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PGS gains more enemies June 26, 2006

Posted by Brickonomist in Housing markets, Planning.
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The current government here in the UK wants to introduce a major reform to the planning system: a ‘Planning Gain Supplement‘ in the form of a (mostly) fixed-rate tax on a development’s ‘planning gain’, i.e. the increased value thought to accrue to a development at the moment it is granted planning permission.

There has been and will be much debate on whether this is a good idea or not (see here for a previous post on the subject, or here for a load of submissions to a parliamentary inquiry on the subject). But I was particularly interested to read in Planning magazine (not available online AFAIK) some comment on the current system of negotiated ‘Section 106′ agreements by Tony Crook and Steven Rowley, authors of research the government portrayed as supporting the case for PGS. They point out that since even the government envisages S106 negotiations being retained for some purposes, such as securing affordable housing on private developments, the question of what rate to set the PGS at becomes critical:

Should the PGS tax rate be less than the effective tax rate on S106 contribution, developers will have an incentive to minimise section 106 contributions to benefit from the lower PGS rate. But if the PGS rate is set higher than the effective section 106 rate, developers may be encouraged to contribute more affordable homes than at present.

They conclude:

Our provisional view is that the risks of introducing an optional charge [another mooted alternative to section 106] and a PGS are high and that current section 106 policy can be made to work better.

It’s actually quite hard to find anyone outside of the government itself who thinks that PGS would be a really good idea. Any time previous Labour governments have tried to do something similar, it has been swiftly abolished by the next Conservative regime. Maybe this time around they could save us all the bother by just not trying it in the first place?

Sensible comment on demolitions shocker June 24, 2006

Posted by Brickonomist in Housing economics, Housing markets, Media, Regeneration.
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Good to see someone commenting on this who has actually taken time to find out what’s happening. John Perry in Public Finance:

In the past few months alone, we have seen veteran journalist Sir Simon Jenkins in the Guardian and the programme Tonight with Trevor McDonald both attacking the notion of demolishing older houses. The Tonight programme, like several others, focused on what could be done by throwing money at one particular house, ignoring the problems of the wider area.

Meanwhile, Jenkins refers regularly to ‘Yvette Cooper’s proposal to demolish 150,000 Midlands and north country terrace houses’. Apart from the exaggeration, of which more later, there is the turn of phrase, which evokes stone-built cottages in Wensleydale rather than pokey two-up, two-down terraces in Liverpool or Stoke-on-Trent.

The prime mover against demolition has been the pressure group Save, whose assessment (on its website) is that as many as 400,000 houses will come down in the pathfinder areas. To those anxious to get on the housing ladder in the south of England, or who have invested their savings in modernising a terraced house, these figures must seem to be a travesty of housing policy. But put them under closer scrutiny, and the argument crumbles.

For a start, there are still something like 2.5 million Victorian terraced houses in England. The vast majority of these form excellent homes or can be modernised with some modest investment. But some are obsolete. That is, they are either too small, too badly designed or in too poor condition to be satisfactorily improved. Or – and this is often the case in the pathfinder areas – there are simply too many houses of the same type, age and size in the same place. For example, in Stoke-on-Trent, more than half of the housing stock is Victorian, consisting mainly of small, back-of-pavement terraces.

Sometimes, this kind of housing can be transformed and given a new niche in the housing market. As part of the local pathfinder programme, Urban Splash has converted 108 terraced houses in Salford into trendy ‘upside down’ units. There were long queues when they went on sale in April and they are now sold out. But this is redevelopment in all but name – the terraces were totally hollowed out and the yards and back alleys bulldozed. It is a tremendous example of regeneration but its effect depends in part on the scarcity value. Doing this to thousands of houses simply isn’t possible.

Opponents of demolition seem to forget that we do need to replace old houses at some point. The country currently replaces fewer than one in 1,000 houses each year – and most demolition is of tower blocks, not Victorian terraces. No-one – least of all the pathfinder agencies – is contemplating mass demolition. The aim must be selective renewal of the most difficult property, as part of the wider regeneration of poor neighbourhoods.

The other argument deployed by the critics is that local residents are up in arms against demolition plans. As Save says on its website: ‘Householders are being forced out of their beloved homes following minimal and often misinformed consultations.’ But the striking thing about many of the pathfinders is not the level of opposition, but the degree of support that they are obtaining for their renewal plans. Stoke and Hull provide two examples.

The Renew North Staffordshire pathfinder expects to replace just over 12,000 houses over 20 years. Although this might seem a lot, it also aims to refurbish or improve 63,000 houses and build 15,000 new ones. But there is no grand plan for demolition – the process is taking place at neighbourhood level, where master plans are being devised in conjunction with residents. One of the pathfinder’s innovations is the appointment of ‘residents’ friends’ in each area, answerable to the local Citizens Advice Bureau rather than to the council or the pathfinder. They help residents articulate their problems and give them independent advice. By putting unprecedented effort into involving residents, Renew is emerging with plans that have high proportions of local support – even from people whose houses might be demolished.

