Better view of the chart, without the cropping, here:
This picks up on an email I circulated to some colleagues a couple of weeks ago:
Those of you who were at yesterday’s zoom will recall a brief bit at the end when we spoke about the need for better short statements challenging the MUSTBUILDMOREANDMORE orthodoxy in English housing. I said I would make a start and hoped that others would join in. Please do comment or write…. If it takes off we’ll put it on a shared document [29/11 This is now at least visible and open to comments. We can make it a google document if people want.]
I had been triggered by talking with one of our new students who is also a Labour councillor in a London Borough. This is what I just sent him (anonymised)
I am just surfacing after a month dominated by moving house (& downsizing in the process from 6 rooms to 3). I guiltily realised that I never did reply to your request for reading / data suggestions on whether increasing the supply of dwellings, irrespective of price, would bring down the cost of housing in London. Aren’t there better ways of securing affordable housing, you asked? Your officers always insist…
It’s an important issue and the dominant orthodoxy has dominated London, and British, planning for decades. Challenges are mounting up and I hope that other colleagues will join in giving the best possible answers. I’m going to circulate this to some allies (without your name) and hope we can build up a useful document.
For a start I would read this paper by a whole group of authors including our (Bartlett) Josh Ryan-Collins
Sophus O S E zu Ermgassen, M. P. Drewniok, J. W. Bull, C. M. Corlet Walker, M. Mancini, J. Ryan-Collins and A. Cabrera Serrenho (2022) “A home for all within planetary boundaries: Pathways for meeting England’s housing needs without transgressing national climate and biodiversity goals” Ecological Economics201: 107562 https://bit.ly/3AGgapU
Sections 1 and, especially 2, are a critique of English housing policy and the supply obsession. This is very up-to-date and useful. In my view the best short treatment of the issues.
(The rest of this fascinating paper is about how the UK’s carbon budget would be gobbled up by anything approaching 300,000 homes a year nationally.)
Also very useful, and even more recent is this paper, not directly on your question but showing how supply-boosting government policies have tended to boost developer profits, not output
Foye, C. and E. Shepherd (2023) Why have the volume housebuilders been so profitable? The power of volume housebuilders and what this tells us about housing supply, the land market and the state, CaCHE, https://housingevidence.ac.uk/publications/why-have-the-volume-housebuilders-been-so-profitable/
Specifically on London, this is the position we (Just Space) took in 2016 and will now have to update for the new London Plan https://justspacelondon.files.wordpress.com/2017/12/js-response-to-housing-strategy-2017.pdf
Then appeared this article from the TCPA (whose journal is at last available online) Murray, C. and P. Phibbs (2023) “Evidence-lite zone: the weak evidence behind the economic case against planning regulation” Town Planning Review 94(6): 597-610
https://www.liverpooluniversitypress.co.uk/doi/10.3828/tpr.2023.24. It’s part of a whole issue which covers ‘resistance’ (to neo-liberalism)
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Bob Colenutt writes (1 December)
The Ryan Collins et al article is very powerful. But I am still not quite clear about the dynamics however, particularly the spatial dynamics and I welcome further discussion.
Agreed that price movements nationally clearly do not correlate neatly with supply, and increases in supply do not make a significant impact on house prices. The article points to overconsumption by those on higher incomes as one factor. I would suggest that pricing strategies by housebuilders is another. But even so demand and supply relationships are at still at play though in in complex ways. It seems to me at a local level, and in the second hand market that dominates prices, demand and supply are a factor in house price movements.
Moreover, regional and spatial variations in prices suggest that supply and demand are still very important. The notion of a low demand area correlates with lower prices, and conversely a high demand area correlates with higher prices. This is not due only to spatial differences in wages and incomes but also due to variations in demand. Housebuilders want to build in high demand areas foremost.
The shortage of social rented homes is a matter of absolute shortage of these homes. So we don’t want to suggest in our messaging that more of these properties should not be built. Even if the PRS sector is reformed there will be still be a need for a lot more social rented homes, whatever happens to the private housing market.
