Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence


Responding to Barker . . . the inverted logic for stimulating the housing market

  Ian Cole

  Professor of Housing Studies

  Director, Centre for Regional Economic and Social Research, Sheffield Hallam University

  The report by Kate Barker on future housing supply has become one of the most prominent and influential housing documents to be produced by the government in the past eight years. In essence, Barker argues that the current crisis of shortage and affordability in many housing markets in Britain stems from a lack of "responsiveness" in which supply has lagged ever further behind changing aspirations and demands. This "lag" is compounded by the constraints on land supply, which have forced prices up still further, especially in high demand areas. Barker therefore argues for a 40% increase in land release in order to ease such constraints, enabling housing supply to increase, demand bottlenecks to ease and prices to become more affordable. The reduction in house price volatility would stimulate further construction activity, as investment is drawn to a more stable market context. This would set in train a virtuous circle, so that the historical drag on market performance is replaced by a more responsive framework meeting rather than thwarting consumer needs and preferences.

  One fundamental problem with this analysis is that it tends to brush aside the intrinsic complexity of housing as an economic good. As any first year economics undergraduate knows, housing is "different" from other goods for several reasons; it is geographically fixed; it is a long-term asset; it is very expensive—requiring a complicated financial and legal machinery to assist consumption, though an array of mortgages, rents and public subsidies—and housing is a positional good, connoting social status as the more tangible physical attributes. What is seen as "desirable" in housing market cannot be reduced to a series of measurable components—the "externalities" weigh heavy.

  The essential problem with Barker is that this complexity is reduced to a simple, and simply misleading, equation; stimulate supply, and demand pressures will ease. This may be a golden rule for many goods and services; but housing is not one of them. The recommendations of the report are based on a lopsided leap of faith rather than hard empirical evidence. The British housing market, for example, is already marked by deep spatial inequalities, often illustrated by regional differences in house prices. While these have slowed somewhat in the past year as the housing market cycle moves into a different phase, it would be entirely misleading to view this in terms of "the North" catching up "the South": the disparities are still intense. The Barker recommendations, focused on easing supply constraints in high demand areas, would simply intensify these differences, with acute difficulties for labour mobility, the revival of vulnerable local markets and the capacity of the construction industry.

  What should be done instead? The government has partly answered that itself through its programme of housing market renewal, seeking to restructure those markets with problems of over-supply, low demand, and neighbourhood stigmatisation. The flaw in this approach is that it has neglected the complex interplay between housing and labour markets. It is perhaps nai­ve to imagine that the government will embrace a dirigiste policy of economic development, but a much more assertive stance could be taken, for example to the relocation of public sector jobs, firming up the rather tepid Lyons review of last year. In a report about to be published7, Professor Stephen Fothergill and colleagues have pointed out that much could be achieved through these means—not by sending civil servants from London and the south east to other high demand enclaves of the North (York, Harrogate, Leeds, Manchester) but to parts of Lancashire, West Cumbria and Teeside instead. A ban on relocating activities to towns and cities that do not demonstrate deprivation and labour market need is one way in which, it is suggested, this could be achieved. Placing an obligation on government departments to demonstrate that the business benefits of relocating to main regional cities significantly outweigh the merits and needs of other locations is another. Such measures would also stimulate local economies and even ensure that refurbishment of existing dwellings relied less on public subsidy and support and more on private investment from households with a significant level of resources. The essence of this approach is to focus efforts on reducing demand in London, the South East and other pressured housing markets, by addressing some of the root causes of uneven economic growth and regional disparities. Implicit in the Barker review, in contrast, is an acceptance and accommodation of these disparities and an agenda which will continue to drive people and resources down south. After all, what's to say that the anticipation of increased supply and lower house prices will not simply attract more people to London and the South East, thereby sustaining the current balance of supply and demand?

