Inequality kills? November 20, 2006
Posted by Brickonomist in Housing inequality.add a comment
There’s currently a good deal of support here in the UK and in other countries for ‘mixed communities’ – mixed in terms of income and/or tenure, that is (though in practice governments seem a lot more willing to try and break up concentrations of poverty than concentrations of wealth). In the UK this is part of the justification for requiring affordable housing to be included in private developments, while it has been taken further in the US with policies such as Moving to Opportunity that focus on transplanting low-income households into ‘better’ areas.
Apart from the perceived benefits of reducing the concentration of poverty itself, socioeconomic mixing is argued to improve the ‘life chances’ of poor people through neighbourhood effects (basically, being around richer people is good for your job prospects your child’s education). Here’s a bit of research suggesting that “exposure to more economically successful neighbors” accounts for much of the gap in educational attainment between black and white households in the US.
But are poor people actually better off in affluent neighbourhoods? According to one rather significant measure, perhaps not: death rates appear to be higher for poor people who live in rich areas than for those who don’t:
(here’s the chart source – thanks to Truck and Barter for the link)
The researchers suggest two reasons for their new findings:
The first is purely economic, as the cost of living in an affluent neighborhood could leave poor people with little disposable income to spend on essential goods and services, such as health care and healthy food, and less time to take advantage of the benefits of living in a high-income neighborhood.
“Economically this group may be worse off,” said Winkleby. Access to free social services and health care could also be a factor because these services are often concentrated in low-income neighborhoods, she said.
Another possibility is that poorer people in higher-income neighborhoods fare worse for psychological and social reasons.
A discrepancy in a person’s social position relative to others may have an effect on a person’s health, said Winkleby. “You look out every day and you’re at the bottom of the social ladder,” she explained.
The researchers caution that their study does not mean poor people are necessarily better off living in low-income neighborhoods. There could be other benefits to living in a wealthier neighborhood, said Cubbin. “We don’t want to imply that poor people should move to poor neighborhoods, where there continues to be great need.”
I’m surprised by how strong the relationship seems to be – and not having read the full research report (abstract here) I’m curious about how the results relate to the seemingly contradictory earlier findings of the same researchers.
Second homes for students August 10, 2006
Posted by Brickonomist in Housing economics, Housing inequality, Housing markets.add a comment
A couple of years ago, Shelter released some research by Bethan Thomas and Danny Dorling which argued that the housing market was becoming one of if not the main driver of inequality in the UK. “If current trends continue”, they said, “in 30 years time the ten per cent of children in the wealthiest areas will have access to more than 100 times the housing wealth of those ten per cent of children growing up in the poorest parts of the country”. This matters because
Housing wealth gives families access to greater security and opportunity.
- Parents can access housing wealth (through downsizing or remortgaging) and help their children financially. Housing wealth gives families greater borrowing power. Children receive a windfall on their parents’ death.
- Children born into families with no housing wealth inherit nothing and have little financial help throughout their lives.
A child will not be able to earn their way out of this disadvantage – a social position determined by who their parents are and, mainly, by where they happen to live – very easily. For children born into families with low housing wealth or none at all, there will be large parts of the country to which they cannot consider moving in the future. This geographical immobility will affect children’s life chances and will impact on Britain’s economic well-being.
And now here’s some fresh evidence:
Second homes for students boost housing market
Published: 08/08/2006 – 10:39:26 AM
House sales have been boosted by parents buying properties for their children while they were at university, new research shows today.
Around 83,000 homes were bought on behalf of students last year, a 26% increase since 2000, according to the study by finance firm Direct Line.
The number of houses occupied by students was predicted to reach 100,000 by the year 2010.
The so-called university effect helped increase the number of “second properties” to 2.6 million, up from 2.3 million five years ago.
Around 1.6 million of the second properties were buy-to-let, while others included holiday homes and work bases.
Andrew Lowe, head of home insurance at Direct Line said: “The continued boom in house prices, the rise in parents buying properties for their children and the growth in tele-working are among the key drivers of the UK’s buoyant second properties market.”
There’s a double effect here: in buying second homes for their student children, wealthy parents are not only giving them an educational advantage but, because housing supply is quite inelastic, they’re creating further price pressures and pushing housing further out of the reach of poorer families, further reinforcing inequality.
