Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications...

Housing Supply, Demand and Affordability:

An Overview of Current Trends and their Implications

Professor Ian ColeCentre for Regional Economic and Social Research

Sheffield Hallam University

WARD Networking Meeting Rawdon 24

November 2012

Outline The challenge for national housing policy Different ways of tackling housing shortage 'Affordability' 'need' and demand' The changing profile of housing tenure Housing demand and supply in the region Implications for the Leeds city region


November 2012

The dilemma of housing policy

Factors making for inertia

Factors making for change

Housing as long term asset

Household composition

Spatially fixed Migration patterns

High cost Changing aspirations

The weight of history Economic opportunities


November 2012

Sounds familiar? Two and a half years of a Conservative-led

government following a period of Labour dominance

Housing shortages grow as building rates fail to keep pace with household formation rates

Difficulties in gaining access to mortgage finance Increasing pressure on social housing Hopes placed in revival of PRS Market principles advocated when market at its

most fragile


November 2012

The challenge.....

So, what could be done...?

in 1954?


November 2012

National housing policy in 1954 govt. maintained large scale council house building

to meet targets (224k completed in 1954 cf 90k private)

building programme geographically spread in GB reduction in standard of materials, design and

property diversity in LA sector to achieve quantity relaxation of rent controls in the PRS designed to

stimulate the sector reintroduction of slum clearance imminent move away (in 1956) from property-based

to person-based subsidy: start of rebates


November 2012

The rationale for national policy in 1954 a pragmatic, and time limited, embrace of the state

as the only means of addressing a national emergency

but public housing would never attain the primacy of NHS or state education

always hedged with stigma: eg 'spiv' replaced by the 'Jaguar owning council tenant'...

and much relied on local innovation not national government dictat


November 2012

Local Innovation 'hidden histories' not captured by national narrative eg Urmston Housebuilders Association in

Manchester Self-build association of 28 households 30 hours minimum a week commitment to build 2

schemes: 16 houses and 12 bungalows Council provided cheap land, guaranteed 5 per cent

fixed rate mortgages over 20 years (£2 per week) £30 down payment as deposit customised design of kitchens and bathrooms

CWAG Conference Leeds 28 September

2012

The outcome price of new houses: £1,300 for 3 br semi-detached

properties average price of new houses in England in 1954

(Q1) was £2,100 priority determined not by a points scheme...but by

drawing lots strong community ethos prevailed the Big Society in action -before it was invented? but not everyone was happy about it....


November 2012


November 2012

The lessons of 1954? you cannot rely on private sector to meet policy targets in

difficult market conditions the planned revival of the PRS may bring with it unanticipated

outcomes affordability is a question of land values and development

costs as much as household income and subsidy the growth of home ownership requires sustained economic

growth across the income spectrum the best 'solutions' are locally created, not nationally

mandated....


November 2012

and now?

WE NEED TO BUILD!

but how...?the market-based response: relieve planning restrictions through s106 revisions and presumption in favour of development

the mixed economy response: target public investment to promote 'leverage' with private sector in the lead

the state-based response: national emergencies require firm government action, if only for a limited time


November 2012

A market- based approach

remove or reduce planning restrictions give developers far more options for sites encourage larger sites but how does this fit with targets....?

'If we are to plan we must have plannable instruments and the speculative builder, by his very nature , is not a plannable instrument' Aneurin Bevan 1947

and how much encouragement do developers need?


November 2012

Recession? What Recession?

Barratts: profit increase of 159%: from £42.7m (2011) to £191.1m (2012) Revenue up 14.1 % and margins increased from 6.6 to 8.2%

Cala Group: increase in operating profit of 96% (2012) and revenue up 18%

Redrow: increase in operating profit of 55% (2012) and revenue up by 6%

Galliford Try: increase in profit before tax of 80% (2012) and revenue up by 17%

LGA: 400,000 planning permissions currently outstanding in E and Wales


November 2012

A mixed economy approach ?

public sector role can target development more effectively, but 'leverage' assumptions are often overblown

will struggle to address geographical imbalances, brinkmanship over planning constraints and in-bred risk aversion

may insulate the development industry still further without gain in output

should infrastructure development remain the primary domain of the public sector, and not a site for profitability? (Hildyard and Heseltine)


November 2012

A state-led approach?

