Sunday, July 31, 2016

Government support for house price inflation

Last week the DCLG published a report 'More people owning their own home'  ( and I emailed the Department to find out whether any research had been carried out into the question of whether the demand side stimuli, on which the previous Chancellor had been so keen, was having the effect of making housing less affordable thereby making schemes like 'help to buy' necessary?

I was pleased to receive the link to a report that had looked into this particular scheme:

I only have the equivalent of an A Level in economics and read the financial pages of various newspapers for over 40 years so perhaps I should defer to the judgement of the eminent authors.  However, the report supplied by DCLG seemed not to answer my question but to actually make it more pertinent.  So I have sent the following email asking whether my take on the findings of the study is correct?

Dear ****

Thank you sending me the report commissioned by DCLG to assess the
'additionality' attributable to  Help to Buy Equity Loans.

The brief was actually not to address my question on the impact on
house prices of lending money to potential purchasers but does give
some clues.

The report emphasises and seems to support the operation of the 'market' and confirms
that the housing market is 'demand led' and that the researcher's approach/analysis  is 'market
led'. However, the plaudits for the scheme are that it would resist
downward pressures (ie a fall in house prices - which some/many people would welcome) and support 'house price appreciation' (making housing less affordable) so that the loans would be repaid! So the answer to my question as to whether the scheme maintained/inflated house prices is
"yes" (and based on deliberate interference in the market).

The report then says that an additional 43% or more dwellings were
built due to the scheme.  It does not answer my question as to how
many more people would have been able to afford to buy or rent if
house prices were say 20% lower in the absence of the inflated prices that could
be asked/paid as a result of the scheme? Of course the developers included in
the study responded by saying that those houses would not have been built.
However, that is because there is no requirement for planning permissions to be
implemented AND most if not all developers have paid prices for land
that factor in existing or inflated house prices.

So, am I right to conclude from this research that these demand side
subsidies all go to those who sell land to developers? and that
actually more people would be able to buy land and houses at the lower
land prices that would result in the withdrawal of the £10 billion
subsidy? Or has this thesis not been tested?


I don't think that a degree in economics (or PPE) is required to see the effect on prices of fueling demand without increasing supply, which is good news as Gavin Barwell the new Planning and Housing Minister has a degree in Natural Sciences. He should be sharp enough to question the purpose and effect of this interference in the housing market and (as a Tory) see the need to build the small houses and flats at prices which people could afford based on the levels of local earnings.

Friday, July 15, 2016

Yet another housing consultation

In my haste to respond to the latest select committee inquiry into housing supply (a couple of hours spent repeating all the old arguments, I missed the opportunity to comment on the last such investigation carried out by the House of Lords.  This concluded that the need was for 300,000 new dwellings each year for the foreseeable future.  The Lords are keen on Councils being able to build, but the fundamental point continues to be missed - the need for smaller dwellings aimed mostly at potential down-sizers. 

The latest consultation can be found here and is open until September.



Capacity in the homebuilding industry


1                 1. whether the numbers of builders and types of firms in the homebuilding industry is sufficient      to  meet housing demand
  1. the structure of the homebuilding industry, in particular the role of small and medium-sized developers
  2. housebuilders' business models and how risk and uncertainty affect incentives to expand
  3. the sustainability, size and skills of the building industry workforce
  4. why fewer homes are being started and completed than the number of planning permissions being granted
  5. the extent to which current planning approaches cause delays to the building of new homes
  6. innovative approaches to increasing the housing supply, for example self-build, off-site construction and direct commissioning by central government and local housing companies
  7. the role of development finance and how it can promote or constrain housing investment

(Questions 1 to 8, excluding 7)

There are many interested parties better qualified than me to respond to these questions.  However, the point should be made that the difficulty in meeting housing needs starts with these being wrongly defined. What is required is a better distribution of the housing stock that means creating a better balance between the size of households (about 2.4 and going down) and houses - with one and mostly two spare bedrooms.

Housing will never been fairly distributed while it is treated as a commodity.   It will be hoarded by those with the means and rationed by the housebuilders to sustain prices.  It is very unlikely that a select committee would recommend Government adopt the level of regulation of prices and rents that would be required to ensure a fairer distribution of housing so the recommendation should be to build only smaller dwellings.

These would be cheaper to build in terms of land, materials and labour and subsequent running costs (with an eye on fuel poverty) and more conducive to neighbourly behaviour than the unsocial or even anti social housing being provided by the volume housebuilders.  Small housing is more affordable and an increase in supply concentrated in one market sector might actually have a influence on price. 

The key is to provide attractive alternatives to the 8 million elderly households looking to downsize - and release larger homes on to the market.

There is a need for a model to show how many new dwellings would be required if aiming to make the level of occupancy more efficient rather than to aim to provide a new dwelling for every new household. The dynamic of downsizing will mean a significant number of sub-divisions of larger dwellings to meet the declining household size.

Response to Question 7

The Committee should be provided with all available information about self and custom building and the associations of individuals looking for serviced plots and putting their names down on the registers being kept by the local planning authorities.  To make any real contribution in terms of numbers LPAs should be reserving parts of larger allocations and sites being granted permission.  By linking supply and demand (the self builder is the consumer and the supplier with an incentive to complete asap) theses houses are more likely to be delivered than those being drip fed into the housing market.


Readers may have specialist knowledge to help the committee.  However, I feel that the same question will be asked until Government has the courage to treat housing stock as a 'commons' which needs to be regulated rather than a jungle where the fittest (richest) prosper at the expense of the weakest. 

Sunday, July 3, 2016

Article 50 and material considerations

A couple of things have emerged from the Brexit debate of interest to planners - apart from the possible brake on house sales and construction.

It is extraordinary that those urging citizens to vote for a substantial change to the circumstances affecting both them and their country could do so with si little by way of a 'plan'.  Accepting that preparing a plan would not have been easy given the uncertainties in what the EU might offer as a leaving present, this would suggest that a two stage vote should have been proposed.

The second curiosity is the apparent lack of understanding of the role of Parliament as the ultimate decision -taker.  Every planner knows that decisions are only lawful if based on all material considerations (starting with any up to date plan) without any false or misleading information into account.  Yet we have a string of MPs (reflected by the media) claiming that the result of the Referendum should be paramount if not actually binding. The 2014 Referendum Act made the Referendum result advisory, and this must now be put into the balance with any obvious falsehoods (for which the blame must be placed on those responsible) and even the circumstances which seem to have changed as a result of the possible Brexit.

Perhaps most important for e Member of Parliament would be to continue to represent all their constituents and the interests of the country as a whole (I wonder whether this is in their oath?).  This must include the over 10 million people choosing not to vote in a one off referendum (placing their trust in better informed elected representatives) as well as the over 10 million too young to vote.  Their interests should not be overridden by the narrow majority of those choosing to vote.

A planning decision based solely on what a parish council might say without taking into account representations from other interested parties and also the professional judgement of experts would be open to legal challenge.  The Article 50 debate (hopefully not a trigger pulled by the Prime Minister) should show how all and only material considerations are taken int account.