The Gateway pathfinder is more advanced with its renewal plans for some neighbourhoods in Hull – but still has support from residents. Houses have already been demolished, and local people are demanding faster replacement of the remaining boarded-up properties. Again, the pathfinder has used a variety of methods to find out local opinion and has high levels of support for what it is doing. It has adopted a ‘charter’, which sets out the promises made to local people. Residents engaged in the process have made a video showing their ambitions for their community. The level of support has convinced the local press, which is also calling for faster demolition of the worst houses.

The latest documentation on the pathfinders nationally – available on their websites or that of the Audit Commission – suggests that on current plans they will replace some 60,000 properties. Some further clearance might be planned in later phases, for which the pathfinders have yet to produce detailed plans. But it seems most unlikely that they will reach the total of 150,000 cited by [Simon] Jenkins, much less the absurd maximum put forward by Save. And this is over a period of up to 15 years, including of course many thousands of unpopular postwar developments as well as the cherished ‘north country terraces’. To put the figures in perspective, the pathfinders cover in total more than three-quarters of a million homes.

Spend on housing to save on health and education? June 22, 2006

Posted by Brickonomist in Homelessness, Overcrowding.
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From 24dash:

A new survey reveals that 92% of housing professionals believe Government targets to improve the nation’s health and education standards will not be achieved unless there is better quality housing for the most disadvantaged.

Behind the figures, lies the experience of housing workers that poor housing conditions affect families’ and children’s health, and from that school attendance and performance can suffer.

Investment in improving housing not only saves families from damp or overcrowded conditions but can give children an environment in which they can study and fulfil their potential.

File under ‘They would say that, wouldn’t they’? Well, maybe, but there is plenty of evidence that bad housing can have a serious impact on health and educational outcomes. Here’s a selection:

Memory of a free festival June 22, 2006

Posted by Brickonomist in International, Local government.
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Not the kind of thing you expect to see on DCLG research pages:

The Free Communes Experiments: Lessons for policy in England

Oh wait, it’s just about freedoms and flexibilities for local government. Unsurprisingly, one of the main lessons is that just because one department decides it’s a great idea to devolve more power to councils doesn’t mean they all do:

A key lesson of the FCEs is that it is important to secure the full commitment of all of the central government departments to which local authorities need to apply for flexibilities and freedoms. Without this it was difficult to achieve ‘joined up working’ at local level and for communes to secure the flexibilities and freedoms that they needed. (Similar lessons have emerged from the first round of LPSAs). It is therefore important that the Treasury, Department of Health and Department for Education and Skills and others, not just the DCLG, are fully involved in and committed to any future attempts to allow authorities new freedoms.

This most centralising of governments is going to take some convincing that “hands off” really is the best policy.

Giving with one hand, taking with two June 19, 2006

Posted by Brickonomist in Housing economics, Housing inequality, Housing investment, Housing need, Party politics.
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24dash is a pretty good site for news on housing and other areas of social policy, and they’ve done well in recruiting Richard Best of the Joseph Rowntree Foundation as a columnist. His latest adds some good detail on a subject I posted about recently, namely the paucity of net government investment in housing:

what people may not appreciate is that a whole series of changes to housing policies have sent billions of pounds to the Treasury. More than enough money to boost the supply of decent, affordable homes …

… over the last 20 years:

* Receipts from the Right-to-Buy sales of Council housing have yielded around £45 billion – but only a quarter has been recycled into improving public housing.
* The abolition of Mortgage Interest Tax Relief (MITR) – which was the corner stone of the Duke of Edinburgh’s Inquiry into British Housing, which celebrated its 20th anniversary last week – has boosted tax receipts by £30 billion, plus a further £3 billion each year.
* Stamp Duty when anyone buys a property (plus a major part of the Inheritance tax) brought in £6.5 billion last year alone.
* The Treasury has not had to put up the money for loans to housing associations through the Housing Corporation because housing associations have been borrowing – more than £50 billion since 1990 – from banks and building societies instead.
* Because of the improved economic climate, with lower levels of unemployment, the government has been paying out less in Housing Benefit to help low-income tenants.

Not convinced about that last one, but housing is clearly generating a lot of revenue for the Treasury – the Right to Buy alone has been easily the most lucrative privatisation of all. Directing a bit more of this money back towards housing seems only fair, and it’s not like there’s nothing to spend it on: Best highlights the need for an extra £2-£3 billion a year for new affordable housing, a safety net for low-income home-owners, help for elderly or vulnerable homeowners to get repairs to their homes, and bringing council homes and estates up to a good condition. He concludes:

The contrast between large financial gains to the Treasury from changes in housing policy and the continued level of misery created by bad housing, is very striking.

