The Politics of Housing Supply

Kate Barker Housing Studies Association Conference

April 9 2015

Outline

• What are the objectives of policy? • How far are these objectives being met?• Policy choices and policy levers: Supply versus environment Where to locate supply? Can the market meet demand? Government intervention in the land market The case for housing tax reform• Political barriers to effective action

Policy Actions

• Labour: Regional planning PPG3 to PPS3 – land supply focus Social housing grant FTB support schemesConservatives: Localism/City Deals NPPF Affordable rent regime FTB support schemes

Political Objectives

• Labour: 200,000 homes by 2020Use it or lose itNew towns and Garden Cities• Conservatives:100,000 starter homes over 5 years10,000 sub-market rentExtend Help to Buy

Other Objectives

• Decent homes for all• Housing mobility• Well-regulated private rental sector• Adequate social rented supply• Planning response to market signals• Less volatile housing market• More equitable access to home-ownership

Objectives met? New supply fails

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

Private Housing associations Local authoritySource: CLG

UK Housing Completions

Three Effects of the Financial Crisis

• Fall in growth of effective demand: demand reflects incomes as well as households• Greater regulation of the mortgage marketmortgage market review; Financial Policy

Committee• Fall in supply capacitydecline of SME builders; supply of materials;

skill shortages

Mortgage Rates Continue to Decline Average quoted household interest rates(a)

Source: Bank of England Inflation Report February 2015

Housing more affordable than pre-crisis?

Sources: Bank of England, Halifax, Nationwide, ONS and Bank calculations.

What happens to excess households?

• Household formation partly endogenous - young people 90,000 more each year/concealed

households; ONS projection assumed household size falls - migration estimated at 30% of growth • Space within stock - 635,000 empty homes (2013) - 216,000+ long-term empty (over 6 months) - 1.1 million over-crowded households - 8.1 million under-occupied homes

The key policy issues/choices

• More generous housing vs land take, water, energy, waste and materials

• Costs/benefits of regional economic imbalances and housing provision

• Garden cities/urban extensions/public land: locations and local support?

• Infrastructure spending/fiscal constraints

Changing financial incentives

• Taxation problematicProperty taxes: Council tax/inheritance tax/CGT unpopular and

complexLand taxation: Development taxation efforts complex and

ineffective CIL/S106 viability issuesPRS: regulation and rents

Summary

• Policy proposals suggest big issues will again be avoided

• Supply constraints not just ‘planning’ • Next government will need to act fast to boost

supply; key choices are: Continue as is Force through garden cities and urban extensions Tackle tax• More likely to stick to FTB stimulus and (?) rent

controls