To diversify housing, let boroughs build (June 2018)

[Originally published on Centre for London blog, 25 June 2018]

Build out rates – the speed with which building takes place after planning permission has been granted ­­– are one of the great mysteries of housing policy.

We talk of how many houses different boroughs can deliver, and compare it to London Plan targets, but once a borough has granted planning permission, its power is actually very limited. Planners can plan, but it’s hard to make builders build.

Under successive mayors (and in spite of falling budgets) London planners have pushed more and more permissions through the system, making it hard to lay blame at their door, but delivery has remained stubbornly slow.

Is this the result of developers sitting on sites as their values rise, of unimplementable permissions, of infrastructure or contamination problems, or of shortages of capital, bricks or bricklayers?

The Letwin Review into build out rates, commissioned by the government last autumn, has been seeking to answer some of these questions. Its analysis, published today, looked at sites with permission for more than 1,000 homes, finding that the median rate of build out is 6.5 per cent per year, with a median completion period of 15 years. Worryingly, the Review’s existing analysis for London suggests an even slower rate of 3.2 per cent per year (though this may partly result from London sites simply being larger).

As in his interim report, Sir Oliver Letwin argues that developers do not simply sit on land, hoping for values to rise before they sell it on, but they limit the rate at which they build to avoid ‘flooding the market’ and pushing prices downwards. Shortages of skills, materials and finance all play a part too, but it is this ‘absorption rate’ issue that is at the heart of slow housebuilding.

The Review will publish its policy recommendations around the time of the Budget, but Sir Oliver writes that diversifying tenure, housing type and architectural style will be central to these; build-to-rent does not compete with housing for sale, and apartments do not compete with townhouses, so these housing types can be delivered alongside each other without pushing prices down.

One big outstanding question is whether this can be achieved through the large housebuilders alone.
Diversifying the types of housing delivered should go hand in hand with diversifying the development industry: commercial developers, housing associations and community organisations all play a part, but London’s boroughs are also getting back in the game.

Local authorities could make a real difference, stepping up delivery of social and affordable housing, mixed with market housing. The schemes built to date, and many more in the pipeline, focus on sites that the market has passed over – often smaller sites owned by local authorities. Most local authorities in London either have a delivery programme in place, or are planning one, but government restrictions on borrowing continue to tie their hands.

Direct delivery by councils and council-owned companies is not a magic bullet solution to London’s complex and persistent housing and affordability challenges, but it should form part of the arsenal. If we are going to accelerate delivery, we need to let boroughs build.

Cool markets and hot debates - Housing in London (Feb 2018)

[Originally publiched in OnLondon, 23 Feb 2018]

The number of houses and flats in London grew by nearly 40,000 in the year ending March 2017 – faster than it has since the mayoralty was established in 2000 and only just short of the former Mayor’s annual housing target. Some of the growth was down to controversial conversions of offices to homes (“permitted development”), but 30,000 new homes were built too, which is an achievement to be celebrated.  

But what if this is as good as it gets? It seems almost churlish to make the point, but there is a pile up of indicators suggesting that new home building in London is about to slow down sharply. The first alarm bell is rung by falling house prices and transaction levels, as highlighted in Centre for London’s The London Intelligence bulletin at the end of January. 

House prices across London have fallen at their fastest rate since 2009, and the fall in prices and transaction levels has been particularly sharp in relation to flats in the centre of the city. A recent survey by Molior Consulting confirms this top-of-the-market slow down: less than half of the luxury flats that were started last year were sold (off-plan or on completion). 

Molior’s figures refer to flats selling at around £3 million and these may seem pretty remote from the concerns of most Londoners – luxury flat developers are pretty low on the league table of much-loved London professions. But all the moving parts are connected. As housing grant has reduced, more and more affordable housing in London is delivered through developer obligations. While the number of affordable housing starts supported by mayoral funding has been rising, as the £3.15 billion funding package agreed with the government in 2016 feeds into the system, developer contributions still account for 50 per cent or more of the total. If the flow of luxury flats slows, so will the flow of affordable housing.

And there are other factors suggesting that supply is slowing. NHBC – the National Housing Building Council – issues warranties for around 80 per cent of new build homes in the UK. These tend to be issued just before construction work starts and therefore give a good indication of future supply. The number of warranties issued in London fell from 26,000 in 2015, most of which will have been built in the bumper 2016/17 year, to 17,500 in 2016, and stayed at that level in 2017.  

