Centre for Cities

Housing crunch

The recession is starting to hit home - literally.

Between April and June, 11k homes were repossessed - up 71% compared with the same period last year. The Council of Mortgage Lenders now estimates that 45k homes will be repossessed this year, up from 27k last year.

Which is obviously bad news for thousands of homeowners. But it's not as bad as the last downturn in 1991, when repossession orders hit 186k and the actual number of houses repossessed peaked at 75k.

Adam Boulton asked Hazel Blears about the housing market last Sunday. She said that homeowners at risk of repossession could ask their local council to buy back either all or part of their property. This was one of the measures in the Government's housing rescue plan, announced last month - a £200m scheme to help up to 6k families avoid repossession. But last night, Nick Robinson revealed that this scheme would not be in place until January at the earliest.

Meanwhile, the CML has just issued new arrears guidance to try and limit the number of repossessions, and make sure repo really is the last resort for lenders. But as the FT pointed out last week, this guidance is a voluntary code - not legally binding.

So although measures are being put in place to limit the number of repos, the numbers will continue to rise for the rest of this year - and into 2009.

In other housing news, The Observer reported last weekend that only "one or two" eco-towns are likely to materialise - from the original shortlist of 15. As I said in The Economist in July, eco-towns will only work if the Government picks a very small number of schemes. And in my article in The Guardian's Future of Cities supplement (earlier this month) I said: "Quality, not quantity should be the goal. The final shortlist should include only the best and most viable schemes. One excellent eco-town will be better than 10 dodgy ones."

New Housing Minister, Margaret Beckett, will make the final decision on eco-towns early next year. Here's her first big speech, to the Home Builders Federation - which didn't mention either eco-towns, or the Government's 3m housing target.

PS Former housing minister, Caroline Flint, is in next month's Marie Claire - with best mate Jacqui Smith. Apparently, they like doing karaoke together - Madonna and Cyndi Lauper are their personal faves...

The R word

Until this week, the R word was off-limits. When I mentioned it to a Treasury adviser last month, he winced. But then Mervyn King mentioned it in Leeds, and Gordon dropped it into Prime Minister's Questions. And today, the ONS has confirmed that the recession is here. So it's OK, we can all say the R word now.

The UK economy shrank by 0.5% in the 3 months to September - the first decline in output since 1992. Today's provisional numbers from the Office of National Statistics show that manufacturing output fell by 1.0%, and services output by 0.4%. Hotels and restaurants were hit hard, with a 1.7% drop in output. The only sector to grow was government services like education and health.

These numbers are only provisional, and could be revised down further. And GDP is likely to contract further in the fourth quarter. The only relief was that growth in the second quarter was confirmed at zero.

Look out for next month's Pre-Budget Report, when the Chancellor will need to revise down his growth forecasts. In March, Alistair Darling was predicting growth of up to 2.75% next year - way above today's expectations. 

I was in Birmingham yesterday, talking to an audience of business people from Birmingham Forward about the recession and their city's performance.  Cities like Birmingham are still trying to get their heads round what all this means for them. Until recently, the focus has been on the City and the housing market. But with unemployment now heading for 2 million and beyond, cities outside London will inevitably start to see redundancies on their patch. What's notable is that the growth sectors of the last decade - financial services, construction and retail - are the ones that are being hit hard now.

We're currently working with Leeds, Brighton and Bristol - to find out what the impact of the recession is likely to be in those cities - in sectors like financial services, retail and manufacturing. Look out for that, in December.

Rugg Review of private-rented housing

Despite the downturn in the housing market, the UK is still too obsessed with homeownership. Earlier this year, we called for an expanded and improved private rented sector - especially for young people, who are not yet ready to buy. Since the summer, demand for rented homes has increased - but the quality of private landlords is still variable.

Today's Rugg Review into the Private Rented Sector (PRS) includes a number of welcome proposals to drive up the quality of privately-rented housing, and drive out the "very small proportion" of dodgy landlords. Here's the executive summary - and full report.

