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Tension And Prospects

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Reading an old thread reminded me that Sir Michael Lyons is beavering away with some domesticated policy wonks on the Lyon's Housing Review which will inform the Labour Party's manifesto for the 2015 GE, (I guess we are seeing some intimations of direction of travel with the commitment to 200,000 homes, but as it only closed for submissions on 28 February 2014, one hopes that there is going to be something more interesting that "Well, guys, like maybe we could build more houses" etc).

I was looking for some indication of when the report was likely to be made public and stumbled across a submission to the Lyon's Review from an ESRC Open University research project called Tensions and Prospects dealing with "the history and prospects for sustainable housing growth in the UK, using contemporary development within Northamptonshire/Milton Keynes as the focus of a detailed case study".

Suggesting that there is a consensus on hpc is a bad idea, but it seems to me that many posters, self included, work on the assumption that housebuilding is basically a cartel and yet another market where manifest market failure has not been addressed and as a result a we don't have the power of the market ensuring that demand elicits supply, but rather we have essentially a cartel, where the excess of demand with respect to supply allows companies to capture outsize profits, (and the company directors to therefore receive excessive rewards).

What amused me was how closely the heart of this assumption (regarding how many houses volume builders build and why they build that amount and not a larger or smaller amount) tallied with the Tension and Prospects submission to the Lyon's Review.

Here's a section that particularly caught my eye, quoted in full without excision, but with emphasis added.

Structural Barriers

Land and planning allocation/obtaining planning permission for housing has not been a barrier to development in the study area. Substantial sites were designated (50% of all new building was to be in new urban extensions) and there were few political obstacles to obtaining planning permission since the local authorities in Northamptonshire and Milton Keynes were generally pro-growth. In addition, special delivery vehicles (SDVs) were set up in West Northamptonshire, North Northamptonshire and Milton Keynes to facilitate growth. It should be noted however that in West Northamptonshire and North Northamptonshire, the SDVs did not own land and were given very limited capital to buy land or develop it, and thus, were reliant on landowners and volume house-builders to bring development forward.

Slow rates of delivery, below planned targets, were evident before the recession in 2008 and became very much worse after 2008. Most significantly, many of the large urban extensions (particularly in Northamptonshire) where most growth was supposed to take place did not get off the ground and remain undeveloped.

Contrary to the oft-stated views of the housebuilding lobby (HBF) that lack of land or local government red tape is a barrier to development, land supply was not an obstacle to housing growth in the study area. Even allowing for variations in demand for homes, the problems of delivery lie largely with structural factors within the landowner/housebuilding sector itself:

  • Major Landowner/housebuilders manage a large portfolio of sites to maximise profit on individual sites released or built out. Many sites in their control may be potentially available for development in the area (and across the country) but to maintain profits, sites are realised very slowly to maintain shareholder asset value, while at the same time, more land is acquired under option agreements with landowners to maintain the size and range of the portfolio. Having a portfolio of developable land is the measure of asset value not the number of houses built. Getting planning permission on these sites is important but not essential. From the point of view of shareholders, the aim is to create an ever larger broad based portfolio from the point of view of shareholders which has some actual and a significant amount of long term potential value. And at the same time, sites have to be continually added to the portfolio to keep out competitors. Thus, in the study area, very large areas of potential housing development land, far in advance of any immediate plan to build them out, is under option agreements.
  • Housebuilders “drip feed” sites onto the market to keep up prices and maximise the difference between the price at which land was bought and the price of the completed housing unit. Thus, land bought at a high price (in the boom) will not be brought forward until sales prices reach a high enough level to cover costs and profit. At that point, completed housing units will be drip fed onto the market. In spite of the prevalence of this volume house builder business model, local authority and government officials we interviewed told us that there had been no assessment or evaluation of this business model or its implications for delivery during the time that ambitious plans for the Growth Areas were prepared in the 2003-2010 period. In fact, what is remarkable is that the SHMAAs, which were supposed to assess need and housing markets within Housing Market Areas, did NOT contain any assessment of the housebuilding sector or landownership in the HMAs and their willingness to deliver the targets. The housing supply mechanism from the private sector was taken uncritically as a given by Government.
A great deal of time and consultation was spent on spatial plans set out in sub-regional and local Core Strategies, which identified sites and patterns of growth, but it was evident from our research that the plans were formulated without any assessment of the reality of delivery by the housebuilders.

