • It’s boring… • It’s predictable… • and it’s taxable!

33. The Minister’s Story…“We will become a nation of homebuilders” • A rural housing revolution… Local Housing Trusts will give people the power to expand their villages up to 10% over 10 years.- Accommodation for the old - Affordable homes for the young - Shops, schools, GP surgeries • People at last really shapingtheir own communities • Power to bypass planning committees • But I don’t want the principles of Local Housing Trusts just to be a countryside thing. Our towns and inner-cities must benefit too.

34. “We’ve been through the highs and lows together”Charlie Hibbert, CLT Member “I am really impressed by the foresight and tenacity of local people in driving this scheme forward. Seeing these houses here, built to high standards by the owners, with the support of professionals is most impressive.”  Grant Shapps, Shadow Minister 2008

35. The model for Community Right to BuildCornwall CLT Programme 2007 17 villages – 120+ homes Unique partnerships… enabling district councils, their communities, Carnegie UK Trust, and an RSL Definitely not normal… Blisland CLT on Bodmin Moor

36. St. Minver CLT Average house price £650,000 Market value £350,000 Cost including land £120,000 12 houses 12 months On time – On budget Definitely not normal… A social movement ? Or just PPS 3 compliance for affordability ‘in perpetuity’ ?

37. A coherent political story? • “The goal of improving social mobility overlaps with other objectives for social policy, such as reducing poverty or narrowing income inequality.”Clegg: August 2010 Centre Forum • “I want to deliver equality of opportunity (rather than equality of outcome) and that the Coalition’s reforms in education, welfare and health – as well as the reduction of the deficit – are part of my hope that a child born today would enjoy a better chance to succeed in life than a child born during the Brown-Blair era.”Osborne: Today Programme interview August 2010

38. The wise words of Clegg? • "Old progressives are obsessed with marginal tax rates… rather than [look] at the overall system…and allow symbolism to trump real reform. • New progressives want to reform the tax base fundamentally, towards taxation of unearned wealth and pollution, rather than people.“ Hugo Young Lecture 23/11/10

39. The answer for our times? • The strength of the economy and the welfare of all citizens depends on stable and fair land markets. • Inequitable wealth creation though inflation of land values and speculation in land prices undermines basic freedoms. • “The best way to make private property secure and respected is to bring the processes by which it is gained into harmony with the general interests of the public.”Churchill in The People’s Land’ 1909

40. ObjectsTo maintain and promote the usefulness of the profession for the public advantage in the United Kingdom and in any other part of the world…securing the optimal use of land and its associated resources to meet social and economic needs RICS Royal Charter 1881

41. LAND… But what’s the Question? Well, I think the answer lies in the soil…

42. The 21st Century Challenge • Capturing value uplift is a 20th Century answer to a far sighted 19th Century question • The 21st Century currency of land value has to be…

43. But we can’t…

44. futureplanners Our principles of public interest practice: • Share a commitment to help create sustainable and democratic places • Come from the traditional professional institutions and none • Believe in value driven work for sustainable development • Promote ourselves to work with value driven clients, and • Share learning and innovation with others stephenhill@futureplanners.net