Almost 2.5 million homes in England are currently rented from over 500k private landlords. And the proportion of under-30 households renting has increased from 33% to 43% since 2001. The problem is that half of private rented homes fail to meet the Government's decent homes standard - worse than in either the owner-occupied or social housing sectors. Rugg's proposed new light-touch licensing system will require private landlords to apply for a permit to rent - which could be revoked if they fail to meet basic standards.

Rugg also says that the Government should encourage more good landlords and higher levels of institutional investment, to "grow the business of letting". We agree. We know from our own research that cities - particularly fast-growing ones like Bristol and Cambridge - urgently need more high-quality private-rented housing. A bigger, better PRS would boost worker mobility - which will be especially useful in a recession.

New Housing Minister Margaret Beckett has welcomed the Review - so has Tory housing spokesman Grant Shapps, and Shelter's Adam Sampson. So it must be on the right track.

Meanwhile, the Government's 3 million new homes target (by 2020) is looking ever more unrealistic. The new Homes & Communities Agency - which goes live on 1 December - should review the target, and include a higher proportion of new homes for rent.

A month is a long time....

I'm off for the rest of this week, recovering from my month on the road - at party conferences, World Bank, etc. And what a long month it's been....

Four weeks ago, Vince Cable told the LibDems that Gordon Brown was a twitching corpse. But now, the PM has re-found his feet amid the global financial meltdown. Or as Nick Robinson says today, he's been re-birthed.

Labour has halved the Conservatives' poll lead from 19% to 10% in the past month - and more people trust Brown/Darling to handle the financial crisis, than Cameron/Osborne. But the reality, according to YouGov, is that the Tories are still ahead - by 43 to 33.

So how did the party conferences compare? Well, the LibDems is always the smallest - and always tends to get forgotten by the end of conference season. Amazingly, the LibDems totally forgot to mention that they now run many of our big cities - Liverpool, Newcastle, Hull, Sheffield, Cambridge. Next year, they should get all their city leaders on the platform, and champion what they're doing. Take note, Mr Clegg.

Labour started their week in Manchester, in fatalistic and speculative mood. After Gordon's speech, that all shifted to slightly inflated optimism. But the febrile reaction to Ruth Kelly's resignation (at 3am the next day) betrayed a continued sense of unease. The leadership challenge is off, for now at least. All now depends on those opinion polls. Meanwhile, it was notable that the big devolvers within the Government - Miliband, Blears, Purnell - are not those closest to him. Which suggests that radical devolution to cities is not on Labour's radar.

The Tories were in a bit of a pickle in Birmingham (sorry, Eric). Overshadowed by the worsening financial crisis, Cameron and co had to contain their glee at their poll lead - and try their hardest to look like a serious government in waiting. The champagne was put on ice - literally. (I couldn't find any, until the Policy Exchange party.) High-speed rail was the biggest announcement on cities, alongside clear support for city-regions and hostility towards RDAs.

Style was a big difference between the three parties. LibDems voted on the most detailed things, with delegates waving their voting cards to remove/retain Line 8 in their eco-towns proposal. Labour Ministers had their speeches cut to 10 minutes, apart from David Miliband - who spoke for over 20. The Tories put on a kind of chat show, with shadow ministers playing Richard or Judy - and random members of the Tory-voting public, including a blacksmith, having a pop at small business regulation.

And so to the World Bank, where I talked about city-regions - while across the road, the world's finance ministers tried to avert disaster. Even I managed to put city-regions in context... 

Innovation, Science and the City

Innovation is all the rage these days - here in the US, and back home. What exactly is innovation? It's  the development of new products, services and processes - and it drives economic growth and job creation.

The US has had a competitive edge on innovation in recent years. But other countries are starting to catch up, and US investment in R&D is starting to fall behind. Leading US think tanks are now coming up with plans for the next Administration to boost US innovation. The Brookings Institution in DC published proposals earlier this year, for a National Innovation Foundation. And the Centre for American Progress published its National Innovation Agenda last year.

The UK Government has focused a lot of policy time and effort on innovation over the past decade. It's been one of the Treasury's five drivers of productivity, and last year's Sainsbury Review re-emphasised the importance of science and innovation for the UK economy.  