While the market cools, the politics of housebuilding in London are heating up. Haringey’s proposed joint venture with Lendlease is only the most prominent of a number of controversial partnerships for housing estate redevelopment. Campaigning in Haringey has unseated council leader Claire Kober and probably sealed the fate of the Haringey Development Vehicle itself. Other councils and developers will at the very least be more cautious about joint ventures – which typically take years to plan and even longer to implement – and nothing will happen before local elections in May.

Finally, Sadiq Khan’s draft new London Plan presents a tough policy environment. The Mayor has tightened affordable housing targets, proposed residents’ ballots for estate redevelopment schemes, restricted use of industrial land and shifted the burden of development on to the Outer London boroughs, where new development is most controversial politically. Many Londoners would support most if not all of these policy positions, but the assumption that developers will live with them in return for a stake in London’s super soaraway property market may be outdated. There is already talk of some of London’s biggest housebuilders shifting their focus to Birmingham, Manchester and other places where the market seems more buoyant.

In short, the prospects of accelerating housing delivery to meet the new London Plan target of 66,000 homes a year are looking slimmer by the day. But perhaps a sharp slowdown of housebuilding would not be such bad news after all. “Never let a crisis go to waste,” in words variously attributed to Winston Churchill and Rahm Emanuel. For some years now, London’s housing market has hobbled along like a Heath Robinson contraption, with housing shortages driving land price inflation, social housing becoming an exercise in gamesmanship rather than provision of public goods, and housing targets always soaring ahead of supply like the stakhanovite fantasias of soviet planning.

Perhaps, if this model starts to look broken, we can look for alternatives. All sorts of magic bullets – housing estate redevelopment, Green Belt liberalisation, public sector land – have been aimed at and missed London’s housing targets to date, so we should be wary of singular solutions of blinding simplicity. But we could start to think about possibilities – about packages of measures that could fix London’s dysfunctional housing market.

This may indeed mean thinking about the Green Belt and estate redevelopment – ways of finding the land needed for new homes – but we also need fresh approaches to how homes are built and paid for. If slow sales are deterring traditional housebuilders, how can we rethink the institutional framework, funding structures and building methods?

Could housing benefit payments support borrowing to build, rather than being funnelled to private landlords? Could local authorities borrow more, directly or through central government bond issues, or work with pension funds and other long-term investors to find sites and build homes for rent, providing a stable income stream for both parties? Could off site construction be used at scale to supply local authorities and developers across the capital with low cost homes for vacant sites?
Tackling London’s housing crisis may mean going after some sacred cows: more focus on rent rather than sale; a positive approach to public investment and less worrying about how borrowing is treated in public accounts; more aggressive approaches to land hoarding; more direct public sector involvement; perhaps even a development corporation that can push through planning and construction across the capital.

Some of these options may be controversial – though a consensus for a radical package of reforms is growing among London’s politicians and housing experts – but watching as the market sputters to a halt seems even less attractive. To adapt Sherlock Holmes, “When we have eliminated the impossible, what remains, no matter how unpalatable, must be the housing delivery plan.”

But is there the political appetite and will to match the urgency of the challenge and the scale of the opportunity? Mayor Khan has already announced that he needs a five-fold increase in government funding for affordable housing, and roundly condemned the autumn 2017 budget for its failure to commit investment at this level. For its part, the government is cash-strapped, Brexit-blinkered, and unlikely to see much political capital in helping out a Labour mayor or London itself. The challenge – to Whitehall and City Hall – is to rise above the politics of the housing crisis, to take shared responsibility and shared credit for the bold steps needed to fix London’s broken housing market.

Man out of time for our time

Rory Stewart can seem like a man out of time, his exotic CV inviting comparisons to mid 20th Century men of letters and action such as Patrick Leigh-Fermor, who wore their learning as lightly as their derring-do.

But, while he remains an outsider, his candidacy for leadership of the Conservative Party is intriguing.  All weekend, I have been reading analyses of the EU election results that talk in terms of an irreconcilable culture war, between young, educated, cosmopolitan urbanites, and older, more traditional, patriotic town- and country-dwellers. It's a thesis that's been pitched in various forms by people like David Goodhart, Paul Collier and Matthew Goodwin, and while sceptical, I have started taking it more seriously over recent weeks, as I have read reports and watched footage of the fury of Farage supporters at his rallies round the country.

Stewart seems to cut through some of these glib anitheses. He professes almost mystical old-Tory affection for the English landscape, its military and its institutions, and has even had (limited) military service himself. But his patriotism seems very far removed from the performative blood-and-soil rhetoric adopted by some of his fellow Conservatives. And he is also clearly a modern metropolitan, extensively travelled, highly-educated, excited by new ideas such as citizens' assemblies. He seems to combine, in a slightly eccentric upper-middle class manner, both facets of our allegedly riven national character.

