Power to build 2

If the next Mayor is going to oversee a dramatic increase in the rate of housebuilding in London, they will need more than effective solutions. They will need to design an approach and strategy that brings together a coalition powerful enough to overcoming the obstacles that have so far prevented these much needed homes from being built.

That was how I ended a blog post last week on how a Labour Mayor of London could rapidly increase the rate at which new houses are built in London.

One of the ways of considering who should be in such a coalition, and how to get them on board, is to undertake a basic power analysis. To do so, we should first ask “who could most help or hinder a Mayor of  London to build new homes?”

The first organisation that springs immediately to mind is central government. On the one hand, the government gives money and powers to the Mayor, on the other hand, the government could ultimately disband the Mayor and the Greater London Authority.

This is exactly what happened when a previous Conservative Government passed the Local Government Act in 1985, disbanding the Greater London Council (GLC). Norman Tebbit famously called the GLC “Labour-dominated, high-spending and at odds with the government’s view of the world”.

We should ask ourselves the following questions about central government

• What is that power?
• What are their goals, demands, or vision?
• Potential target? Who does this person listen to? Who has influence over them?

What is their power?

The government can decide on how much money the Mayor is given to build homes. They can also decide on the powers the Mayor has, for example, over planning or raising taxes.

What are their goals, demands or vision?

One of the principle aims of the government is to reduce the deficit.  A secondary, but important goal, is to increase the number and percentage of people who own their own home. Part of their vision is to build a so-called ‘Northern Powerhouse’ which includes giving more powers to the the combined Manchester Authorities.

Potential target?

George Osborne is the Chancellor of the Exchequer. As such he is supremely influential when it comes to deciding how much money the Mayor of London will be given to build new houses. He is widely credited as the main proponent of the ‘Northern Powerhouse’. In his recent budget speech he said he is “unwavering “in his “support for home ownership”.

Assessment

We now need to assess to the government’s attitude towards the agenda, shared by all Labour candidates for Mayor, of increasing the amount the number of homes being built in London. Where would we rate George Osborne on a scale from die hard support to die hard against? I would say he is somewhere in the middle.

Although he supports the idea of increasing home-ownership, he does not support the idea of affordable housing let at social rents financed by government grant. He also does not support the idea of a Labour Mayor forcing developers to build more affordable housing and probably does not support the idea of a Labour Mayor forcing Tory controlled Local Authorities to build, for example by using targets or sanctions.

Implications

What does this mean for developing a housing strategy that might actually have a realistic chance of being supported and not opposed or even vetoed by central government?

The idea that the Mayor will receive any additional money to grant finance social housing is for the birds. Similarly, the idea that the Mayor will be given powers to raise taxes or borrow more to grant finance social housing seems highly unlikely.

In fact, I would go further and suggest that a Labour Mayor who vigorously lobbied for more grant or more powers to borrow or raise taxes, would risk going the way of Ken Livingstone in the 1980s and being disbanded.

However, a strategy that was built around using part of the increased power of a devolved health budget to support the development of innovative home ownership products such as Genie might have a chance of success.

Conclusion

There are of course a number of other players at work in the world of London house building, including land owners, housing developers, residents who might oppose development, housing associations, town planners, local councillors, to name a few.

A proper housing strategy would analyse each of these groups in turn, in the way I have done here and assess the extent that these groups can either be overcome or brought into alliance.

A Labour Mayor of London who wants to oversee a dramatic increase in the rate of house building needs to ensure that they are supported by and not blocked by the government. Appeal to the Chancellor’s support for home ownership and devolution, rather than calling for more tax raising powers or imposing more conditions on house builders, seems like the strategy with the best chance of success.

The power to build

All the Labour candidates for Mayor of London are committed to increasing the number of homes that are built in the capital. Tessa Jowell, amongst others, has called for the creation of a new agency ‘Homes for London’ to “take the lead, building thousands of homes that Londoners can afford on the vast swathes of land that the Mayor owns”

Tessa has a number of ideas for how this agency would London get building. These include:

• Building directly on land the mayor owns
• Training more Londoners in construction skills and,
• Using planning powers to require affordable home ownership is part of new developments

These ideas will be familiar to many, partly because various voices have been advocating them for a number of years. But if these ideas are so good, why haven’t they been implemented?

Perhaps one of the reasons is that we haven’t had the right leader. Certainly a number of Tessa Jowell’s backers have made great play of her ability to get things done. For example, the NewStatesman, in their endorsement of her, refer to her track record moving both Sure Start and the Olympics from the drawing board into reality.

However, there is more to getting houses built than a strong and experienced Mayor (although that would certainly be a start). Alinsky’s famous quote springs to mind:

the problems facing inner-city communities do not result from a lack of effective solutions, but from a lack of power to implement these solutions

If the next Mayor is going to oversee a dramatic increase in the rate of housebuilding in London, they will need more than effective solutions. They will need to design an approach and strategy that brings together a coalition powerful enough to overcoming the obstacles that have so far prevented these much needed homes from being built.