What a sh!tty way to run a country. I don't want to be accused of pimping for NuLabour, principally because I am not! Therefore, let me be the first to say that the government in power, which stood idly by throughout the first 7 years of the study period (2003-2013) and had been in power for 6 years before, was Labour - so hoping that Labour will save us from the predations of the volume builders might be a little naive, ;) . They had plenty of time and power to start tackling this problem and they did absolutely nothing - for thirteen years. Mind you, we can all forgive Tony and Gordon. They were busy with other things. Look at all the good they did in Iraq - and wasn't it awful when we had boom and bust - oh wait...

Anyway, the problem still needs to be solved. It would be nice if at some point the mainstream media and the political class would acknowledge it, then we might be able to address it. People can bang on about immigration too if they want to - I'm not fussed. I'm not suggesting that the failure of the volume builders to build is the only cause of the excess of demand with respect to supply. I'm suggesting that it is one of the causes. We need to get stuck into all of them.

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That's really interesting. Personally I'm not part of the "concensus" that it's about a cartel of builders rather than restrictive planning regulations, but if I read more reports like this I'd change my mind.

My concern is that it's based on one area, Milton Keynes & Northants, which the report characterises as pro-growth. My experiences are more in West London, Surrey, and South West Hampshire, and here I see NIMBYism that's red in tooth and claw, and local councillors repeatedly being cowed by anti-development pressure groups.

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I think the solution to that has indeed been mooted here. A Land Value Tax, where the land value reflects the planning permission, would be a powerful disincentive to hoarding land and trickle-building. The clock starts ticking as soon as planning permission is granted, and full tax on all permitted houses is payable after, say, one year.

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I think the solution to that has indeed been mooted here. A Land Value Tax, where the land value reflects the planning permission, would be a powerful disincentive to hoarding land and trickle-building. The clock starts ticking as soon as planning permission is granted, and full tax on all permitted houses is payable after, say, one year.

You'd think that an LVT on land held for development with some kind of clock mechanism as you suggest would play with voters, it would certainly be less contentious than a no holds barred LVT on all land. Might end up being the thin end of the wedge on a wider LVT but that's a different matter.

It seems to me that it would be difficult for a chelping volume builder to answer the argument "If you're not ready to build on it, then you shouldn't have bought it. Now sell it to someone else who does want to build on it, build on it yourself, or start coughing up. We need more houses."

I think I'm right in thinking that most of the employees involved in construction (as opposed to Head Office types) are contractors and presumably the building companies lease or hire most of the kit (earth movers, cranes, scaffolding and so on). I don't buy the argument that they are some kind of fixed input/output sausage machine that has to process a certain amount of land at a certain immutable rate and thus has to meticulously manage its land banks accordingly.

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That's really interesting. Personally I'm not part of the "concensus" that it's about a cartel of builders rather than restrictive planning regulations, but if I read more reports like this I'd change my mind.

My concern is that it's based on one area, Milton Keynes & Northants, which the report characterises as pro-growth. My experiences are more in West London, Surrey, and South West Hampshire, and here I see NIMBYism that's red in tooth and claw, and local councillors repeatedly being cowed by anti-development pressure groups.

A very good point, but if you don't get much building even where you have lots of land a 'pro-growth' populace and authorities, what are you chances of getting much built anywhere?

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Basically the entire economy is now being run to benefit rentiers at the expense of 'hard working families'- even the meagre obligations on the builders to include some 'affordable homes' (whatever the f*ck that means) on their sites have been cut back, on the basis that they will thus be incentivised to build more homes to rent. (= More buy to lets.)

Lets face it with half the political class with it's snouts in the housing trough can we really be surprised that the flagship 'solution' to the housing crisis is 'Help to Buy' a policy clearly designed to bolster house prices and preserve the asset values of the property owing class?

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Whilst I am in favour of a LVT and all of its benefits ie moving away from taxation of income, I find myself asking isn't it successive government market intervention that has got us to the disastrous position the country is in now? Relying on government to sort out the issue will only lead to possibly more disastrous unintended consequences.

The whole market mechanism is distorted, we need to be removing any/all interference in a hope it will reach a new equilibrium point lower than it is currently.

Government created these kinds of problems by making it legally possible for land to be privately owned in the first place.

Edited by Dorkins

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Government created these kinds of problems by making it legally possible for land to be privately owned in the first place.

"From downtown!", as they say in the NBA.

You could quibble that land ownership is a feature of feudal power structures that existed before anything that we might call a government existed, but just tweak that argument to "Government is responsible for these problems by allowing feudal notions of land ownership to persist" and I'm in.

