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item0065E  958, 959

958   24 March 2004  

ONE   Size of the UK housing stock

You must first decide whether you consider there to be a problem at all.  Are the 21m usable houses which go to make up the “housing stock” already adequate for our purposes? The powerful Campaign for the Protection of Rural England (CPRE) thinks we have enough houses – and that there is no need to “concrete over” any more of rural England: this is what they say. They advocate all sorts of other measures, including regional relocation, as a means of taking the pressure off housing supply.  Linked with this question is the reliability of population forecasts which, since the early 1990s, have been predicting chronic shortage, in the light of multiple changes - smaller households, delayed marriage, more divorce, more single elderly, and migration settlement.

The question of “stock adequacy” is more than a statistical, mathematical one - it is a matter of policy.  At what age “should” children be enabled to live independently of their parents?  The answer varies from society to society, even within the UK.  At what age is a young couple “entitled to expect” to be able to buy their own house (as distinct from renting a flat)?  Is it right to increase population-densities in the South-East, when there are plenty of empty houses “up North” or “out West”?  These are all value-judgments which will critically affect your conclusion about the adequacy of the 21m stock.

In 1995, the Government was advised that accommodation would be needed for 4,000,000  additional households, mostly small, by 2016.   John Prescott has just announced a campaign to build “2,000,000” houses over the next decade – which argues a construction-rate rising to 250,000-a-year, which is a very modest ambition indeed.  My advice to you is to ignore the macro-statistics, and to come to the following conclusions – 

There are clearly housing shortages in the regions of high-demand, principally SE England, but also around a number of UK cities.  Land should be “released” for development well in excess of local requirements, so as to facilitate competition and to give house-seekers some choice where to live.  “Planning” should not be too prescriptive – after all, it is principally restrictive “planning” which has got us into this mess in the first place. 

Land-supply should be increased to meet local city-regional requirements.  We should not, in a democratic society, be dictating the life-choices of our citizens by imposing arbitrary limits upon the supply of homes.  A home-seeker in Basildon should not be referred to available accommodation in Wolverhampton. 

Whatever the long-term may hold, house-construction has fallen to an absurdly low-level – 170,000 last year – and urgent action must be taken to increase annual production.  Do not be put off by the restrictive propaganda of the CPRE, which would love to keep all Green Belt for the middle-classes alone.  The very planning designation of Green Belt is a mischievous class device, which the Government should critically re-examine. 

House production should move to 300,000 per year for the years 2006/2010 – and we should then take stock.  Not much can be done, in the short-term, about 2005 production – but it would be realistic to get production up by 2006. 

  • My only relevant conclusion about the housing stock is that it is too small.  What is yours?   Drop me a line.

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TWO    Housing Land Supply

Not all land is “housing land”.  In our owner-occupied market, no housebuilder can afford to build in locations, or on poor sites, where purchasers are less likely to buy his product.  A housing site needs good highway links, access to all services, convenient facilities (shops, primary schools, recreation), and reasonable access-to-work.  To the extent that these must be provided by the housebuilder, the affordable price of the land is reduced.  In addition to all this, no housebuilder can make use of “planned” site if the owner is not willing to sell the land for development. 

These simple propositions seem obvious, don’t they?  Indeed, they are.  Yet they drive great divides between the housebuilding industry and professional local authority planners.  The Planners always exaggerate the amount of usable housing land that has been designated in their Plan – the housebuilders contend that the real figure is much lower than the Plan suggests, for all the above reasons.  This problem is particularly acute where the Planners are under pressure from local communities to resist development, rather than welcome it. 

Some of these differences are endemic to the system, and mere politicians will not wish them away.  But they all restrict land supply, both for housing and other uses.   For us politicians, if we want to ensure there is sufficient land for new housing, the only course is to instruct the Planners to over-provide, to ensure that land is plentiful, not a miserably-scarce commodity.  The most drastic measure in this connection was taken by Nicholas Ridley, Thatcher’s Minister in the early 1980s, who declared that in the case of “white land” (i.e. land not already designated for any other specific use) there should be a presumption in favour of release for housing. 

I would now use the Ridley Method.  It is drastic, but so is the requirement for housing.  I would declare that, on appeal to me as Minister (or to the Welsh Assembly, for that matter) I would ask the Planners to demonstrate why a site should not be released for housing, and get them to argue the case against its release. The prospect of losing planning appeals on a major scale would soon change the balance-of-power between the planning authorities and the housebuilding industry which they regulate.  Housebuilding would flourish, and in the lower price-brackets, price rises would be moderated.