We've just published our latest report on innovation - Innovation, Science and the City - by Chris Webber. We argue that UK innovation policy has been too narrowly focused on science and technology - and has spawned a very confusing array of initiatives and programmes. In Birmingham, for example, businesses have to choose between 55 different innovation initiatives across 29 different organisations and partnerships.

Instead of all these multiple different initiatives, we think that cities need to get the basics right - by delivering good transport and faster planning decisions. We also reckon that the six Science Cities have had mixed success. Here's what my colleague, Hannah Brown, says in the Guardian.

World Bank focuses on city-regions

The world's urban population topped 50% for the first time this year, according to the United Nations. 3.3 billion people now live in urban areas across the world - that will rise to 5 billion by 2030.

This projected rapid increase in urbanisation has triggered renewed interest in cities at the World Bank. Traditionally more concerned with rural populations, the Bank is now aiming for "a rebirth of its urban programmes" - and will be producing a new Urban Strategy next year.

The Bank is particularly concerned about governance and finance issues, in developing cities like Cairo and Sao Paulo. As these cities continue to grow, their real economies spill over traditional political boundaries, and across multiple different jurisdictions. This makes it difficult for the Bank's funding to get through and have maximum impact.

The Bank's Urban Development Unit has recently got interested in city-regions and metropolitan governance. Which is why they asked me over this week, to speak at a seminar yesterday on the emergence of city-regions in England. I presented this paper - written by Kieran Larkin and Adam Marshall, at Centre for Cities - on the case for city-regions (and the difficulties), including the example of Greater Manchester.

Manchester is obviously very different from Cairo. But they are both "under-bounded", and their metro areas face similar governance issues - the need to collaborate across political lines, to co-ordinate different funding streams, to reduce disparities between prosperous and underperforming areas, to ensure accountability. These are universal issues facing all modern urban economies. 

PS The World Bank audience was totally gobsmacked at how centralised the UK is. They couldn't believe that our cities have so few financial powers, and get 80% of their funding from Whitehall. Like us, the Bank believes that greater decentralisation and fiscal autonomy are vital for cities to succeed. 

UK cities enter recession

So, it's official. According to the IMF, "the world economy is now entering a major downturn...the major advanced economies are already in, or close to recession..."

After +1% growth this year, the UK economy will go into recession next year - the first full year of negative growth since 1991. The Fund's half-yearly report has cut our 2009 growth forecast from +1.7% to -0.1%. And, to use economists' jargon, "the risks are on the downside" - which means it will probably be worse than that.

In his Budget speech six months ago, the Chancellor was not forecasting recession. Instead, he was looking forward to growth of up to +2.25% this year, and +2.75% in 2009 - way above today's projections. But a lot has happened since then. So look out for a massive write-down of our growth forecasts in the forthcoming Pre-Budget Report. 

And remember, these are not just abstract numbers. Negative growth means less money for public spending in the next few years. Which means less public investment in our cities. All quite worrying, really.

Alistair Darling arrives here in DC tomorrow (Thu), for the World Bank's annual meetings, after yesterday's co-ordinated cut in interest rates. The Federal Reserve told me tonight that they had choreographed that co-ordinated move, in order to maximise the impact of the interest rate cut here. But it doesn't appear to have worked so far, as the Dow fell another 2% and the FTSE 100 dropped 5% - its worst 3-day run since October 1987.

PS It's only six weeks since Darling's infamous Guardian interview - when he said the economic times we are facing are "arguably the worst they've been in 60 years". Back then - I know, it seems ages ago - Alistair got a load of stick for exaggerating the problem. Now, the IMF says this is "the most dangerous shock in mature financial markets since the 1930s". Seems like Alistair was onto something, after all.

  

Obama v McCain

Am back in Washington DC - will be speaking at the World Bank later this week, about Greater Manchester and city-regional governance. The Bank is in the middle of updating its Urban Strategy, and is keen to find out more about our proposals on city-regions - and how cities like Manchester are collaborating with their surrounding towns and cities. More on all that later...

I arrived just in time for the latest Presidential debate - which I reckon Obama won. CNN pollsters today put Obama at 49% and McCain at 44%. And tonight's debate just reinforced that.

