An attack on mixed income communities

The Government has announced an attack on mixed income communities.

The previous coalition government certainly showed no interest in the idea of building or maintaining mixed income communities. This logic is now being pushed further and we are witnessing an all out assault.

The Government will:

  • Force local authorities to sell council housing in richer areas
  • Continue to squeeze the local housing allowance
  • Cap the total amount of benefits a household can receive at £23,000 pa

The combined impact of these policies will be that deprivation will be more concentrated in certain areas and there will be fewer mixed income communities.

This all comes at a time when academics in America are finding more and more evidence that growing up in mixed income communities is good for children in low income households.

Of course, under New Labour there were legitimate criticisms that the rhetoric of ‘mixed communities’ was far more often used to justify destroying social housing than to help poorer people to live in richer areas.

What Lawrence Katz and others are looking at is slightly different. They found that children in poor households who grow up in richer areas do better in a number of ways than children in poor households who grow up in poor areas.

every extra year of childhood spent in a low-poverty environment appears to be beneficial

This is true for different races and genders. Similarly, they found that children who moved to poorer areas, did less well as adults than those who stayed in richer areas.

This is not to say that poverty is inevitable. However, it does appear that it’s better to be poor in a mixed income neighbourhood than to be poor in a poor neighbourhood.

Housing and neighbourhood policy should aim to be part of eradicating poverty. While poverty is still a feature of our country, housing and neighbourhood policy should aim to make sure that as many poor children as possible can grow up in richer areas. The Government is failing to do this. What’s the phrase for the opposite of evidence based policy?

Are there slums in the UK?

Do slums exist in the UK? It’s more complicated than that.

Peter Marcuse’s blog has a ‘critical discussion’ on the nature and role of slums. This lead me to ask whether there are slums in the UK, or, more specifically, whether housing in poorer parts or areas of the UK is of substantially worse quality that in richer parts.

image (7)

Many people’s initial reaction to this would be to say of course housing in poorer areas is of a worse quality than in richer areas.

It’s certainly true that, as this chart shows, the poorer the area the more likely it is that housing will have damp.

image (8)

However, if we look at a different wider measure of housing quality (the decent homes standard), the picture is more complex.

There are a similar percentage of homes that don’t meet the decent homes standard in the poorest areas of the UK as there are in areas of average wealth.

image (9)

The picture gets still more complex if we look at a different way of dividing areas, not by wealth but by whether they are urban or rural.

This chart shows us that homes in rural areas are far more likely to fail the decent homes standard than homes in city centers which are in turn more likely to fail the decent homes standard than homes in suburbs.

image (10)

Part of the explanation for this complex picture is that social housing in the UK is often kept to a good standard, while lots of private rented housing is not kept up to standard.

What to conclude from this? Perhaps the idea of area based housing initiatives in the UK is wrong headed, and a strategy to improve the quality of housing in the UK should focus on giving individual homeowners, landlords and tenants, the right support and incentives to bring all homes in the UK up to a decent standard.

Where should homeless people live?

While the number of people who experience homelessness has been rising, the number of bed spaces in homeless hostels has been declining.

  • In 2010 there were 43,600 bed spaces in homelessness accommodation services. Today, this stands at 36,540.
  • In 2010 there were 1,768 people sleeping rough in England (using the government’s measure). In 2014 there were 2,744.
  • In 2010 Local Authorities accepted 42,390 household as homeless, in 2014 they accepted 53,250 as homeless.

Many homeless hostels were funded by through a government scheme called “supporting people”. This money is no longer ringfenced meaning councils can use the money for other things. Given the overall cuts in funding for councils, this is exactly what many have done.

The effect is that many single homeless people end up living in private hostels. While the anonymity of “dosshouses” can be attractive, it is a highly insecure way to live and not one that aids many people’s recovery.

Is this the future? More people being made homeless and fewer specialist services to support them. Sadly, a combination of austerity and so-called localism points that way.

The so-called ‘Housing first‘ model offers a glimpse of a different future. The model essentially works by giving homeless people a flat (i.e. paying their deposit and rent) and linking them with a worker who sees them for hours a day, helping them in whatever way is best.

Using this method Utah has seen a 72% reduction in the number of homeless people.

A bold Labour candidate for the Mayor of London could announce a pan-London Housing First scheme and end homelessness in the capital within 8 years.

Where is it better to live, UK or USA?

“England [sic] is just a small island. Its roads and houses are small.” – Mitt Romney

When it comes to housing, which country is best, the UK or the USA?