If only a modest proportion of the government’s increased revenue was to be recycled, a vital contribution could be made to defusing the growing crisis in British Housing. Come on Gordon Brown, housing needs a better deal!

Are we building enough new homes? June 19, 2006

Posted by Brickonomist in History of housing, Housebuilding, Housing need, London.
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Great to see Channel 4’s excellent FactCheck service back in action, especially as today they took a timely* look at housing minister Yvette Cooper’s claim that “We’ve increased the level of house building very significantly to one of the highest rates for many years now”.

It’s a good analysis too. As they say, the volume of housebuilding in 2005 was indeed the highest (at 159,000 units – see table here) since the early 1990s, but it was nowhere near the estimated annual household increase (209,000) and also way below the level of the 1980s (around 180,000 units a year), let alone the 1970s (around 260,000 units a year). They also talk to the right people, such as Adam Sampson of Shelter, who correctly points out:

When Thatcher came to power, the government had historically built 100,000 council properties a year. In 2003 the government built no more than 13,000 equivalent properties. That alone explains the massive drop in output.

Indeed. In the chart below the blue is homes built by the private sector, the black is housing associations and the grey is local authorities.

housing-supply.png

One point FactCheck might have raised is that looking just at the number of units built doesn’t tell you whether we’re delivering more housing in terms of rooms for people to actually sleep in. Clearly a hundred 4-bed houses is a greater housing supply than a hundred 2-bed flats, so the apparently declining average size of completions (especially in London) should temper Cooper’s enthusiasm somewhat (though to be fair to her, she’s seemed a lot more interested in the consequences of failure to build family homes than her predecessors).

*given the publication tomorrow of the ODPM committee’s report into housing supply and affordability

Quick links 15/06/06 June 15, 2006

Posted by Brickonomist in Design, Environment, Housing markets, Housing need, Overcrowding, Party politics, Planning.
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Sorry for the lack of posting recently – too much work, sun and football on the telly. Here’s a round-up of what’s been happening:

  • Homes to be energy-saving rated: “Every house sold in England and Wales will be given an energy efficiency rating like those found on electrical goods”. Sounds reasonable to me, but will it be introduced for rented housing too? Doesn’t seem to have been confirmed, but these people seem to think it will be.
  • MPs out of touch on housing concerns: “while 98% of the public think that a lack of affordable housing is a major issue, only 34% of MPs think the same.”
  • Redwood all at sea: Let’s build a new city on land reclaimed from the sea, says John. Not sure if this is meant to be more environmentally friendly but it probably wouldn’t be. Maybe Redwood has been inspired by Anthony Lau’s concept of Offshore Living, part of the Sustainable Living By Design exhibition at the GLA, which involves sticking people in refashioned cargo containers stacked on decommissioned oil rigs.
  • Fancy re-designing Castleford?
  • A tight squeeze: “A chronic shortage of family sized homes, planning problems and economic ‘factors’ are contributing to the growing crisis of overcrowding.”
  • Beware the winds of change: “Low income households could lose out in the government’s push towards homeownership, Dominic Maxwell warns”.

Nick Raynsford on planning obligations June 4, 2006

Posted by Brickonomist in Housing markets, London, Planning.
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Here’s an excellent article on the government’s proposed Planning Gain Supplement by former local government minister (and MP for Greenwich and Woolwich) Nick Raynsford. I’m impressed by his clear explanation of why the PGS, which at first sight appears an ideal solution to the vexed question of tapping planning gain for community benefits, may not work in the context of brownfield development:

There are serious grounds for concern [with PGS]. The first is to do with the concept itself. The PGS is predicated on the assumption that there is a significant one-off increase in land value when planning permission for development is granted. When the earlier development tax schemes were evolved, this was generally correct. It still applies to some extent, particularly with greenfield developments. However, today’s more complex planning system allows value to emerge progressively through the various stages of plan development, so the uplift at the point when permission is granted might be less abrupt.

But on many brownfield sites the position is very different. Where there has been profitable prior use of the site, there might be little or no immediate uplift in value when planning permission is granted. Demolition and remedial costs and the need for discounted lettings in the early stages of development can effectively eliminate any such immediate gain. The site might well prove very profitable in future years as the new uses consolidate, but because the PGS relates only to the immediate uplift in value attributable to planning permission, that future profit will remain uncaptured.

The example of the large-scale regeneration schemes in my Greenwich and Woolwich constituency is instructive. Through the Section 106 procedure, the local authority has successfully negotiated very substantial developer contributions towards infrastructure and social and environmental provision. Yet because many of the sites, such as the Greenwich peninsula, required very expensive decontamination works, it is doubtful whether there was any significant uplift in value when planning permission was initially granted.