  Barker also operates of a limited and rather antiquated view of tenure. Entry to owner-occupation is the goal, apart from a rather disconnected reference to the need to increase social renting for households in need. But in the context of a residualised social rented sector and a relatively unregulated private rented sector offering no security of tenure and variable in quality and cost it is no wonder that alternatives to home ownership are viewed, at best, as inferior and short-term and, at worst, as a last resort. Even a most cursory look at the housing market in the past twenty years would show the intrinsic interconnectedness of different tenures, as a balance is sought between flexibility, affordability and desirability. Look at the right to buy, or mortgage rescue packages, or the growth of the buy-to-let sector—tenures adapt and change. There are arguments for social housing to be developed going beyond a narrow function of "meeting need" by adopting niche developments, imaginative design and playing a lead role in the creation of mixed communities. Instead there seems to be a trickle down model of the most basic kind at work—in which affordable home ownership eventually reaches those in temporary accommodation. In a country of pronounced inequalities in income and wealth there is little to deny that an increase in supply would not simply increase the number of second homes rather than ease problems for key workers in high demand areas.

  The planning system is simply set aside in the Barker prognosis beyond reference to English partnerships role in land assembly and reform of section 106. Yet if developers are to be encouraged to provide a greater proportion of affordable units in their new developments, this will come at a cost. In a sector not renowned for its risk taking and innovation, a warm (and hence expensive) security blanket of discounted land, hidden and overt subsidy may be needed to induce private developers to take part—that has been the experience in several "mixed" housing schemes across the country. Nye Bevan's maxim more than 50 years ago—that "the developer is not a plannable instrument"—has stood the test of time rather well. Instead, a revitalised and diverse social housing sector, and a well regulated and incentivised private rented sector might begin to dispel some of the deep-rooted received wisdom about different housing sectors—that renting is inherently inferior. There are signs that this is starting to change in some sub-markets ("loft living" scenarios). Barker simply attempts to turn the clock back to the not so golden 1980s when tenure polarisation stifled labour mobility, fed social division and in different ways "trapped" both poorer home owners and households on housing benefit.

  The environmental and social impacts of extending high density development in the most expensive and crowded part of the country needs to be examined—this is not necessarily "nimbyism"; there are often strong positive social and economic arguments for achieving a better balance between supply and demand across the country. An environmental impact assessment prior to all new development, for example, would help to ensure the ecological value of the land is not diminished and fiscal incentives could be introduced to encourage the uptake of sustainable homes (for example Stamp Duty relief, capital allowances to convert premises into sustainable homes, reduced VAT on supplies required to create sustainable homes)

  And what, at the end of it, about affordability? Barker concentrates solely on supply and the price mechanism. Yet,as she acknowledges herself (oddly enough), there is little evidence that increasing supply will per se reduce prices—much more depends on the macro-economic position, interest rate movements, the housing market cycle. In particular, demand side solutions—reform of the housing benefit system to make it more market responsive, the creation of new mortgage products, targeted subsidy for private landlords, the extension of subsidised home ownership schemes like Homebuy—are simply ignored. This may not have been considered part of Barker's brief; but to look at supply without considering demand is as ill-conceived as doing it the other way round. And to examine supplying more to over-heated housing markets at the expense of thinking through creative ways of reviving those with problems of over-supply may be similarly wrong-headed.


1  Securing the Future—UK Government sustainable development strategy. March 2005.

2  Sustainable Communities Plan "Sustainable Communities: Building for the future" February 2003.

3  Report of the Sustainable Building Task Group, May 2004.

4  "One million sustainable homes": Moving best practice from the fringes to the mainstream of UK housing, WWF, January 2004.

5  "One million sustainable homes": Moving best practice from the fringes to the mainstream of UK housing, WWF, January 2004.

6  Study into the environmental impacts of increasing the supply of housing in the UK. DEFRA, April 2004.

7  Fothergill, S, Gore, T and Powell, R (2005) Relocating Public Sector Jobs: The Case for Deprived Non-Traditional Locations, Centre for Regional Economic and Social Research, Sheffield.

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