Superstar hamlets? July 19, 2006
Posted by Brickonomist in Design, Environment, Housebuilding, Housing inequality, Housing markets, NIMBYs, Planning, Rural housing.add a comment
In an earlier post, I wondered whether London might one day turn into the kind of ‘Superstar City’ researchers have identified in the US. But according to today’s Guardian, it looks more like the Superstar syndrome (high income households taking over areas that are unique, desirable and feature little or no new construction) is happening in many parts of the English countryside:
It may be an over-simplification to argue that a form of social apartheid grips rural England, with traditional country dwellers confined either to the remaining council houses or the tied cottages of the big estates, rarely in contact with their neighbours – the superannuated, and rich. But the divisions are apparent.
A good place to start is the roof of England. Drive on the country’s highest road, where the lush North Pennines briefly meets a more barren landscape, and the pressures and conflicts of the countryside are soon evident. Down the winding Hartside pass, old farmhouses and buildings – which once supported hundreds of agricultural workers – have become the preserve of a new rural elite. At the bottom of the pass, and over the Eden valley on the edge of the Lake District, Kit Scott-Harden, aged 59, has farmed 300 acres on a tenancy most of his working life. With his income around £45,000 annually – 60% met by subsidy from the EU’s common agricultural policy – he’ll be lucky to break even this year.
Most farmers are now in their mid to late 60s. The industry is rapidly contracting. Farmers’ sons often leave the land. The result: empty properties. As upland farmers, and the few remaining agricultural workers struggle to make ends meet, wealthy incomers splash out hundreds of thousands for small cottages – and, sometimes, close to £1m for larger properties. Over two years ago a two-bed cottage in the hamlet next to the Scott-Harden farm went for £280,000 to an investor. “Terrifying price,” he says. “And it would be worth much more now.”
There’s usually plenty of space to build in these areas – the main obstacles are NIMBY attitudes, an over-protective planning system and inadequate funding for new social housing in rural districts.
Lord [Ewen] Cameron, a cross-bencher in the Lords and former chairman of the government’s Countryside Agency, can see what is happening from his farm in south Somerset. He is alarmed by the rigidity of a planning system blocking affordable housing initiatives. This has led to “serious demographic mismatch in the countryside”. Why, he wonders, do the authorities approve plans to convert buildings into holiday cottages, yet refuse plans for low-cost homes? He would like to see redundant farm buildings re-classified as “brownfield land” so that they can benefit from urban-style grants and incentives. “Why can’t we build, say, 50% for straight purchase and the rest for renting? That would benefit people all round.”
But, as things stand, Mark Shucksmith, a professor at Newcastle upon Tyne University, a government adviser and expert on rural housing and planning, says the countryside is becoming too skewed in favour of one class. “While people have a clear aspiration to live in the countryside, it is becoming much more exclusive,” he laments. “You have to ask that if only people with higher incomes can afford the move, how this chimes with the [government's] agenda of choice that is rooted in the context of social justice.”
As I said, NIMBYism is a big reason for resistance to new housing developments in rural areas, but it’s hard to disentangle pure selfishness from the quite justified perception of much new housing supply as ugly, sprawling and car-centric. This takes us back to the vexed questions of design quality and planning and funding new public transport, which I hope to look at in more detail in the near future.
Superstar cities July 19, 2006
Posted by Brickonomist in America, Housing economics, Housing inequality, Housing markets, NIMBYs, Planning.add a comment
According to Joseph Gyourko, Christopher Mayer and Todd Sinai, ‘Superstar Cities’ arise when high income households are sorted (or sort themselves) into areas that are (a) desirable, (b) unique and (c) feature low rates of housing construction. Their very restrictiveness makes them desirable, and perhaps their desirability makes them more restrictive. A similar dynamic certainly appears to be happening in some parts of the UK, but will it ever go so far as to make London, for example, the exclusive domain of the rich?
Here’s the abstract from NBER (the full paper is here):
Differences in house price and income growth rates between 1950 and 2000 across metropolitan areas have led to an ever-widening gap in housing values and incomes between the typical and highest-priced locations. We show that the growing spatial skewness in house prices and incomes are related and can be explained, at least in part, by inelastic supply of land in some attractive locations combined with an increasing number of high-income households nationally. Scarce land leads to a bidding-up of land prices and a sorting of high-income families relatively more into those desirable, unique, low housing construction markets, which we label “superstar cities.” Continued growth in the number of high-income families in the U.S. provides support for ever-larger differences in house prices across inelastically supplied locations and income-based spatial sorting. Our empirical work confirms a number of equilibrium relationships implied by the superstar cities framework and shows that it occurs both at the metropolitan area level and at the sub-MSA level, controlling for MSA characteristics.
