Centre for Cities

Housing Market Renewal: where is it now?

Over the past 12 months, housing has become the zeitgeist for economic growth - and rightly so. Cities Outlook 2013 has shown that if we put the place back in to policy by understanding the variation in housing markets between cities, it has the potential to have quick economic wins as well as a more efficient long term strategy.

 

Those cities that are most unaffordable in terms of home ownership and rental (the top right) tend to have low vacancy rates and should focus on expanding the supply of housing. This will bring the price of housing down, allow existing people to buy property and encourage new workers to live and work there – all of which will boost the economy.

But the more complex story happens in those places that are relatively affordable already but often suffer from vacant or low quality stock (cities in the bottom left). Here, a focus on retrofitting and refurbishment will make the city more attractive, encouraging businesses and workers to the area while also raising house prices for existing owners.

Essentially, this is what the old Housing Market Renewal Initiative (HMR) focussed on.  The HMR targeted places in the Midlands and the North of England where the housing markets suffered from low demand and high vacancy rates and the area suffered from low wages and a poorly performing economy.

The initiative ran between 2002 and 2011 and initially worked with 25 local authorities but was expanded to 38 in 2006. In total, between 2002 and 2008, £1.2 billion was spent predominantly on refurbishment (40,000 refurbished properties and 1,100 new builds) and a further £1 billion was allocated to it for between 2008 and 2011. However, the initiative wasn’t without local political difficulties as housing demolition raised concerns about empty streets and destroying social cohesion which led to the formation of community lobby groups.

Unsurprisingly, some of those local authorities targeted by the HMR initiative are found in our top ten cities by vacancy rate. Indeed, seven of the ten cities that suffer most from vacant stock were targeted (shown below in bold).However, due to a combination of austerity measures and the political tensions within the HMR initiative, the Coalition Government scrapped the program and assisted in the formation of a Transition Fund which is managed by the Homes and Communities Agency.

Addressing problems caused by weak demand requires public sector involvement. Government should look to provide incentives and funding - for example, cuts to tax rates on refurbished or renovated properties, or a more efficient use existing policies, such as Get Britain Building or ideas from the Montague Plan - to enable cities to improve their existing housing stock without the priority of new build. This, in turn, will have beneficial impact on the local economy in both the short and long term.

Follow Joe on Twitter: @joesarling

Maintaining the golden glow

After six months of relative silence, the debate about the Olympic Legacy reappeared on front pages yesterday with a joint article by David Cameron and Boris Johnson. And it appears that they have been reading our report “A Marathon, not a Sprint” that we published in September. 

In our report we looked at the experiences of past Olympic cities to see what London can learn from them.  In their article the PM and the Mayor used the same approach to show that London is already taking lessons on board and to restate their commitment to the 2012 Olympic legacy.

Here are some of the recommendations we made and how they have been reflected in Cameron’s and Johnson’s article:

1. Use the success of the Games to help business grow. The agreement announced yesterday between the British Olympic Association (BOA) and International Olympic Committee (IOC) to allow businesses to promote their Olympic experiences will benefit suppliers across the country and is likely to unlock more export-led growth.  The fact that the Prime Minister is engaged in conversations about getting British firms involved with future Olympics is also a sign of the Government’s commitment to making the most of business opportunities created by the Games.
2. Develop a clear legacy vision for the Olympic park. The speed with which the conversion of the Olympic Park and venues is progressing is also good news. With a number of venues reopening this summer and several events already scheduled, the threat of these venues becoming white elephants appears to be receding.
3. Use the Games to deliver a social legacy for east London. The commitment to deliver more jobs and apprenticeships, housing and social infrastructure as part of the legacy is welcome.  Yet it is still unclear whether any of the new development will be located outside the Olympic Park, and whether local communities will benefit from new developments. In our report we showed that most of the direct Olympic interventions were limited to the Olympic Park and its immediate boundaries. East London remains one of the most deprived areas in the country. The challenges of low skills, unemployment and poverty are deep rooted and can’t be resolved through developing the Olympic Park alone. The Host Borough Unit is committed to narrowing the gap between Olympic Boroughs and the rest of London, and has seen some success. But broader initiatives focused on addressing deprivation are still missing from the Olympic legacy framework.
4. Be patient and be ready to invest more. A long term plan for legacy development outside the Olympic Park needs to be put in place, and the Government needs to commit to it and be ready to invest more to make it happen. It remains unclear whether any progress has been made in this regard. It took Barcelona’s Olympics over a decade to be recognised as a legacy success, and that was based on considerable political commitment and more investment. There is no reason to believe that it will take less than that in London.

