NEIER: Land Markets Henry G. Overman (LSE & SERC)

Background Bring own perspective on key themes within the review Challenge the Evidence Base and opinions from stakeholders within the region.

Context NELEP economy relatively weak headline economic indicators Long run challenges from structural change exacerbated by recession High public sector employment and transfers make area vulnerable to cuts

Problems in local land markets Contaminated industrial sites needing remediation Weak demand -> low rental values -> lack of private sector development (short and long run) Residential stock of low quality and limited range Despite relatively low residential prices an affordability problem (income & employment)

Policy interventions Public sector investment to decontaminate sites and get development ready Direct investment (in partnership) in commercial/residential Schemes to subsides private sector Use of planning restrictions to achieve long term policy objectives (brownfield, tenure and quality mix)

Stakeholders assessment Widespread feeling that substantial progress Broad support for long term objectives Downturn causing severe problems Funding constraints limit use of existing policy mix (£££) to tackle problems Rents ‘too low’ which has helped create employment but in low value added activities EZ a major opportunity to attract high VA Continued concerns about affordability and quality/range of existing stock

More of the same? Why have transformative projects not lead to substantial improvement in economy? More needs to be done or … Supply side (regeneration) responses not very effective?

The regeneration problem Structural weaknesses – Demand relatively inelastic (i.e. not responsive to price) – High vacancy rates and availability make supply relatively elastic Further expansions in supply -> area wide falls in prices rather than increased occupancy Avoiding this requires demand to be v. responsive – Improvements in quality of stock – Improvements in general built environment

‘But it worked so far’ At small spatial scales demand can be quite responsive as a result of displacement from lower quality sites But at regional scale such displacement is ‘zero- sum’ Regional wide supply increases – Decrease regional prices – Reshuffle employment from existing to improved sites [high deadweight costs] – Disguised by use of occupancy rates to assess success of supported developments

Policy implications Need to recognise problems Supply led responses to current demand side problems will exacerbate long term issues Need careful coordination at regional level to limit deadweight (RDA didn’t manage this according to legacy documents) No reason why EZ should help address this problem unless strong coordination mech

Residential development Similar problems exist for higher end residential development (shuffling round existing stock of households) But do care about quality of residential stock per se If private sector development still feasible in this part of market might be only short run response consistent with long run objectives

Wider planning issues Policies that raise cost of private sector development – Brownfield – Mixed use Cheshire and Hilber cost of offices in Birmingham similar to San Francisco (mostly driven by planning constraints)

Wider planning issues (cont) General lack of responsiveness of planning system to price signals especially when run counter to long term objectives – E.g. call centre versus town centre – Relative prices of different types of space

Policy implications Limitations of existing supply side policy interventions (Much) greater cross LA-coordination needed Aggressive intervention insufficient to offset costs imposed by planning system Demand side (particularly improved skills) far more important than more supply side