The Politics of Housing Supply Kate Barker Housing Studies Association Conference April

Outline What are the objectives of policy? How far are these objectives being met? Policy choices and policy levers:  Supply versus environment  Where to locate supply?  Can the market meet demand?  Government intervention in the land market  The case for housing tax reform Political barriers to effective action

Policy Actions Labour:  Regional planning  PPG3 to PPS3 – land supply focus  Social housing grant  FTB support schemes Conservatives:  Localism/City Deals  NPPF  Affordable rent regime  FTB support schemes

Political Objectives Labour:  200,000 homes by 2020  Use it or lose it  New towns and Garden Cities Conservatives:  100,000 starter homes over 5 years  10,000 sub-market rent  Extend Help to Buy

Other Objectives Decent homes for all Housing mobility Well-regulated private rental sector Adequate social rented supply Planning response to market signals Less volatile housing market More equitable access to home-ownership

Objectives met? New supply fails Source: CLG UK Housing Completions

Three Effects of the Financial Crisis Fall in growth of effective demand:  demand reflects incomes as well as households Greater regulation of the mortgage market  mortgage market review; Financial Policy Committee Fall in supply capacity  decline of SME builders; supply of materials; skill shortages

Mortgage Rates Continue to Decline Average quoted household interest rates (a) Source: Bank of England Inflation Report February 2015

Housing more affordable than pre-crisis? Sources: Bank of England, Halifax, Nationwide, ONS and Bank calculations.

What happens to excess households? Household formation partly endogenous - young people 90,000 more each year/concealed households; ONS projection assumed household size falls - migration estimated at 30% of growth Space within stock - 635,000 empty homes (2013) - 216,000+ long-term empty (over 6 months) million over-crowded households million under-occupied homes

The key policy issues/choices More generous housing vs land take, water, energy, waste and materials Costs/benefits of regional economic imbalances and housing provision Garden cities/urban extensions/public land: locations and local support? Infrastructure spending/fiscal constraints

Changing financial incentives Taxation problematic  Property taxes: Council tax/inheritance tax/CGT unpopular and complex  Land taxation: Development taxation efforts complex and ineffective CIL/S106 viability issues PRS: regulation and rents

Summary Policy proposals suggest big issues will again be avoided Supply constraints not just ‘planning’ Next government will need to act fast to boost supply; key choices are:  Continue as is  Force through garden cities and urban extensions  Tackle tax More likely to stick to FTB stimulus and (?) rent controls