Indeed, unity is one of his big themes, as he travels round the country listening to people:

This whole day - whether in “remain” areas or “leave” areas is just a reminder that we have far more in common than divides us. #letscometogether pic.twitter.com/JJs3Xtze6S

— Rory Stewart (@RoryStewartUK) May 27, 2019

It's not a radical message, but it seems to come from somewhere that is heartfelt, and is accompanied by a reluctance to adopt the melodramatic poses of modern political discourse. One example: a journalist this morning quoted a description of Stewart as a 'suicide bomber' clearing the way for a Michael Gove candidacy. Stewart replied that the metaphor sat "a bit awkwardly for someone who was in Iraq and Afghanistan", but left it at that, without the pearl-clutching synthetic outrage that has become customary.

It seems highly unlikely that the Conservatives will pick a relatively untried Old Etonian as their leader (the last one was hardly a success), and the things that make Stewart appealing to me may be the very things that will rule him out. But politics at the moment seems capable of supplying, to paraphrase the Red Queen, at least six highly unlikely things before breakfast.

Eat yourself fitter?

The health stories came on like a rash last week. Kitchen sprays cause COPD, yoghurt stops heart attacks, processed food gives you cancer.

The outbreak was partly the result of the American Association for the Advancement of Science conference, always fertile hunting grounds for ‘things that will kill or cure you’ stories. But the fascination of these stories for the media never seems to fade, even though they miss two big issues.

The first is, without getting too Lenten about it, we are all going to die. Every person saved from a heart attack – where rates have dropped dramatically in recent years –  is one more waiting in line for cancer or Alzheimers.  While dying before your time is a tragedy, the slow drawn-out processes of decline that accompany diseases of ageing are miserable too.

But perhaps more seriously these stories peddle a myth of control, suggesting that we can cheat death through our behaviour.  We do, of course, know much more than we used to about the damage done to health by our own behaviour – smoking, drinking, poor diet and inactivity – as well as by environmental factors like air pollution.

But these behaviours only load the dice; they don’t determine the outcome.  Bad diet, for example, is associated with about 15 per cent of deaths from cardiovascular disease, smoking and inactivity with another 10 per cent. So three out of four deaths from heart attack and stroke have nothing to do with any of these. Of course, we shouldn’t neglect health, or downplay its impact on the quality of our lives as well as the manner of their ending, but most people dying from ‘diseases of lifestyle’ are just unlucky.

There seems to be a certain ironic obtuseness in the amount of effort we put into trying to influence the one thing that is beyond our control – our mortality and its means – while neglecting the huge threats posed by climate change, or any number of social evils, which are firmly within our grasp collectively if not individually.

Urban growth forever?

[Original published on OnLondon, 3 January 2018]

In his foreword to his draft London Plan, Mayor of London Sadiq Khan writes of London’s population growing by 70,000 every year, to reach 10.5 million in 2041. Population growth has been London’s big story for the past 30 years. Growth assumptions underpin the business case, and increasingly the funding strategy, for everything from affordable housing delivery to major infrastructure projects like Crossrail 2. But could these be wrong? Could a toxic mix of falling immigration and priced-out professionals slow or even reverse London’s growth trajectory?

Population projections – like all predictions – tend to be either lucky or wrong. As Tony Travers observed in a recent edition of Centre for London’s London Essays, population projections underestimated London’s decline in the 1960s and 1970s, then missed the first signs of recovery in the mid-1980s when London’s shallow growth was dismissed as a blip in the pattern of decline that cities were expected to pursue. But growth continued, gathering pace through economic cycles of boom and bust.

London’s population growth is not a single process, but the product of great surges of people arriving and departing, at airports and stations, maternity wards and hospices. In mid-2016 London’s population was estimated, on the basis of passenger surveys and NHS registrations, to have grown by around 110,000 in the preceding 12 months. The components of this growth were as follows.

Births	130,000	80,000	110,000
Deaths	-50,000
Domestic in-migrants	580,000	-95,000
Domestic out-migrants	-675,000
International in-migrants	220,000	125,000
International out-migrants	-95,000

This pattern has been pretty consistent in recent years: young UK residents move in to London from across the country, but more move out every year – generally to south east England. This domestic net migration from London is countered by international migration to London, and the city’s young age profile is reflected in a surplus of births over deaths.

There have been variations: in the years of the financial crisis, domestic out-migration slowed, perhaps because the credit crunch meant thirtysomethings were unable to get mortgages and so were stuck renting for longer. And the years since 2014 have seen a spike in international in-migration, potentially driven by the lifting of restrictions on Romanian and Bulgarian workers.