Fortunately, next week’s blog post will outline exactly what such a strategy might look like. Watch this space.

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?

Expensive houses or really expensive houses?

Houses are getting more and more expensive in the UK.

Expensive houses in London are getting more expensive at a fast rate

Expensive houses in inner London are getting more expensive at an even faster rate.

The gap between the cost of the more expensive houses and averagely priced houses is getting bigger and bigger in London, while it is quite stable in other parts of the country.

Similarly, the gap between how much an average home costs and how much a cheaper home costs is getting bigger and bigger in London, but not in other regions.

What’s going on here? It’s partly a matter of not enough homes being built. If there were more homes being built in London then house prices would not go up so quickly.

However, is there something else at work here? Larry Summers has argued that the rich countries are experiencing ‘secular stagnation‘. Economies with low interest rates and low growth rates don’t offer investors many places to put there money. It’s perhaps to be expected that in these circumstances rich people from around the world invest their money in property in inner London.

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.

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.

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.

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.

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 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

Verdict: Draw

2. Far more Americans than Brits sleep rough

Verdict: UK wins

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

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)

Verdict: Draw

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

Verdict: USA wins

Final score: UK wins 2:1. 

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.

 

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

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

 

This is what the overall picture looks like.

 

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.

 

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).

 

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

 

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).

 

This chart puts the rise in private renting into perspective.

 

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.

 

Crowded house

In the rush to condemn the so-called ‘Bedroom tax’ some commentators have been tempted to down play the problem of overcrowded housing in England.

Using the so-called ‘bedroom standard’ (more details on that measure here) there were, at the time of the last census, over a million households living in overcrowded accommodation.

This is a serious policy problem. Living in overcrowded accommodation is bad for your health and your wellbeing.

There are at least three things worth bearing in mind about overcrowding in England.

1. Overcrowding is a massive problem in London

This map (made from the census data here) shows overcrowding in different neighbourhoods of London. The darker the colour the more overcrowding there is.

In some areas of Newham nearly a third of households are overcrowded and the problem is not restricted to East London.

2. Overcrowding is a problem in many other cities of the UK

While people often claim that there is only a housing problem in London and the South East, this is not the case with overcrowding. This map shows overcrowding in England.

You can just about see that there are darker coloured sections in most towns.

For example, here is a map of overcrowding in areas of Birmingham.

And Sheffield

And even Stoke-on-Trent (which has quite affordable housing by English standards).

As you can see from these maps, while cities outside of London do not have as systemic a problem with overcrowding as the capital, it is still a problem for a sizeable number of people in different neighbourhoods of our major cities.

Over 20% of households in Washwood Heath in Birmingham are overcrowded and 13% in Hanley Park in Stoke and Burngreave in Sheffield.

3. In most overcrowded areas there are a number of under used houses, although these are mostly privately owned

A large part of the solution to this problem, as to quite a few housing problems, would be to build more houses.

Having said that, there are a large number of under used houses, even in areas with a large number of overcrowded households.

In Green Street East in Newham over 10% of houses have 2 or more spare bedrooms, while 35% are overcrowded.

In Washwood Heath in Birmingham 23% of households are overcrowded while 17% have 2 or more spare bedrooms.

In Hanley Park in Stoke and Burngreave in Sheffield there are more houses with spare bedrooms than there are overcrowded houses.

The problem for those who have proposed the so-called ‘bedroom tax’ as a solution to overcrowding is that most of the houses with spare bedrooms in are not social housing they are privately owned, as this chart from Savills makes clear.

If we want to solve the problem of overcrowding without building new homes in inner cities but instead by making sure all the bedrooms in larger houses are used, we would need to think about how we can encourage home owners to use their spare bedrooms.

Housing quality and equality

Is it possible to improve the quality of housing for people on low incomes in an unequal society?

That might be a strange question but the case of the Decent Homes Standard shows how hard it actually is to improve the quality of social housing when society is unequal.

The Decent Homes Standard was introduced in 2000 as a way of ensuring that all social housing in the UK was up to a certain quality.

It cost somewhere between £19 billion and £37 billion and was, by its own standards, a success.

Here is a chart showing, over time, the percentage of houses owned by local authorities or housing associations that met the standard.

 

As a result of a significant investment of public funds many people had new kitchens and bathrooms and other improvements made to their homes.

You might expect that people who live in social housing would be much more satisfied with their housing as a result of this investment, but you would be wrong.

Here is a chart showing how satisfied people were, over time, with their accommodation.

 

We can see that there was no noticeable increase in the number of people living in social housing who said that they were satisfied with their accommodation.

Why might this be? One reason is inequality.

If a government spends public money improving the quality of social housing, this doesn’t stop middle class people who own their own homes spending their own money (or their parents money) improving their homes.

In fact, it is conceivable that public investment in social housing might encourage middle class people to spend even more money on their homes, to make sure that their homes remain of a higher quality than social housing.