Here is a completely scientific and in no way impressionistic answer.

1. The number of people who own their own home is on the decline in both the USA and the UK

image (1)

Verdict: Draw

2. Far more Americans than Brits sleep rough

image

Verdict: UK wins

3. Partly because there is so much more public housing in the UK than the USA

image (2)

Verdict: UK wins (showing my bias)

4. Compared to average wages, houses in the UK aren’t anymore expensive than in the USA (on average)

image (3)

Verdict: Draw

5. But American homes are a lot larger than homes in the UK (Romney was right about something)

image (4)

Verdict: USA wins

Final score: UK wins 2:1. 

The benefits of housing benefit

I feel the same way about housing benefit that Millwall fans feel about their football club, no one likes it and I don’t care.

On the left wing of politics housing benefit is called “‘taxpayers’ subsidies to landlords” while the right talk about how spending on housing benefit is ‘out of control‘.

Despite arguments by some, the fact is that housing benefit is here to stay. Because;

  • It stops people who lose their jobs from being evicted
  • It pays for the rent of people who rely on state pension or disability benefits for income
  • It funds a big chunk of the cost of building new social housing (because housing associations or councils borrow for part of the cost of this housing against future rents, which partly come from housing benefit)

Perhaps most importantly, the reason house benefit is hear to stay is because it accounts for a significant proportion of the income of poorer households.

This chart shows the percentage of poorer people’s income that comes from housing benefit;

Screen Shot 2014-01-30 at 8.09.51 PM

You might say that housing benefit isn’t really income because it goes to the landlord. This doesn’t really make any sense. It’s like saying my wage isn’t really income because it pays for my mortgage. People are getting something for this money.

None of this is to say that the current housing benefit system is perfect. Far from it. Just look at this chart which shows how much, on average, poorer people pay on rent even after housing benefit is taken into account;

Screen Shot 2014-01-30 at 8.15.11 PM

‘Net rent’ (ie rent costs on top of the amount paid for by housing benefit) still accounts for over 10% of the incomes of poorer people.

There are a number of problems with the current housing benefit system, including;

1. Low take up

In 2009 to 2010, the number of people that were entitled to but not claiming Housing Benefit was between 0.75 million and 1.14 million. The total amount of Housing Benefit unclaimed was between £1.85 billion and £3.10 billion.

2. Stigma

In a recent survey, 4 out of 5 landlords said they would not accept tenants who receive housing benefit. This gives even more power to landlords who do have tenants on housing benefit, because they know their tenants are not going to be able to easily shop around.

3. Paid in arrears

Like most benefits, housing benefit is paid in arrears. This can cause problems for tenants, especially if there are any delays or complications, if they can’t afford a deposit or if any other of the number of things that can go wrong with administration of a complex benefit go wrong.

These problems with housing benefit are not being addressed in contemporary political debate because housing benefit is so unloved. Perhaps it’s time to change that, for example by proposing a ‘basic income‘ for all citizens.

Kirby’s cunning plan

Paul Kirby, former head of the No 10 policy unit claims to have come up with a simple idea to solve the housing crisis

http://paulkirby.net/2013/12/31/a-simple-idea-to-sort-out-the-housing-market-and-make-the-economy-boom-for-the-next-5-years/

In essence he says we should start building social housing with a grant of £50,000 per unit. HMT would recoup this outlaw by insisting that any social housing that becomes vacant is sold on the open market. Kirby estimates that each unit will go for £120,000 per unit.

It sounds like a win-win with more housing being built and more money for the government to build garden cities and other goodies.

From another way of looking at it, this is a deficit financed growth strategy.

Kirby is probably right to say that you can build a new social housing unit for £50,000 per unit. The reason that this is possible is because the housing association or council that build the unit borrow the rest of the money, on the basis that they will pay back the loan from rents.

Council housing debt is certainly a form of government debt. Housing association debt is probably a form of government debt, since, ultimately, the government would stand behind housing associations if they were threatened with insolvency.

(It is also worth noting that much of the money for the rents will be paid for through housing benefit.)

This is the first way that Kirby’s plan is financed through deficit spending. The second way is contained in the idea that you would ‘build the new houses quicker than the old ones are sold off’. Kirby explicitly says that this means a Treasury ‘guarantee’ of £240 billion. ‘Guarantee’ here in effect means spending money that the government does not currently have but will have in the future. This is another way of saying deficit financing.