Although I agree with the argument that more homes will not bring down prices at a national level of analysis, you can’t take demand and supply of houses out of the equation at a local level. In Oxford we make the case for more housing not because it will bring down prices but because there is an absolute shortage of affordable homes. It seems to me that the real problem is the lack of affordable homes not the number of homes built or on the market.
However I do agree that national and local housing targets are pretty meaningless. They do not equate with meeting housing need in a genuine sense and cannot ever satisfy market demand in booming areas like Oxford. Nor can they meet demand for socially rented homes. But what I am not clear about from a policy point of view is the alternative. If we say that the number of new homes is not the issue (in Oxford say) what is the supply side policy? Are we saying it can found in the under-occupation, inefficiencies and inequalities in existing properties, and how do you tackle that? Thus supply is an issue but only to found without as much new building.
There are also issues about the quality of existing housing particularly its energy efficiency which again is not about targets of new supply but investment in current stock. Maybe we need a target for that. .
Anyway just some thoughts
Thank you for pursuing this!
all the best, Bob
Please do add material and/or comment below, or email m.edwards@ucl.ac.uk
Michael Edwards writes: an interim comment on Bob Colenutt, 5 December 2023
Bob I value this comment a lot and knitting it in to the rest of the argument and then boiling it down to short versions will be a good challenge. But my initial comments are:
- How can we argue that inadequate supply is not the sole or main cause of unaffordable housing when evidently supply/demand interactions do play some role? The public debates are so polarised that it’s easy to get driven in to over-simplification. The main answers are about time and space, by which I mean…
- SPACE: It helps to think of housing markets as whole sets of sub-markets, overlapping and inter-penetrating. The sub-markets are all to some extent potential substitutes for each other, for some buyers. (Flats for bungalows; Witney for Jericho, new for old). Changes in supply in a particular sub-market can have effects on prices in that sub-market which may ripple out to effect others. Developers (big ones) operate multiple ‘outlets’ (selling offices) and adjust their outputs in each to the level they think they will be able to sell annually without having to offer discounts or otherwise drop prices. And of course we know that house prices are determined across the whole stock, in which new construction may be around 1% per annum so, at best, a slow way to try to influence overall prices.
- TIME. Those who have tried to estimate how long it would take for increased housing supply in England to bring prices down. zu Ermgassen and others put it well in their §2: “Even if there are housing supply constraints, evidence suggests that expansion of the housing stock may have a limited effect on housing affordability. Estimates of the sensitivity of UK house prices to increases in housing stock consistently show that a 1% increase in housing stock per household delivers a 1–2% reduction in house prices (Auterson, 2014; Oxford Economics, 2016; MHCLG, 2018). This is minimal in the context of a 181% increase in mean English house prices from 2000 to 2020 (£84,620–£253,561; HMLR, 2022).”
Of course the housing stock is an accumulation of buildings of various ages and many of the events which influence today’s prices for individual homes are long past: infrastructure networks, social infrastructures, designations like green belt and conservation areas. Many of these act over long periods. For example the rapid designation of conservation areas in England since the late 1960s has, de facto, almost frozen the supply of additional dwellings in the areas designated.
References cited in the quote:
Auterson, T., 2014. Forecasting House Prices (Working Paper No. 6). Office for Budget Responsibility.
HMLR, 2022. UK House Price Index – UK Land Registry https://landregistry.data.gov.uk/app/ukhpi/browse
MHCLG, 2018. Analysis of the Determinants of House Price Changes. Ministry of Housing, Communities & Local Government, London.
Oxford Economics, J., 2016. Forecasting UK House Prices and Home Ownership (Report for the Redfern Review).
Last point, for the moment: nobody (tell me if I missed it) has integrated into the affordability analysis the effect of social class changes since the 1970s: the increase in income inequalities (fastest during Thatcher) wealth inequalities (very rapid more recently and itself both an effect and a cause of house price inflation) and shrinking of the social wage. No ‘market’ could possibly be expected to meet everyone’s housing needs in such a society and we should hypothesise that the housing provision system we have would be good at meeting the preferences of what they judge to be the asset-rich strata of society, and perhaps their children.
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