  • So my advice to the Government is - Do a Ridley!

Do I have any support for such a market-moving policy?  I say that the established class-and-property system is standing in the way of providing decent housing for our people.  What do you think?   Drop me a line.

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THREE   Servicing Land for Housing

If we want to see housebuilding rise significantly, we will have to find more public funds for preparing the land for development. True, it would be possible to raise much more money from UK landowners in the longer-term, but there would have to be bi-partisan agreement on any new tax system, and that is simply not a practical political possibility.

I know that to spend scarce public funds on building new roads and drains and schools to service highly-profitable new private housing will seem unjust, and so it is.  But be practical.  There is no short-term solution to the taxation problem.  Labour tried and failed in 1947.  Labour tried and failed in 1966.  And Labour’s best attempt, in 1976, was reversed by the Conservatives in 1981.  If Prescott wants results (say) in the next six years (i.e. before the end of a Labour Third Term, to help fight for a Fourth), we must pay for those services from public funds. There is no other option.  A housing site needs good highway links, access to all services, convenient facilities (shops, primary schools, recreation), and reasonable access-to-work.  That is costly.  John Prescott is already facing big bills for the planned land-releases in London and the South-East – and those bills are bound to rise.

We are, historically, the victims of a system of private landed property has never delivered to the landowner the true “bill” for bringing has land into development.  The landed gentry, from 1840 onwards, busily sold off their land for railways, factories, and later housing and more rapid urban development, without ever having to meet an appropriate tax bill.   There is still no effective means of charging the owners of development land for any of the public services necessitated by its development.  The sheer cumulative power of private property, in the English establishment, has successfully kept the tax-collector away from the safe door, while enormous fortunes (like the Duke of Westminster’s) have been harvested.

This could be changed, if the Government had any appetite for radical change.  We did make the change in 1976, with the Development Land Tax Act and the Community Land Act: I worked on both those measures myself, as Industrial Adviser on Construction to the Government.  And I put a great deal of time and energy both into drafting and then promoting their operation. 

But those two vital measures (which were supported by the housebuilding industry) were lost in the destructive maelstrom that was the Thatcher Government.  Now, New Labour has no appetite for radical change – certainly, not for change that would seriously disjoint the noses of the wealthy.

That means that the rest of us must pay, if we want higher levels of house-construction.  The tab for increased land-servicing investment must be picked up by the general tax-payer. There is no other way.  And the ownership of development land will remain a licence to print money. 

  • Unjust?  Certainly.  But get real.  That is part of the price of having lost to Thatcher in 1979.  Political defeats are for real.  Political victories should be for real too.

Do I have any support for such a market-moving policy?  I say that the established class-and-property system is standing in the way of providing decent housing for our people.  What do you think?   Drop me a line.

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FOUR  Moderating house-price rises

Much nonsense has been written about this.  The management of price-levels generally is beyond the power of a Liberal Socialist Government.  About 800,000 house-sales are completed each year, with only perhaps 150,000 of them being newly-built houses.  Most are existing houses, traded up and down in the ordinary way.  Even if the new-house supply were increased by 50,000 p.a. that would hardly shift the price-levels, in a market of 800,000. 

Rising house-values are not, at base, an insubstantial “bubble about to burst”, and the Meeja sometimes claim.  To understand the way in which capital wealth is accumulating among the upper two-thirds of society, should read Dane Clouston, the radical advocate of capital redistribution.  Parents are investing more and more in securing for their children a privileged position on the housing ladder, and so house-prices escalate.  And the wealthy put very large sums of capital indeed, into securing for their children a high place in the system.  House prices no longer reflect simply the purchaser’s “income capacity” to buy – there is a great deal of accumulated capital deployed, in every transaction. 

Also, the UK has experienced a once-for-all shift from its conventionally “high” interest rates to the low rates which characterise both the continent of Europe and the Americas.  This shift will not be reversed, and therefore house-values are likely to be maintained. 

Other factors bolster the UK house-prices, certainly at its upper end.  Nowhere is the Ol’ Devil Class more active than in the housing market.  And although the supportive influence of the building society movement is far less than of old, the housing market remains extremely attractive to financiers, who value their place in the strong UK mortgage market. 

The simple volume of new housebuilding is therefore only a minor factor in determining house-prices.  Conventional economic analysis is not a good guide to the future operation of the market – as a myriad of inaccurate past predictions testify.  It would be wrong to expect a mere 50,000 extra new houses per year to make any significant difference to price levels generally. 

