Transcript A new direction for London`s housing

A New Direction for London’s
Housing? An Alternative View
Christine M E Whitehead
LSE
Evolving London
GVA Second Series, October 13th 2014
Kings Fund, London
The Housing Problem: Is there
anything new to say?
• At one level not really – everyone thinks they know the
problem but no-one really knows the answer
• Housing now regularly comes top of the list of political
concerns, especially in London
• Problems include affordability; access to owneroccupation and generation rent; lack of social housing;
and most importantly low levels of new supply
• The two biggest problems are: plans are unrealistic and
political courage is very limited (nil?)
What are the big issues?
• Shorter term problem arising from the financial crisis
and the subsequent near closure of the mortgage and
development funding markets
• Longer term problem about the slow and inadequate
response of new supply to changing demand
• The volatility of house prices and the concentration of
demand in London
• Structural changes in tenure and affordability
• Reductions in government support for both supply and
demand - which are unlikely to be reversed whatever
the result of the election
• Plans need a reality check
The basics 1:
London’s
demographics
• London’s population grew
by 88,000 a year 2001-11 –
1.1%
• Young population: births
exceed deaths
• Substantial net
international inflow
• Large net flow out to rest
of UK
• But net outflow has been
lower during recession
• So both shorter term and
long term pressures
How big is London’s housing
problem?
• Updated projections
suggests 53,000 homes a
year required
• This still implies falling
headship rates for 25-34s.
• ‘No age group worse off’:
63,000 homes a year.
• Alan Holmans: 23,000
affordable homes a year
• 15 boroughs housing a third
more households in over 20
years?
• London’s housing shortfall
could be around 30,000
homes a year
What has been happening?
• Looking at the 2534s
• Many fewer single
person households
• More ‘others’
• More couples – with
and without
children.
What might
happen 2011 to
2021?
2011-21 - from DCLG 2011 Homes needed or released
New 15-24
124000
15-24 to 25-34
535000
25-34 to 35-44
285000
35-44 to 45-54
-6000
45-54 to 55-65
-52000
55-64 to 65-74
-91000
65-74 to 75-84
-56000
75-84+&over to 85&over
-199000
• Cohort requirements from
DCLG’s 2011-based
projection (based on
53,000 pa)
• 149,000 homes released
by households aged 35-74,
many from moves out of
London – but will there be
somewhere for them to
go?
• Biggest impact of
undersupply likely to be on
groups with biggest net
requirement
The Basics 2: Economic Fundamentals
• Building more will not have much immediate effect on prices –
unless everyone is convinced that we can and will go on doing so
for a very long time. The evidence of the past 30 plus years is
against this. So no easy or immediate benefit – even if numbers can
be increased rapidly;
• The recession has reduced household formation – so any economic
improvement is likely to offset demographic changes putting
further pressure on the market resulting in higher prices and lower
standards of housing and occupancy;
• The demand for housing rises not just with demographics but with
incomes – so economic success means higher demand. The easiest
and worst way of reducing house price increases in current
conditions is to have a recession – especially in London – this is NOT
what anyone wants;
• So unless fundamental reductions in demand from existing
households the problem will not be solved
• But that is not a reason not to try
The Basics 3: What are we going to
build?
• Plan assumes (has to assume?):
- building within the GLA boundary
- building high and high/super density
- building for the private rented sector
- continuing to build significant
proportions of social and affordable
housing;
• Planning permissions have now risen in line with
requirements and starts beginning to come forward;
• But very different development model from before the
crisis and many reasons (including experience) to expect
completions to be far behind.
The Basics 4:
Where are we going to build?
• Latest suggestions:
- Opportunity /housing zones
- Garden cities and/or cities within cities?
- Change of use from commercial
• Greenbelt/greenfield?
• All must be tried, but
• All have major issues (including the potential fro
building the slums of the future) and likely to be
slower than predicted
• Still massive political objections to development
The Basics 5: Who will build/finance?
• Established developers – can they expand and do
they want to?
• Smaller and medium sized builders (inc self build)
– major planning and cost issues
• Bringing in developers and contractors from
other countries – need knowledge and support
• Role of institutional funders – the wall of money
but management skills?
• Local authorities: only with partners
• Housing Associations: social and private renting?
The Basics 6: Role of Government
• Planning not the only issue – but still many
barriers
• Vast number of government initiatives –all
currently very small and need to be maintained
and developed into a more coherent whole
• Most initiatives if they work will work slowly need stability and commitment
• At regional level – micro monitoring and
management having some success
• The basics are still that there is less money and
more uncertainty
Conclusions
• If London is to remain a world city the housing problems
will not go away;
• Those who are prepared to pay more and live in worse
conditions will outbid those who can make other choices;
• Need to do all that is possible to build – but new initiatives
take longer to get going;
• Can more be done in more traditional ways – especially in
the outer suburbs;
• Can intermediate tenures play a larger role?
• Need to improve outward mobility;
• Need to tax established households more effectively;
• Need commitment and stability in both policy and the
macro-economy!