Tullet Prebon: Building a Road to Recovery? August 2012 State can invest in housebuilding without sucking in

imports. In the long-term, it will be self-financing (increase growth and revenue and reduce HB)

'We would stress that this investment should be undertaken by local authorities or housing associations, not through public-private gimmicks like PFI'

'The government and social sectors should act as owners and commissioners of new housing'.

'A national housebuilding programme should be a national economic imperative, not thwarted by sectoral self-interest or ideology'


November 2012

Putting Policies to Boost Housing Supply to the Test

Questions are developers straining at the leash to build? is land supply the problem ? where are the 'new' home owners? can leverage fill the 'production gap'? is there any public, let alone government, support for a stronger state role? ....and can it be afforded anyway? what spending is sacrificed elsewhere? what evidence is there of a shortage anyway? how much new housing needs to be 'affordable' and what does that mean anyway?


November 2012

But who will build?

spec developers are quick to take frightbuild for rent vehicles will be concerned about churn and limited security of tenure housing associations may find it difficult to borrow when full welfare reform measures are implementedand councils now have the freedom to build - but symbolic rather than substantial in most areas


November 2012

Demand, Need and Affordability

need to focus on 'effective' demand risk aversion to lending will be very slow to clear housing 'need' - now a redundant term? be wary of any household projections!: patterns are

culturally and financially shaped, as well as statistically determined

defining 'affordability' and 'affordable housing': not clear-cut

Affordable Housing Programme 80% of market rent - arbitrary but convenient ?

implications for HB spending?


November 2012

What about tenure location and type?

home ownership - the end of the affair? blurring of private and social (HA) distinction in renting sharper contrast between market and welfare sectors in

PRS opportunities in the PRS left vacant by students assumed growth of REITs may be over optimistic pressure on HMOs and hostels increased 'sifting' in residential markets


November 2012

Moving to a more European model ?

beginnings of a corporate rented sector? later entry into home ownership wider acceptance of shared ownership flexible tenure better integrated HA sector: rationalisation is overdue residue of public welfare housing for transient and

displaced groups

....but what about the Y and H region?


November 2012

Regional Public Enquiry 2009 housing market will not return to pre-recession state until

2013...14 ...or 15?

Barriers to growth lack of finance for development and s106 constraints need a new model not dependent on ever increasing land values

(HBF) lack of finance for purchasers: over-reaction by lenders land...? (no consensus)

Where to build? Selby district as prime location for 'deflected growth' ? Keep away from the 'golden triangle'


November 2012

The Leeds sub-region

At 2009 Public Enquiry argument over housing supply in Leeds city CC said developable land not in short supply developers: being forced to use unattractive parcels of

land...'quality homes in quality sites will always sell' and now scramble for growth (when it comes) and Leeds has high

commuting in-flows at present city centre apartment market will not expand regeneration of more deprived areas unlikely for medium term welcome to north east Leeds and the A65 corridor as favoured

sites !


November 2012

Some Questions and Issues

What does 'muscular localism' really mean? Will new residential development ruin integrity/identity of

places? Is there lower grade 'green' elsewhere that might attract

developers? Will mixed communities be close to mixed employment

opportunities? Can the transport and other infrastructure sustain it? One thing's certain....


November 2012

self-build housing will not be enough to save the day...

Housing Supply, Demand and Affordability:

An Overview of Current Trends and their Implications

Professor Ian ColeCentre for Regional Economic and Social Research

Sheffield Hallam University

Housing Supply, Demand and Affordability: An Overview of Current Trends and their Implications...

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