The Olympics produced a once in a lifetime summer of sport.  Its legacy is likely to take more than a lifetime to realise.  

Related articles

East London leads the way on business base growth in the Capital

2012 was a big year for UK cities; now 2013 is all about delivery

David Cameron and Boris Johnson: Six months on, we won't let the Olympic Games legacy die

The Olympic legacy has failed to bring jobs to London's East End | Rushanara Ali

Milton Keynes shows the way out of the housing crisis for our cities

'So how many houses do we have to build in our city'? This is the somewhat surprised question that has been posed to us on a number of occasions in media interviews for Cities Outlook in recent days. It is not for the Centre for Cities, just as it is not for Whitehall, to prescribe a magic number to answer this question. But a look to Milton Keynes suggests how cities should go about tackling their housing affordability problems.

Milton Keynes has been one of the UK’s strongest city economies in recent years. But unlike many other strongly performing cities, most recent house price data shows that at £219,000 its house prices were not only below the South East city average but also below the English average of £249,000. This is despite the city seeing the strongest population growth of all UK cities between 2001 and 2011, when its number of residents increased by over 17 per cent.

This is partly explained by the pro-development stance taken in Milton Keynes. By allowing supply to move broadly in line with demand – the housing stock increased by 18 per cent between 2001 and 2011, the largest of any English city – house prices are much lower than many other cities in the south east. This in turn makes it easier for people to access the job opportunities that exist within the city’s economy. Despite the large increase in its population, the employment rate in the city remained on average almost six percentage points above the English employment rate over the 10 years.

Milton Keynes' consistent expansion allows it to play an even bigger role in the success of the national economy. Our other strongest performing cities should look to the example set by Milton Keynes to deliver the housing growth needed to tackle the affordability crisis that they face.

To own or to rent: housing is a spatial issue

Another data nugget from the Census which was released last week reveals patterns of residence by tenure. With much talk on needing to boost the construction sector and a renewed focus on housing, our analysis clearly shows that tenure patterns have a spatial element to them.

Oxford and Cambridge have the lowest rates of home ownership (47 per cent of households) and high rates of private rental (28 and 27 per cent, respectively). Hull, London and Liverpool make up the next lowest rates of home ownership (50, 51 and 54 per cent, respectively) with Hull showing the highest rate of social tenancy (28 per cent). Hastings has the highest proportion of people privately renting (29 per cent), while Warrington, Wakefield and Wigan have the lowest (11, 11 and 12 per cent, respectively).

Contains Ordnance Survey data © Crown copyright and database right 2012

Clearly, the factors influencing the housing tenure patterns in different cities are varied. For example, cities with high levels of deprivation where individuals and households have limited access to decent jobs and income are likely to have higher shares of social housing. 

In other cities high house prices mean people can’t afford to buy and have to rent. Whilst in other cities with high levels of renting this will be down the size of the student population.

Regardless, one thing is for sure – different cities need to identify and respond to their different issues.

Follow Joe on Twitter: @joesarling

Introducing Private Finance 2: Son of PFI

As part of his Autumn Statement, Chancellor George Osborne is tomorrow expected to unveil a wave of infrastructure projects including new schools, hospitals and roads, to go forward under a revamped version of the Private Finance Initiative, to be known as Private Finance 2 (PF2).

When in opposition, both Coalition parties were often critical of the last Labour Government’s use of PFI to fund long term infrastructure investment across the country, insisting that the details underpinning PFI contracts left the taxpayer exposed to higher costs over the long-term.

More recently, a 2011 Treasury Select Committee report deemed the benefits of PFI “illusory” and noted that, despite often incurring a higher cost of borrowing than traditional routes, Government departments had become “addicted” to PFI as a means of reducing up-front cost and moving expenditure off the public balance sheet. This prompted the Government to scale back new PFI investments and announce a review of existing PFI contracts in an attempt to renegotiate the terms upon which they were based.

However, since this announcement and against a backdrop of a faltering economy, the Government has been under mounting pressure to set out how it intends to reform PFI to support major public sector building works in the years ahead.

