Wednesday, 18 July 2012

Need, Demand and Politics in the Housing Crisis

It was a chance conversation in London and then a train journey home that got me thinking. We have a housing crisis in this country; everyone says we need 230,000 new homes a year (and possibly those projections will have to increase given the unexpectedly high increase in England and Wales' population revealed by the most recent census). Everyone also knows that if this is the level of need, then actual housebuilding hasn't kept pace. Homelessness is rising, but by nowhere near the levels that the mismatch between household formation and housing supply would suggest. So where is everyone actually living?  
Where exactly is everyone? Source
And that prompted me to think about need versus demand, two quite different concepts, with an inter-relationship that if not misunderstood is certainly under-reported. Housing need would be met by more building more houses. But not all housing need is actually housing demand, because not everyone in need has the purchasing power to get it. It is not a situation of "if we build, they will come" - if it was only that simple, we'd see housebuilders building out their landbanks not sitting on them. To turn it into any kind of active demand then there needs to be finance around it. 
Successive opposition parties have shown that you can certainly beat a government up on the issue of the shortfall of housing built against housing need. If there was real demand then builders would be building those houses and the problem would disappear. The only people who are creating demand in the market are already pretty well housed. If there was the political support (and the money in the public purse), more demand could be created by using public subsidy, but let's be realistic, for the next few years that's going to be in short supply. Witness today's apparent deferral till the Autumn of the housing element of the infrastructure initiative trailled in last weekend's papers.
So if meeting need isn't the driving force of housing policy, and demand can't be stimulated by subsidy, what are we left with? Two strategies are emerging:
First, if you believe what the housing minister said at the Institute of Housing conference, the new message is not how how new homes meet housing need, it’s this new metric that every 100,000 homes built adds 1% to GDP that counts with the "quad". So housing is being viewed as an economic engine and being able to house a few people is a useful by-product, not the end in itself. 
The second approach is to fill up the homes we already have. To some extent that must be what is actually happening to absorb the excess of need over demand and so is the most likely answer to my question of where is everyone actually living. There's an underlying message developing that the problem is with under-occupation. You can make an argument that we have more than enough rooms in this country, it’s just that many of them are empty – so people must be forced to make more effective use of their housing. 
In the absence of money to build, the government are noticing that there are large parts of the housing estate which are under-occupied. What they probably miss out and forget is that during the 1980s when allocation of public sector housing was done by numbers – so if it was a five person house you let it to a family of five people – the result was that the public services and the public realm became unable to cope: police, parks, schools – it just didn’t work.  
Cramming might just work to pass the exams that pass for an education, but every good housing manager knows it's bad policy for housing. As public service reform focuses on measures to reduce demand in the future, why are we and our residents being steered back to a policy of cramming that will have precisely the reverse effect. It's fairly tired thinking.

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