Perhaps there is nothing wrong with housing associations, councils and central government borrowing money now to build housing given that interest rates are low and there is lots of slack in the construction industry.
However, this form of deficit financed growth strategy is precisely the approach that the coalition government has rejected.

There’s room for everyone but will everyone benefit?

There are more and more people living in inner London. Some residents are benefiting more than others from this trend. The principle question this raises for public policy is how to ensure that any new wealth that is created is shared more equally.

You might be surprised to hear that the population of inner London is increasing. Surely the poor and those on middle incomes are being priced out by foreign billionaires! Some articles on this topic remind me of the old joke about New York, no one drives, there are too many cars.

Robbie de Santos‘s piece for Changing London is too nuanced to fall into this trap. In it he argues that, in rapidly gentrifying areas, more should be done to provide housing that households on £30-45,000 per year can afford.

Dave Hill at the Guardian has already pointed out that it might be controversial to argue for increasing spending on shared ownership housing when the amount being spent on social housing has been cut so dramatically.

In addition to this we need to remember that the population of inner London is increasing. As a result there are now actually more people on middle incomes living in inner London than previously.

This chart (all data from the 2001 and 2011 census) shows the significant increase in the number of people in ‘intermediate occupations’ living in a few inner London boroughs.

chart7

 

Here is a similar chart for people in ‘higher managerial’ jobs;

chart6Here is a similar chart for people in ‘routine’ jobs

chart8

 

This is what the overall picture looks like.

chart9

 

Although some people on middle incomes may be being priced out of inner London, overall the number of people on middle incomes living in inner London is increasing, as is the number of people on high incomes, and on low incomes.

How is the increased population of inner London being housed? Robbie will be glad to see that there has been an increase in the numbers living in shared ownership, although this still accounts for a very small number of people.

chart2 (3)

 

There has certainly not been a general increase in the number of people who own their own home (although those that do have, on paper, in general made a lot of money).

chart1 (10)

 

And there has been a noticeable and much commented upon decrease in the number of people who rent from housing associations or local authorities.

chart3 (1)

 

Most importantly, there has been a dramatic increase in the number of people who rent privately (lots of these will be houses that have been split into flats).

chart4 (1)

 

This chart puts the rise in private renting into perspective.

chart5 (2)

 

The story then is not so much that people on middle incomes are being prices out of the inner London boroughs (although some may be and more may be being priced out of certain neighbourhoods within these boroughs).

In fact, there are more people on middle incomes living in the inner London boroughs but they are more likely to being renting privately than people on similar incomes would have been a decade ago. This means that rising house prices do not benefit them and in fact probably harm them, since their rents go up.

Robbie’s argument is not only that people on middle incomes are increasingly being priced out, but also that this has a negative impact on community life and the diversity of businesses in an area. This is an interesting argument. I am not sure that the splits between tenures by itself, can guarantee much about community life, which is as much a result of interaction and institutions as it is a result of population composition.

However, if we look that the situation in terms of how the new wealth that has been created by the increased population can be shared more fairly perhaps we get different answers (some earlier thoughts from me on a related topic can be found here). For example, we might start thinking about how newly built houses can be part of community land trusts, so that increased housing wealth is invested in the community and does not just go into the hands of the owners. Similarly, there may be a case for more flexible local property taxes and co-operative ownership of local businesses.

Who knows how long the current increase in population in inner London will last. As long as it does the key questions are how we can build enough houses so that rents do not force people into poverty and overcrowding and how we can spread the newly created wealth so that everyone, not just home owners, benefit.

 

Gentrification is not for everyone

Something, like nothing, happens anywhere, Larkin once wrote.

He wasn’t writing about gentrification but perhaps the sentiment applies.

Many writers are tempted to suggest that examples of gentrification and displacement in certain London neighbourhoods tells us a lot about what is happening throughout London.

For a classic example of this genre see this recent piece in the NewStateman.

A recent piece in The Atlantic makes quite a different argument, claiming that in 22 of the 55 biggest cities in America, including San Diego, Charlotte, Buffalo, Pittsburgh and Detroit, gentrification affected 5 or less percent of all neighbourhoods.

What’s the situation in London? How widespread is gentrification?

Here is a map of London in 2011. Neighbourhoods that are dark red have a higher percentage of residents that work in routine or semi-routine occupations (all data from the census).

routine2011

Here is a map of London in 2001.