Details emerging today suggest we will soon know the answer. So, what do we expect to be new about PF2?

• Profit sharing – Under the revamped PFI, the Government will become a minority stakeholder in project companies, giving it a seat on the board and a share of profits. Reports suggest that this will typically equate to a stake of around 20%, but it could be as high as 49%.
• Transparency – It is thought that project companies will be made to publish details of profits and also make future taxpayer liabilities transparent.
• Tighter timelines – In order to speed up the assembly of a project pipeline and avoid a re-run of the PFI process where projects could take up to five years to reach financial close, it appears there will now be an 18-month limit on project negotiations.
• Room to re-negotiate – The Government is also expected to introduce new contract clauses to allow hospitals and local authorities room to renegotiate service agreements with other providers, if they are more cost effective.

The Government will hope that PF2 is capable of kick-starting major investment programmes across the country, but that reforms ensure the taxpayer is able to share in any returns made on projects, as well as underpinning delivery risk. However, until we know more about how these measures will work in practice as part of a broad programme of investment, it is impossible to know whether the flaws of the previous regime will re-surface.

As always, the devil remains in the detail.

Follow Ben on twitter: @BenCities

The return of city centre living?

ONS has released today Census population data at geographies below a local authority level. And as it is increasingly doing, it has provided the data in a very user friendly way to compare it to 2001. I strongly suggest you use a couple of minutes of your Friday afternoon to look at it.

A very quick play with it shows how city centres have become increasingly attractive as residential areas in some cities in recent years. As the screenshot below shows, this is very clear in Manchester – its city centre has transformed from a place to leave to a place to live.

A similar trend is seen in other cities too, such as Leeds and Sheffield. We’ll look to do a more detailed analysis on these figures soon.

City Matters - my weekly cities reading list

I hope you enjoyed some, if not all, of my reading suggestions from last week.  I received some great suggestions via Twitter and email from fellow city geeks, which are much appreciated.

This week I’ve gone for a mix of the current, the old and the classic.  I hope you enjoy these and please continue to suggest others that I should read and recommend. 

• ‘Homeownership and Entrepreneurship’ by Philippe Bracke, Christian Hilber & Olmo Silva (2012) - highly relevant analysis of how buying a house influences whether someone is likely to start their own business.
• ‘Regional Economic Resilience, Hysteresis and Recessionary Shocks’ by Ron Martin (2011) - provides substance to the widely used notion of resilience and explores how places can and do respond to economic shocks and what this means for their long-term success.  
• ‘Abundance of land, shortage of housing’ by Kristian Niemitz (2012) – critiques some of the reasons offered to explain why UK housing costs have increased over the last decade before calling for a more ‘liberal’ planning system.  
• ‘Contrasts in Agglomeration: New York and Pittsburgh’ by Benjamin Chinitz (1961) - all I can say is read this and enjoy.  10 pages of great insight into how industry dynamics affect city success.
• ‘Soft City’ by Jonathan Raban (1974) – a travel writer’s perspective on what makes cities so appealing and revolting.  Includes a great chapter on anonymity in crowds that reminds me of travelling on the tube every day.

Follow @AndrewCities on Twitter

Stalled Site Survey: Tell us where your local developments are at a standstill

Is there a stalled development you walk by daily? Whether it’s a ‘hole in the ground’ or a half-finished structure, part-finished homes and offices are a symbol of the sluggish economy.

 

Source: http://www.thetelegraphandargus.co.uk/news/4704148._No_talks_to_buy_back_Broadway_site_/?action=complain&cid=8066048

Developments are stalled around the country. As the economic downturn has made housing and commercial projects less viable, many developments have been held up. Sometimes, third parties can step in to provide temporary funding, equity, or rental guarantees to make completing the project profitable again.

The Centre for Cities is working with the European Investment Bank and DCLG to evaluate the feasibility of Urban Development Funds (UDF) across the UK. As a part of our research, we want to find out where development is stalled in order to gauge the potential for UDFs to invest in projects in UK cities. That’s where you come in.

There’s only one way to know how many developments are at a standstill and where they are: ask. We are calling on the power of our blog, mailing list and social media to collect data on stalled developments. The next time you pass by that stalled site, please take a picture and/or send us the location. You can do this via

Twitter: @urbantweetuk #stalledsites

Short Survey: http://www.surveymonkey.com/s/G6S939N

Email: [email protected], subject line: 'Stalled Sites' 

We are collecting information through 10 October, so please submit at your earliest convenience.

