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.

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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”

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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.

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

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

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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.

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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.

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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.

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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.

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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.

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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.

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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

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Verdict: Draw

2. Far more Americans than Brits sleep rough

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Verdict: UK wins

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

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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)

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Verdict: Draw

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

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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.

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

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

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This is what the overall picture looks like.

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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.

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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).

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

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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).

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This chart puts the rise in private renting into perspective.

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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.