Income inequality and housing affordability July 15, 2006
Posted by Brickonomist in Housing economics, Housing inequality, Housing markets, Uncategorized.add a comment
There’s evidence that relative low income can lower subjective well-being: people feel worse when those around them earn more. But can earning relatively less make you objectively worse off, even if your own income doesn’t fall?
Apparently so. In a great bit of research, Janna Matlick and Jacob Vigdor find evidence that the increasing incomes of others can raise the price we pay for housing, leading to more income spent on housing or overcrowding. Especially in tight housing markets, like we have in many parts of the UK, “the poor do worse when the rich get richer”:
Do rising tides lift all boats? If raising the income of the wealthy increases the prices that the poor must pay for certain necessities, then it becomes more difficult to argue in favor of policies that exacerbate inequality on the grounds that they at least do not lower the incomes of the poor …
In the end, the evidence on this question is mixed, and it seems relatively clear that the answer depends critically on the elasticity of housing supply. In this sense, the study of demandside determinants of housing affordability problems should not be conducted in isolation from study of the supply side. In the United States, tight housing markets tend to be those where incomes are rising rapidly at the high end of the distribution, while incomes at the low end trend upward only slowly if at all. In these areas, the poor have experienced greater crowding, and there is at least some evidence that their expenditures on housing increase as well, though not in all specifications …
Do price effects negate the impact of “trickle-down” effects? The answer appears to be “sometimes.” The key to making rising tides lift all boats appears to be ensuring that there are more than enough boats to go around.
What this paper doesn’t cover is the further effect of higher house prices on inequality: in a rising market, those who could afford to buy enjoy windfall gains which they can use to help their children buy when the time comes, distorting the market further and leaving those who couldn’t afford to buy in the first place (and their children) even further behind. This effect is already quite marked in Britain.
Giving with one hand, taking with two June 19, 2006
Posted by Brickonomist in Housing economics, Housing inequality, Housing investment, Housing need, Party politics.add a comment
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!
Quick links 30/05/06 May 30, 2006
Posted by Brickonomist in Environment, Housing economics, Housing inequality, Links, London, Planning.add a comment
Not one but two Guardian opinion pieces related to housing today:
- Philip Pullman: The Castle Mill Boatyard will be wiped out and “developed” into a cluster of identikit houses by British Waterways and their developers. This plan isn’t only ugly: it’s daft.
- George Monbiot:Housing inspectors could make a huge impact on climate change – by enforcing the laws on energy efficiency.
Monbiot is scathing about the government’s new, voluntary “code for sustainable homes”, so I wonder what he thinks of this:
Climate change is top priority of London Plan review
Mayor of London Ken Livingstone announced that his London Plan Review will set radical new objectives for planners and developers that will require new developments to connect to “decentralised” local energy supplies and achieve the highest standards of sustainable building design. The Review also doubles the carbon emission reductions that developments must achieve through onsite renewable energy from 10% to 20%.The London Plan Review also proposes to set carbon dioxide reduction targets – a 20 per cent reduction by 2015 and a long-term target of a 60 per cent reduction by 2050. This is the first time that statutory carbon reduction targets have been set for London.
The Mayor is proposing a series of new development, transport and energy policies all with the aim of making London an exemplary and sustainable world city, adapting to inevitable climate change and reducing future carbon emissions.
Looking at the detail of these policies in the text of the Mayor’s Further Alterations to the London Plan, it seems to be a similar story of lots of encouragement, ’should’-ing and good practice, but without real powers of enforcement. The new London Plan should give a boost to sustainable construction in the capital, but we’ll have to see whether it is ultimately too little, too late.
Last link today is to Housing wealth – First timers to old timers from the IPPR. Exec summary is here, key points are as follows:
combating the wealth inequalities produced by the growth in home ownership cannot be achieved with subsidies to help people onto the housing ladder. Nor can homeownership alone deliver the benefits associated with mixed communities, such as improved educational outcomes and increased levels of community participation. Rather than providing large subsidies, the government should support people at either end of the lifecycle with policies that encourage ownership of a wider range of assets.