By telling us where stalled sites are, we can let Government and banks know where there is potential to invest and get Britain building again.

Thank you for your support.

City matters - my recommended reading list

One of the many joys of working at the Centre is having the opportunity to read and think about some of the great research that is undertaken across the globe looking at cities, their economies and why they matter to the future wellbeing of individuals, businesses and communities (however you define it). 

Also if you’re like me, you rely on a very wide range of sources and contacts to alert you to all this great work.    

So in my very humble way I thought I’d start a weekly blog highlighting my recommended reading list of research on cities that I’ve come across that week.  My recommendations whilst obviously personal and subject to all my biases and judgment errors, will be guided by the following criteria: a) those I’ve actually read; b) contains or is based on research; c) is accessible to a wider readership; and d) I enjoyed reading them.

So my initial list is:

• ‘Education or Creativity: What matters most for economic performance?’ by Emanuela Marrocu & Raffaele Paci - combines Glaeser’s ‘human capital’ and Florida’s ‘creative class’ ideas into three separate groups – creative  graduates,  bohemians and non-creative graduates – and looks at the effect of these groups on the economic performance of 257 regions across the Europe.
• ‘Defining a Great Street’ by Kaid Benfield - photo-based consideration of what makes a great street drawing on city streets from across the US and Europe.
• ‘When Migrants Rule: the legacy of mass migration on economic development in the US’ by Andrés Rodríguez-Pose & Viola von Berlepsch – fascinating analysis showing the lasting effects of migration in the late 19th and early 20th century on the current economic performance of US counties. History matters!
• ‘Great Britain’s Second-Order City Regions in Recessions, 1978-2010’ by Tony Champion and Alan Townsend – compares the jobs performance of UK’s big city regions in the current recession to show how much ground cities have lost  and how this differed from previous recessions.
• ‘New Geography of Jobs’ by Enrico Moretti – brilliant rich and insightful exposition of why and how the modern economy benefits certain people and places more than others.  He also has some interesting things to say about urban manufacturing.

I hope you like them.  Please feel free to add to my list and let me know other research that I should be reading.

Follow @AndrewCities on Twitter

 

The lights are on but no one’s home

Housing is increasingly becoming the focus for economic growth and as such, today, David Cameron partnered Nick Clegg to announce yet more initiatives to stimulate house building.

While detail is somewhat thin on the ground, the Government appears to be laying the foundations for a quicker planning process. For example, current restrictions of affordable housing quotas will be scrapped where developers can prove that it is this which makes a project unviable and, hence, stalled. This will certainly be a contentious area where developers can renege on the affordable housing agreements and start building – who will judge this criteria? Moreover, will there will be targets to ensure that house building starts as soon as the affordable housing criteria is removed?

Planning teams are also expected to pick up the pace of their work or face being put in to a ‘special measures’ group allowing developers to bypass councils altogether. Notwithstanding the issue of who judges the ‘pace’, there are likely be capacity issues within many depleted planning teams.

There were also some funding announcements, such as FirstBuy, the deposit opportunity for first time buyers, which is to be extended by £280m and new capital funding of £300m for affordable housing but it has also been difficult to distinguish what has already been announced.

Fundamentally, the measures are based upon the premise that the planning system is the key issue both in the short term and long term to getting the more houses that the country needs.  While there are definite gains to be made by tweaking the system, we also need house builders to pull their weight too.

Many house-builders bought land at the peak of the market and are now stuck, understandably unwilling to incur losses. But this means there are large amounts of land which have permission granted but on which no building is taking place.  This restricted supply of both land and housing is pushing up prices.

Part of the problem is the lack of competition within this industry. It is dominated by a few large firms who are not incentivised to keep prices competitive nor incentivised to sell on land they can’t/won’t build on.  Options for encouraging more competition within the industry as well exploring ways to use the tax system to ensure that land with planning permission is built out within a reasonable time-frame need to be explored further.  Recent initiatives such as IKEA’s cheap, flat-pack houses, as well the refocus on the role of self-build offer a glimpse as to how the industry might develop in the future. 

There are clearly two sides to the story in solving our housing issue – the trick is finding out whom and in which areas the problem lies with.

More information on housing can be found here.

Follow Joe Sarling on Twitter: @joesarling