The money pit, not April 27, 2006
Posted by Brickonomist in Homelessness, Housing investment, Party politics.add a comment
In a revealing answer to a written parliamentary question, Housing Minister Yvette Cooper makes much of the fact that “since 1997 the Government have consistently invested more in housing than they have received in receipts [from sales of council housing]“.
This just goes to show how tiny tax-funded investment in housing is: for the first six of those years, investment exceeded receipts by an average of only £1bn a year, and in 2004-05 the net investment of around £2.4bn amounts to around one quarter of one percent of England’s GDP.
To put it into a bit more perspective, consider that in the most recent year with available data (2002-03) housing accounted for 1.2% of all government expenditure, compared to 21% for health, 14% for education, and 6.5% for defence. That year, our government spent more on “Culture, media and sport” (1.6%) than on housing.
Housing didn’t always have such a low priority for government. In 1980-81 housing accounted for 6% of government spending, and even Thatcher’s government spent more on it than New Labour.
So what happened? Perhaps today’s government thinks the problem of inadequate or insufficient housing is a relatively minor one today. Is that really tenable when a million children still live homeless or in overcrowded or unfit housing, with serious consequences for their health and education?
Jane Jacobs, 1916 – 2006 April 25, 2006
Posted by Brickonomist in Writers and theorists.add a comment
Jane Jacobs, the original, eclectic and highly influential author of “The Death and Life of Great American Cities” and many other works on urban life, died today in Toronto. I am only beginning to explore her ideas myself so I’ll leave you with the relevant Wikipedia entry and another blogger’s recent appreciation.
Key worker housing – not exactly selling like hot cakes April 14, 2006
Posted by Brickonomist in Housing economics, Housing markets.add a comment
In my last post I suggested it was better to put subsidies into supply (‘bricks and mortar’) than into demand. Here’s a story from Inside Housing that suggests I might be wrong:
Key public sector workers snub new build scheme
More than half of all homes built for sale under the government’s £690 million scheme to house public sector workers are lying empty despite a concerted effort to fill the vacant properties.
Just 615 of the 1,393 shared ownership homes that had been built by the end of February as part of the key worker living programme have been sold.
The Office of the Deputy Prime Minister figures, obtained by the Liberal Democrats, also showed that 223 of 1,424 properties earmarked for intermediate rent are vacant. Andrew Stunell, the Liberal Democrat housing spokesperson, said it was ‘a phenomenal waste of money’.
Looks like people prefer to take the money offered by the government in its ‘Open Market HomeBuy’ scheme and pick out their own home. But what if the problem is not too little money going into OMHB but too much?
A development director from one large housing association who did not want to be named said prospective buyers would continue to shun key worker properties as long as the government allocated large sums of money to its open market Homebuy scheme. Prospective buyers preferred using the equity loans offered through Homebuy to buy homes on the open market, he said.
Then there’s the eligibility criteria. At the moment ‘key worker’ housing is available only to a fairly limited range of public sector workers. So,
The government is helping housing associations to fill properties by broadening access to the scheme to include more occupational groups and allowing units to be converted to general shared ownership using a cascade mechanism.
Of course, one of the attractions of the key worker scheme for the government was that it could be targeted at their favourite kinds of workers. Relaxing the criteria may make the scheme less attractive to politicians.
Housing subsidies – people or places? April 6, 2006
Posted by Brickonomist in Housing economics, Housing markets, London, Overcrowding.add a comment
Over at the Adam Smith Institute blog, Eamonn Butler asks:
Housing Benefit aims to give poorer families the money they need to rent a home. So it is bizarre that politicians want to build and own low-income housing too. Why not just pay, and let the private market provide?
US housing economist Ed Glaeser made a similar argument back in 2000:
all government-provided public housing should be sold off and replaced with vouchers that allow residents to move freely.
Glaeser’s hope was that this would de-concentrate poverty, as poorer families moved from the large-scale housing projects in the inner cities to mix among the wider population. I’m not convinced, however, that this would actually work so well somewhere like London, where the scattered distribution of social housing arguably reduces neighbourhood segregation by income, and where our limited supply of developable land and extremely high housing costs might force poor families reliant only on housing benefit to cluster together in the cheapest areas.
Back to Butler. Here’s a few other reasons why relying solely on demand-side subsidies might not be such a winning plan:
- It would be hugely expensive. The current housing benefit bill is around £13 billion a year. Most of that goes to tenants in social housing, and you’d probably be looking at doubling their chunk if they all had to pay private sector rents, which are around twice as high. The savings from bricks and mortar subsidies, meanwhile, would be neglible, since net bricks and mortar subsidies are, well, neglible. Social housing is actually almost self-financing.
- It would distort the private rented sector, as rents would rise because of the massively increased demand from subsidised ex-council tenants, which would require yet more housing benefit for those already in the private rented sector. Presto, the HB bill goes up even higher.
- It would harm work incentives. The withdrawal of housing benefit as income increases is one of the major factors behind the high effective marginal tax rates faced by low-income households, and thus a major cause of worklessness. Making all those ex-council tenants pay private sector rents will require a lot more housing benefit, which means a lot more people with less incentive to work. The solution here would be to make housing benefit a flat rate for everyone, but the cost of that would again be enormous and somehow I don’t think Dr Butler would approve.
- It would put homeownership beyond the reach of more tenants. Butler criticises social housing on the grounds that it has become too expensive for tenants to exercise their Right to Buy their council home. But private tenants have no such right, and never will, so abolishing social housing will abolish any chance that many tenants have of every becoming home-owners. Again, I’m not sure this is something that Butler would actually support.
Butler also says that the problem of overcrowding in social housing could simply be solved by reducing under-occupation. But even if it was possible or desirable to force everyone currently under-occupying to move to a smaller home – and it is neither – we would still have overcrowding, because the percentage of households overcrowded in London’s social housing is higher than the percentage under-occupying.
In conclusion, I think Butler’s right to call for more mobility for social tenants; for example, there is much to be said for a policy of selectively selling off social housing in poor areas to help poorer households move into rich areas (and, hopefully) to help regenerate the poor areas would probably be a good idea. But I fear his simplistic solution of simply abolishing social housing and throwing tenants onto the mercy of private rented landlords (who social tenants have an entirely justifiable mistrust of) would just be an incredibly costly means of increasing segregation.