Could Brexit disrupt these flows? There are already some signs that things are changing. In November 2016, the Office for National Statistics’ latest estimates of net long-term international migration showed a sharp fall of 38 per cent in London. The figures are only estimates, with wide margins of error, but the ONS assessed the fall as being statistically significant. It may be a blip, but could it signal a longer-term change? Other indicators certainly suggest a slowdown: the number of foreign nationals registering for a national insurance number when they arrive to work in London dropped by 20 per cent between the beginning of 2016 and the beginning of 2017, with European nationals accounting for most of the decline.

Bringing the UK’s international migration down to “tens of thousands” as the Government has pledged would therefore have a big impact on London’s population, and it looks as if the mere prospect of tighter controls is already having an impact. Would this be offset by more people coming to London from the rest of the UK, and fewer leaving? Previous research has shown that when international migration declines (generally in recessions), domestic out-migration also slows, keeping population levels up.

But this depends on the balance of push and pull factors remaining constant: as long as London offers economic opportunity, people will come here; as long as it remains an expensive and tough city to live in, people will leave. Net out-migration has been rising since 2009 – from 30,000 to more than 90,000 – but it still has some way to go to attain its previous peak of 110,000 in 2004.

So what about births and deaths? The number of deaths in London has been pretty constant – around 50,000 Londoners die each year – but the annual number of births has climbed from around 100,000 to around 130,000 in the past 15 years. However, “natural increase” replenishment of London’s population has also been affected by immigration: 70 per cent of babies born in London in 2016 had one parent born overseas. Reducing immigration levels could, therefore, have an impact, in the long term, on that part of the picture too.

When London’s population started to recover in the mid-1980s after four decades of decline, it was driven first by domestic migration and then by accelerating international migration. Since then, momentum has grown, as freedom of movement, an internationalised economy and cheap air travel have combined to open London up, creating a city where 800,000 people – 10% of its population – arrive every year, and only slightly fewer leave.

But there is nothing inevitable about continued growth. It is perfectly possible to imagine a scenario where falling international in-migration and rising domestic out-migration combine to stop London’s growth in its tracks. If net international migration fell back by 20% a year, it would fall to around 65,000 in three years’ time – only slightly lower than its level in the early 2000s. If this was combined with a growth in internal out-migration to its previous peak, and a slight dip in births, London’s population growth could be reduced to just 17,000 by 2019 and could go into reverse the following year.

This is all highly speculative. We are still in the dark about the nature of Brexit, let alone its impact: London is still creating jobs and attracting inward investment, though business confidence remains fragile. The long-term change in international migration may be negligible, or may be counterbalanced by domestic movement.

London may continue to thrive economically, preserving and enhancing its offer to businesses and talented people from across the world, or its service sector economy may take a hit; academic research in recent months has suggested both that London will be hardest and least hard hit by Brexit. London property prices may resume their stellar trajectory, or may cool off to allow wages to catch up. It will only be in the next few years that we understand whether Brexit checks, stalls or amplifies the phenomenal population boom that London has experienced over the past 30 years.

It's-a-hard?

-->

I’m starting to wonder whether there is a remainer case to be made for a ‘hard Brexit’, for severing trade ties completely with the EU, rather than seeking to maintain regulatory alignment, or some type of associate membership of the single market and customs union.

Many remain voters – me included – still hope that the referendum result can be undone, by parliamentary process or referendum, so that the UK can stay in the European Union. As a fall back position, we tend to advocate a ‘soft Brexit’. But, without quacking about “vassal” status, it is worth questioning the value of this option. It would be like a slightly inferior version of what we have today, with no say in the rules governing trade and the development of the single market.

This means that those rules would over time work more and more against UK interests and in favour of those of the EU27 (for example, stipulating that financial institutions must be located within the Eurozone, or slapping ever higher tariffs on the medicines and engine parts that we export). This will not happen in every case, and when it does it will not be the result of malice but of simple self-interest – and the absence of a UK voice at the negotiating table. And every time it happens, the Brexit geek chorus will start up, rattling its chains, bemoaning that we are being penalised by evil and unaccountable bureaucrats, and making Faragist demands for “true Brexit”.

So, why not let the Johnsons, Foxes and Hannans have their hard Brexit, setting sail on the high seas of global commerce to seek our fortune? I personally think that this will be disastrous for the UK – culturally, economically and environmentally. But what do I know? It may be that hard Brexit will lead to a great renaissance of the UK as a prosperous, open and respected nation, and I hope I would have the good grace to be delighted as well as surprised if that was the result.

