APPENDIX 1
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.
REFERENCES
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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