• 54% of CNN viewers say Obama did better tonight - only 30% think McCain won it
• 57% say Obama would handle the economic crisis more effectively - only 36% went for McCain
• 65% think Obama is more likeable - only 28% like McCain
• And 57% say Obama is more intelligent

The "town hall" debate came from Nashville, Tennessee. Half the 90 minutes focused on Issue Number One - the economy. But neither candidate said much new. These debates attract so much attention, and millions of viewers - but are too stage-managed, and don't really add much.

The main surprise was the set - which was terrible. Clunky, old-fashioned, more 1984 than 2008. Anchorman Tom Brokaw was stuck behind a schooldesk-type thing, and struggled to keep time. Our own Question Time looks positively space-age by comparison.

The best bit was the "focus group tracker" - a real-time opinion poll of 25 uncommitted Ohio voters - which ran throughout the debate. (The BBC Parliament channel should run one at every Prime Minister's Questions.) It clearly showed that Obama did better than McCain, and is very popular with Ohio women. Every time he spoke, the female tracker went through the roof.

The third and final debate is next Wednesday. McCain will need to do a lot better, or hope that women stay home on November 4.  

Congestion charging: West London consultation ends

Consultation ended yesterday on the future of the western extension to London's congestion charging zone. Any major changes would have to wait until the end of 2009, at the earliest. There are three main options:

• Keep it
• Drop it
• Change it

Possible changes include: (1) a charge-free period in the middle of the day - for the western zone only, (2) making it completely free for residents, throughout the whole charging area, (3) making it easier to pay, with direct-debit account-based payment.

Boris recently hinted that he's in favour of changing the scheme, rather than ditching it altogether. The proposed changes would be a good idea, but they would reduce revenues. In 2007-08, £73m of the £268m total revenues came from drivers paying late (and higher) charges. The new account-based payment system would eliminate most of that £73m. And if West London residents get a charge-free period in the middle of the day, those in the original zone will want the same.

Meanwhile, consultation in Greater Manchester ends this Friday 10th, on its Transport Innovation Fund package - and its proposed congestion charging scheme. All ten Greater Manchester councils will vote on the package in December. Seven need to say "yes", otherwise it won't happen.

We've just published this note on congestion charging. It sets out the economic benefits and costs - and shows that these are finely balanced, and will vary from city to city. It highlights that certain groups - e.g. SMEs and those with poor access to public transport - are less likely to benefit. And it argues that congestion charging is primarily an economic, rather than an environmental, one.

On balance, we support the Greater Manchester package - because it will trigger almost £3bn of new and much-needed transport investment. But advocates of the scheme have got their work cut out, and will need to make their case very effectively in the weeks ahead.

Reshuffle - the full pack

After Friday's Cabinet reshuffle, here's the rest of the non-Cabinet line-up:

• Lord (Andrew) Adonis replaces Rosie Winterton as Transport Minister of State. Rosie is off to DWP, but remains Minister for Yorkshire & Humber. Transport is a new one for Adonis, who has been Mr Education for Blair and Brown over the past few years. He was also a LibDem councillor in Oxford in the late 80s.

• Lord (Paul) Drayson - the multi-millionaire motor racing peer - replaces Ian Pearson as Science Minister, at DIUS. Pearson becomes Economic Secretary at the Treasury, replacing Burnley MP Kitty Ussher - who joins Rosie at DWP.

• Tony McNulty replaces Stephen Timms as James Purnell's number two at DWP. Stephen goes back to the Treasury (again), for his third stint as Financial Secretary.

• Former CLG Minister, Phil Woolas, replaces rising star Liam Byrne as Immigration Minister.

There are rather a lot of Lords in Gordon Brown's new-look government. Peter Mandelson leads the pack. Paul Myners is also made a peer and becomes Financial Services Secretary, at the Treasury - beefing up Alistair Darling's ministerial team. And comms supremo Stephen Carter is moved from No 10 to the Lords. Alongside Adonis and Drayson, that adds up to quite a few unelected ministers. 

...Which helps to explain why Prime Ministers don't really like the idea of an elected upper chamber. If the House of Lords were wholly elected, Gordon (or any other PM) wouldn't be able to insert unelected ministers into his team.