Alternatively, hard Brexit might lead to a short, sharp and shocking decline, rather than the gradual ebb of a soft Brexit. This might be succeeded by a Phoenix-like recovery, or the shock might precipitate a collective volte-face and desire to rejoin the EU.  The terms might not be perfect, but I think the continent would welcome its prodigal home.

And that’s where the irony lies. Given the simmering resentment on both sides likely to result from soft Brexit, its main appeal lies in the ease with which we would be able to rejoin the EU, but perhaps makes that outcome less likely.  A cleaner break would give us a clearer view of what we had left behind, but make it that much harder to rejoin. I don’t want to underplay the damage that might be done by a hard Brexit, but worry that the rule-taking halfway house of soft Brexit may just lead to a slower and more rancorous slide to a similar end-state.

All that said, however, "nobody knows anything" as screenwriter William Goldman wrote about the inability of studios to predict confidently which films will succeed and which will bomb at the box office. As we begin another year of bad-tempered Brexit wrangling, it’s a maxim worth bearing in mind.

Found in the suburbs

[Originally published online by the Guardian, 6 December 2017]

The London plan, the latest draft of which was published at the end of November, is the great ocean-going liner of London mayoral politics. It carries as its cargo all the mayor’s most important policies, as it sails from draft to adoption, navigating the choppy waters of public consultation and examination-in-public on its way.

As soon as the plan’s two to three-year journey is completed, it turns round to begin afresh the process of review and redrafting. It is the keystone of mayoral strategies, and one of the most powerful tools the mayor of London has to define the shape of London. It regulates the use of land – a scarce asset in a growing but constrained city – and over time all 33 London boroughs should ensure that their plans and planning decisions fall in line with its policies on what should be built where.

This concentration of mayoral powers in planning means many policies take on a spatial complexion: while the mayor cannot tax or ban unhealthy fast food shops, he can propose that they are located away from schools. He cannot license nightclubs, but he can require developers to meet the cost of soundproofing if they build alongside nightclubs. He does not manage financial services, but he can preserve land for offices in the Square Mile and Canary Wharf.

If you are a hammer, everything looks like a nail; and if you are a planning document, everything looks like a land use issue.

At the heart of the latest London plan is its focus on annual new housing supply, raised from its previous target of 42,000 to 66,000, with half being affordable. It’s an ambitious target, considering that the present supply of new homes, 29,000, is less than half the new target – but the mayor argues that the capital’s crisis over a lack of affordable homes requires a big step up. Few would disagree with that.

Some of the proposed homes may be built outside London – the plan commits to working more closely with neighbouring councils, a scheme that will be considered in a forthcoming report by Centre for London and the Southern Policy Centre – but the priority will be building homes within the capital.

Alongside investment in affordable homes, which Khan says needs to be increased to £2.7bn, and land at the Olympic Park and Old Oak Common, the mayor must rely on his planning powers to achieve his target. In some cases, he will be able to intervene himself in planning decisions, but can only do so where certain conditions are met, such as schemes with more than 150 housing units or buildings over 30 metres tall.

In most cases, he will have to rely on the policies and planning decisions made by individual London boroughs and some outer London boroughs, who are being asked to double or even treble their speed of housebuilding – and who may be reluctant to do so, given the concerns of local voters.

So the plan seeks to make it easier for boroughs to grant planning permission and harder to refuse it. High density in itself, for example, can no longer be a reason to turn a scheme down – although there is sensible provision for careful scrutiny of the design of the highest density schemes.

There is also a sharper focus on smaller sites, which are expected to account for 25,000 of the 66,000 new homes a year. The plan says smaller sites should be prioritised by boroughs, with design codes drawn up to identify opportunities for new development, particularly around transport hubs, and a presumption in favour of giving planning permission.

But all this relies on developers wanting to build. For 20 years, London’s housing market has boomed, so the challenge has been how much the mayor and boroughs can secure from developers in terms of social housing and other community benefits; where permission has been refused, developers have often come back with a better offer.

At the launch of the draft plan, London’s deputy mayor, Jules Pipe, was adamant that it would not stifle development or undermine viability of schemes. But planning as a tool works better at directing development than initiating it. There is already a growing backlog of planning consents that have been given, but where houses have not been built, and without a dramatic increase in funding, the mayor has only limited powers to get homes built.

The draft plan does want to find incentives for homes to be built faster, and a switch to more rental developments and smaller sites should help, but at a time when London’s housing market is cooling, planning permission will only be half the battle.

• This article was corrected on 12 December to clarify the mayor’s target of £2.7bn to invest in affordable homes.