Having said that, I do consider that, at the very bottom of the market, a significant increase in supply (say, 100,000 house a year, sustained for five or more years) would begin to moderate house-prices.  At the very bottom of the market, for first-time buyers and even for those “trading down” in retirement, I think that prices would respond, if local markets were oversupplied.    

  • If I were John Prescott, that would be my target.

PS I should not leave this subject without trying to explode the myth that house-prices are driven up by increasing land-prices.  That is pure, unadulterated nonsense.  The land value reflects the residual effect of all the other transactions.  Land values simply represent the price which a house-builder can afford to pay for development land, in a competitive market.  He is forced to cut his own profit-margins in order to secure the very land upon which to build.  As building-costs are far less volatile than house-values, land-values increase disproportionately, as house-prices rise.  

  • The only reason why land-values rise is that house-prices have already risen, or are predicted to rise still further.  

  • Is that quite clear?

I suggest that Labour focuses on the lowest-price end of the market, and seek to engineer a significant increase of supply.  What do you think?   Drop me a line.

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FIVE  Construction of housing for rent

This is the sector in which the UK system has failed most dramatically.  There has been no new house-construction for rent, other in Central London at the highest property-values, or by local authorities or housing associations, since 1915.  In 1915, rent-control was introduced for private rented housing (as it was in France at the same time) as a panic price-control measure triggered by the social instability of war.  And new private construction for rent was stopped dead in its tracks, in both countries.  Capitalism abhors State price controls.

In 1958, De Gaulle got the French off their 1915 hook with a brilliant device to promote private flat-construction.  No UK Government has ever pulled off the same trick for us – so we are still pinned-in to the rent-control constraints of 1915.  The huge UK City property industry has never invested in private rented housing (other than as lenders to housing associations and other social landlords), and so there has been no commercial drive to increase the stock of rented accommodation, other than by the refurbishment, subdivision and conversion of existing buildings.

Labour should grasp this nettle.  De Gaulle managed to do it in 1958, for France, and it is time that we caught up.  It is possible that Gordon Brown will crack it with his Real Estate Investment Trusts (REITs), copied from the USA – in his Budget speech he promised details of these proposals, but they are not yet to hand. 

I can imagine a dedicated REIT, committed to the provision of rented housing and enjoying tax privileges for as long as that provision continued.  Nothing would more effectively take the pressure of the owner-occupied market than a successful drive to build good new housing for rent.

  • Go to it, Gordon!

What do you think?   Drop me a line.

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SIX  Meeting special local, regional needs

Wherever you look, there are difficulties being caused by price-levels in the owner-occupied market.  The Welsh Nationalists want measures to protect local Welsh-speaking communities by manipulating the housing market in their favour.  Similar local movements exist surrounding London (Kent, Hampshire, Essex), as well as in comparable English regions like Devon and Cornwall.  I recognise that these are real problems, and that politicians like me must respond to them.  In the long-run, the answer is to increase the size of the housing-stock in every region so as to eliminate local shortages.  But that is for the very long-term.  What of the short term?

First, let me state a home truth.   It is a Liberal Socialist home truth.  It is not possible, in the sort of society we have and we value, to “rig” the owner-occupied market to achieve such results.  That is simply not a management method open to a Liberal Socialist government, or to any other imaginable UK Government.  Liberal principle requires that we should each be entitled to sell our homes to the highest bidder, when we no longer have need of them.  It would not be acceptable to force a home-owner to sell to a specific category of purchaser – nurse, or a fireman, or a Gaelic-speaker, or a Welshman, or a Kentishman, or a Son of Cornwall. 

The wrong must be addressed in other ways.

The only practical solution is the creation of tenant-specific rented housing, where the landlord is carrying the value-risk of the constraints imposed, and the constraints are “designed in” at the very beginning of the venture.  A number of some dedicated housing associations already exist.  They may provide for nurses, firemen or policemen, or other key workers, locally-born Welshmen, Men of Kent or whatever.  Such methods would amount to discrimination, of course – but it would not be unlawful discrimination. 

It would not be struck by the Human Rights Act 1998, for the simple reason that the European Convention of Human Rights does not recognise any “human right” to housing in the first place.

  • Kate Barker, in her recent report, stressed the importance of expanding the public rented sector, particularly by way of social landlords.  That is the solution which I commend to you, to meet these special requirements.

What do you think?   Drop me a line.

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