2001routine

The picture is pretty clear. In large parts of East and West London and parts of North and South London there are lots of neighbourhoods where a large number of people work in routine or semi-routine jobs.

However, in inner London, near the Thames and to the West, there are neighbourhoods in which there are very few residents who work in routine jobs.

In contrast, here is a map of London in 2011. The neighbourhoods that are coloured darker blue are home to a higher percentage of residents that work in senior management positions.

managers2011

Here is a map of London in 2001.

2001managers

Again, the picture is pretty clear.  In Inner West London and bit of suburbs in the North and South there are neighbourhoods in which there are quite a high percentage of residents who work as senior managers. In large parts of East and West London there are numerous neighbourhoods in which very few residents work in senior management positions.

In both cases, what is striking is not an image of constant change but of continuity.

So what? It’s probably no surprise to anyone that Barking and Dagenham has lots of residents that work in routine jobs and Kensington & Chelsea has lots of senior managers.

A few observations follow;

  • Even if you believe that attracting new rich residents to your neighbourhood is the best way of regenerating it, ultimately this strategy cannot work for most neighbourhoods in London because there simply aren’t enough rich people to go round.
  • Gentrification is a curious mixture of the global and the local. International developments such as the march of the knowledge economy interact with specific neighbourhood traits such as transport infrastructure. This probably means that well resourced Local Authorities are best positioned to be the principle public agency that manages the process of gentrification (not national or city government) and to ensure that any wealth created can be shared equally.
  • Perhaps most importantly, we need strategies of neighbourhood improvement and community development that rely on building on the strengths in working class neighbourhoods since these will always be a large part of London life.

What’s wrong with rising house prices?

The government’s ‘Help to Buy’ scheme could raise house prices by 20% in the next couple of years, according to a report by Fathom Consultancy.

This is not being heralded as good news by everyone (although The Express has followed its time honoured tradition of solely reporting on speculation about house prices with a very positive story)

But why would it be a bad thing for house prices to go up? We don’t worry so much when share prices go up, why are house prices any different?

Three of the most important reasons for concern about booming house prices are;

  • It could be a bubble followed by a housing crash leaving people in ‘negative equity’

  • Rising house prices can make it harder for first time buyers to afford to buy (especially if they do not have help from the bank of mum and dad)

  • Less commented on, but still important, richer people might benefit disproportionately from rising house prices since they own more property wealth than the rest of us

So, as Lenin famously once said, what is to be done?

There is a healthy debate in think-tank land about so-called ‘de-coupling’, the idea that as the economy grows middle and low income people do not benefit because their wages do not keep up. This has lead to proposals such as living wage zones and representation of low paid workers on remuneration committees.

Perhaps we need a similar debate around how we can ensure that everyone benefits from rising house prices.

This could involve ways of re-distributing housing wealth including;

A land value tax

– A ‘mansion tax

– Or even more technical reforms of how we tax land and property which can be found in the Mirrelees Review

The money that these measures raise could then in turn be used to benefit those who do not have the good fortune of owning expensive properties that have gone up in value.

This could happen, for example, through;

– Funding a programme of housing associations or council built starter homes

– Funding part of the state pension as it becomes increasingly contributory

– Paying for part of a new universal adult social care system

Of course, as with so many questions of public policy, there is a possibility that any attempt to both take the heat out of the housing market and distribute gains more fairly, could be self defeating if they dampen the market too much.

However, this does not take away from the principle, that, currently, wealthy people disproportionately benefit from rising house prices and that we need to think about how we create a system in which more and more people, especially those on low and middle incomes, can benefit.

Housing wealth

There has been lots of discussion recently about how much more the ‘1%’ earn than everyone else. There has been less attention paid to how much more they own.

In fact, wealth (what people own) is more unequally distributed than income.

Wealth vs income distribution

 

This chart gives you an idea of just how unequally distributed wealth is in the UK.

Wealth distribution

Wealth includes things like pensions and stocks. If we just concentrate on housing wealth (Total housing wealth in the UK stands at something like £3,375 billion) we see a similar picture. Here is how housing wealth is distributed.

Distribution of housing wealth

 

House prices have increased significantly, even adjusting for inflation, since the 1970s as this chart shows.

House prices adjusting for inflation

 

However, this has not uniformly benefited all homeowners.

Rises in house prices for mean and median

 

But has hugely benefitted those who own expensive houses.

Rise in value of prime accomidation

 

Many of whom are not born in the UK.

Country of origin of prime accommodation buyers