Housing is, to an extent, a ‘positional good‘, a lot of the value of a house comes not from some objective measure of it’s worth, but through a comparison with other houses. It gives people little satisfaction to look at their kitchen and to think that it is much better than the kitchen their grandparents had, when their neighbours have a nicer kitchen still.

We all know the phrase ‘keeping up with the Joneses’. It might just be that it is impossible for public investment in social housing to keep up with the Joneses, when the Joneses are so much richer than those on low incomes.

Towards a popular left wing housing policy

The death of Margret Thatcher reminds us that she was the last Prime Minister to have a popular housing policy.

The famous right to buy policy is still seen by many people as her greatest achievement. I doubt even their biggest supporters would list the housing policies of Major or Blair as among their greatest achievements.

As I argued last week the Labour party has yet to fully detail a decent, popular housing policy. This post will attempt an initial outline of what such a policy might look like.

***

Public Opinion

To design a decent, popular housing policy we need to understand the public’s views on housing.

The most obvious thing to say here is that the public, broadly, want to own a home.

64% of people who rent privately want to own a home and 70% of people living with friends or relatives want to own a home. Fully a quarter of people who live in social housing also want to own a home.

Why do the public think it’s hard to buy a home?

As you can see from this chart, many people say that houses are too expensive for them to buy, that it’s hard for them to get a mortgage or that mortgage repayments are too high.

Finally, what do the public think could or should be done to make it easier to buy a home?

Lots of people are hoping for a windfall to help them buy a home. Short of that, or a pay rise, ideas around reducing house prices or making mortgages cheaper or more accessible are clearly popular.

***

State of the industry

As well as understanding public opinion, to design a popular housing policy we need to understand the current state of the housing industry.

Since the credit crunch there has been a dramatic reduction in the number of households getting mortgages. This number seems to have stablised but shows no sign of returning to the numbers we say before the recession.

Similarly, the percentage of households that own their home has been steadily declining since before the recession.

So, fewer and fewer people own their home, fewer people are able to get mortgages and yet people would very much like to own their home.

While that is the overall picture, the facts of the matter look very different depending on where you live. The map above shows the ratio between low wages and cheaper homes in different areas of England. You can see that there are many areas (such as the North East) where cheap homes are not expensive when compared to low wages, while there are other areas (obviously West London but also the South coast) where cheap homes are essentially out of the reach of people on low incomes.

***

Principles of a popular left wing housing policy

Before we take the plunge and outline some specific ideas for a popular decent housing policy for the Labour party it is worth pausing and asking, what makes up popular decent Labour policies in general?

I would point to three characteristics (there is not much method here other than this excellent blog by Nick Pierce)

1. They build institutions

You only have to think about how much popular the NHS is than tax credits to understand that people can have much stronger positive feelings towards institutions than other types of public policy.

2. They pool or share risk

The NHS, unemployment benefit (actually a Liberal policy, but there you go) or, to a lesser extent, schools and even the BBC, are delivered by at such incredibly low costs because everyone pays in. This means we can all benefit from sharing the risk in a way that schemes that were offered to much fewer people could not provide.

3. They build a better economy

The modernisation of British industry after the Second World War, through nationalisation, or the introduction of the minimum wage, are both examples of popular Labour policies (at the time!) that not only improved the economy in a dry GDP type of sense but also built an economy that people felt more comfortable with

***

Towards a popular left wing housing policy

All that is left for us to do then is to mix together what we have learned about public opinion, the state of the housing industry and the characteristics of popular Labour policies and we can come up with some decent popular policies. Easy, right? Perhaps not. 

Here are some initial thoughts though

– The People’s House

Labour could pledge to begin the construction of a selection of basic homes to buy at low cost. This could be done in a number of ways including allowing councils to set up their own house building companies, having a state owned house builder (as they do in, for example Korea) or, more simply, by giving more support to housing associations to develop homes for sale.

– A People’s Mortgage

Similarly, Labour could pledge to introduce a basic, low cost mortgage for people on low or middle incomes seeking to buy their first homes. This could be done in a number of ways including through the Post Office, credit unions or even the state owned banks.

– Local Homes

Labour should seek to ensure that these housing policies are delivered in a way that is sensitive to the specifics of each area. This could mean using processes like participative design where people get a say on what their future home will look like as well as giving a prominent role to local authorities and other agencies that operate closer to the ground.

– Reforming housing benefit

Housing benefit and local housing allowance currently cover renting. There are other types of government support for people having trouble paying their mortgage and other schemes to help people buy a new home (such as shared ownership homes).

An interesting policy area for Labour might be to look at reforming benefits that are currently given to people to help them pay for their rent so that these benefits could actually go towards buying a home. Countries such as South Africa have given people on low incomes one off grants to help them buy homes. At present, with our high house prices, this seems unthinkable, but perhaps could become a possibility if government was building low cost houses.

***

These are some initial thoughts. I would be interested in comments on any aspect of this.

For those of who are interested in this kind of thing you might read IPPR’s recent(ish) housing report, the Labour Party’s policy document on renting or the Resolution Foundation’s work on housing