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Basically the entire economy is now being run to benefit rentiers at the expense of 'hard working families'- even the meagre obligations on the builders to include some 'affordable homes' (whatever the f*ck that means) on their sites have been cut back, on the basis that they will thus be incentivised to build more homes to rent. (= More buy to lets.)

Lets face it with half the political class with it's snouts in the housing trough can we really be surprised that the flagship 'solution' to the housing crisis is 'Help to Buy' a policy clearly designed to bolster house prices and preserve the asset values of the property owing class?

its - and asset prices. Don't confuse value and price - it's called housepricecrash for a reason. Nobody in their right mind wants any of the national housing stock to lose value, regardless of who owns it or occupies it. (Well maybe some nutters want to watch Rome burn - but not me, thus far.)

You've got to lay off the nihilism.

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Housing was the responsibility of the Ministry of Housing and Local Government until 1970

In 1970 through mergers/changes etc it became the responsibility of the Department for the Environment.

In 1997 through mergers/changes the responsibility was under the Department of the Environment, Transport and the Regions (DETR).

In 2001 responsibility was merged/changed to Department for Transport, Local Government and the Regions (DTLR).

In 2002 it became the responsibility of the Office of the Deputy Prime Minister.

Since 2006 it's been the responsibility of the Department for Communities and Local Government (DCLG).

It's been a mish mash for decades - for whatever reason(s). The word "Housing" hasn't been in the title of the government department responsible for housing since 1970.

However for them still be carrying out research into the whys and wherefores of housing supply is pretty incredible considering all the enquiries/white papers/papers/research reports etc over the years. Housing must be one of governments' most researched subjects ever in the UK - but always with inadequate outcome in terms of housing supply.

Who knows but maybe something will come out of the latest research - some hope.

If they don't know the reasons by now they never will. They're just time wasters wasting people's time. It's no way to run a country.


http://

en.wikipedia.org/wiki/Departments_of_the_United_Kingdom_Government

http://

en.wikipedia.org/wiki/Ministry_of_Housing_and_Local_Government

http://

en.wikipedia.org/wiki/Secretary_of_State_for_the_Environment

http://

en.wikipedia.org/wiki/Department_for_Communities_and_Local_Government

http://

news.bbc.co.uk/1/hi/uk_politics/7922578.stm

Edited by billybong

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its - and asset prices. Don't confuse value and price - it's called housepricecrash for a reason. Nobody in their right mind wants any of the national housing stock to lose value, regardless of who owns it or occupies it. (Well maybe some nutters want to watch Rome burn - but not me, thus far.)

You've got to lay off the nihilism.

The problem is that price can and does prevent many from accessing that value- so it's not so easy to draw a neat line between the two. If by virtue of price only the very rich can afford to purchase property that is then left sitting unoccupied then price has destroyed value- or rendered that value null.

So it's hardly nihilistic to object to gross distortions in price if price has become the enemy of value.

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http://

www.open.ac.uk/researchprojects/tensionsandprospects/communication-outputs/briefing-notes/briefing-note-6

Thus, public land should NOT be sold off in the way proposed by the Coalition, but should either be retained in public ownership for public authorities to build out, or sold under very strict covenants.

Maybe there's some scope to retain the land in public ownership but allow the private houses to be built on it. To avoid builders land hoarding.

A bit like mobile homes but without all the mobile home park restrictions etc (such as not being able to live in a mobile home for a full year etc etc).

The new owner to have to buy the land at market price at the time of purchase of the house - or pay rent on it. Subsequent buyers to have the same arrangement.

Edited by billybong

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Maybe there's some scope to retain the land in public ownership but allow the private houses to be built on it. To avoid builders land hoarding.

A bit like mobile homes but without all the mobile home park restrictions etc (such as not being able to live in a mobile home for a full year etc etc).

The new owner to have to buy the land at market price at the time of purchase of the house - or pay rent on it. Subsequent buyers to have the same arrangement.

They could call it something catchy like Leasehold. ;-)

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They could call it something catchy like Leasehold. ;-)

Something like that but the main differences being

1. The land being owned by someone separate from the owner of the bricks and mortar (until the owner decides to buy the land) and

2. The owner of the land being the government until whenever the house buyer decides to buy the land. In the meantime the house buyer owns the house outright (but not the land) and has to maintain it and the gardens etc as if it's a normal house ownership.

The point being that the builder of the house never gets the opportunity to profit from just hoarding the land, the builder is only there to build the houses.

Edited by billybong

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