Here's how we solve the housing crisis

This green and pleasant land. Image: Getty.

Great news, Londoners: the capital doesn't have Britain's biggest housing crisis. Let's hear it for Oxford where, relative to wages, prices are even worse. Yay, Oxford, woo.

This thrilling news comes from a report from the Centre for Cities think tank, published today, on the never less than entertaining train wreck that is British housing policy. The report as a whole is kind of a good news/bad news thing.

Take the bad news first. In the most over-heated cities – which also include Cambridge, Brighton and Bristol – high housing costs are a side effect of economic success. These places have lots of jobs, so attract lots of new residents, but because they're not building enough homes to house all these people, prices are inevitably going up.

This doesn't just hurt those paying through the nose for a roof over their heads, the report argues: “This matters to the national economy as well, because these cities are the most productive”. So, high house prices are hurting us.

There's more. Recent housing policy has focused on building more on “brownfield” areas - land that’s been developed at some point in the past - as a way of preventing urban sprawl. However you look at it, though, there isn't enough of this to meet demand. Oxford has enough brownfield land for less than 2,000 homes; it needs an estimated 30,000. London needs something like 50,000 extra homes ever year; it’s not building anything like that, but if it was, it'd run out of brownfield land within a decade.

That's the bad news. But! It turns out that actually, we have loads of space for housing. To build 1.4m extra homes, at low-density, and near existing infrastructure like railway stations, we'd only have to build on 5.2 per cent of the green belt. If we built on 12.5 per cent of it, we could have 3.4m homes. All our problems would be solved, and we’d still have 90 per cent of the green belt the go for walks in.

Then it's back to the bad news, which is that nobody with the power to make this happen wants to because the pro-green belt/anti-building lobby is basically all-powerful.

So, that’s all good.

The key message of the report, though – the one overriding lesson it contains – is that Britain needs to free up more land for building. That's basically non-negotiable. So, if any of Britain's politicians do fancy growing a spine, the Centre for Cities has a few recommendations as to how we can do that.

1. The catch-all “green belt” label isn't massively helpful: we need to “evaluate land on its merits rather than its existing designation”.

In other words, we need a more nuanced planning system that can distinguish between, say, scrubby wasteland which would be perfect for development, and genuinely beautiful countryside.

2. “Brownfield” land often requires state action to make it appropriate to housing. That means infrastructure, land assembly, even direct development. That'll all cost money, and political will.

3. The economic footprint of cities often extends across local authority borders, whether to contiguous built up areas or commuter towns miles away. Councils should thus be incentivised to work with their neighbours when working on housing plans.

The report contains other, more technical suggestions, too: streamlining Compulsory Purchase Orders, to make it easier for councils to assemble land; allowing cities to buy land at its current value, so that they, rather than previous owners, benefit from the increase that comes with planning permission; create development partnerships between councils and builders, which will be able to borrow to invest.

All this means that there’s no quick fix. If we’re ever going to solve this mess, we need use brownfield land and build at higher densities and re-designate parts of the green belt.

But – we can solve it.

Here, for your delectation, is one last map. Build on just a fraction of the areas marked in red, which are all within 2km of railway station, and we could solve London’s housing crisis. The full report is available here.

 

 
 
 
 

Why don’t high exports always lead to economic success?

Some exports, being exported. Image: Getty.

While trade and exports are usually talked about in the national context only, the reality is that the UK’s exports are sent from places up and down the country. But as the Centre for Cities’ recent Cities Outlook 2017 report shows, some places are much more successful at exporting than others – and this has big implications for the UK’s productivity gap and the government’s industrial strategy.

In total, cities accounted for 62 per cent of Britain’s total exports in 2014. The dominance of cities was particularly marked for services: they accounted for 51 per cent of goods exports, but 74 per cent of services exports.

Of course, there was much variation between them. Sunderland was Britain’s top exporting city, sending £40,650 of goods and services overseas for every job in the city. This is one third higher than second-placed Worthing (£29,640) and 11 times higher than bottom-placed York.

Curiously though, the varying export performance of cities doesn’t necessarily go hand-in-hand with its wider economic performance. Comparing exports with productivity at the city level shows only a weak relationship between the two: Sunderland in particular stands out for having relatively low productivity despite its strong export performance.

Splitting exports out into goods and services offers a clue as to why this might be the case (see the charts below). While there is a reasonable positive correlation between services exports per job and productivity, there is no relationship between goods exports per job and output per worker.

This may be a result of where the “value-add” of an export takes place: the disaggregated nature of manufacturing means that design and engineering don’t necessarily take place in the same place as assembly. For example, in Nissan’s case, its Qashqai model was designed in Paddington, engineered in Cranfield but built in Sunderland. So while the sale of the car is allocated to Sunderland, little of the higher value input to the product takes place there.

Increasing trade and exports was one of the ten pillars that the government set out in its recent Industrial Strategy green paper. What this data shows is that boosting exports won’t necessarily improve productivity across the country: what’s important is the type of exporting activity. As the example of Nissan suggests, it is knowledge-intensive exporting activity in particular which will have the biggest impact in driving up productivity – both in terms of firms that export services and those in advanced manufacturing.

And this has implications for the approaches taken to improve exports across the country. The standard approach, and the one emphasised again in the government’s green paper, is to focus on export credit schemes and trade missions. Such schemes will no doubt have a positive impact in the cities that already have a number of exporting businesses (such as those cities in quadrant A in the chart above). But it will do very little for the worryingly large number of cities – 37 out of 62 – that are in Quadrant C.  Their poor exporting and productivity performance suggests that it is their lack of exporting businesses full stop, rather than any reluctance of their businesses to export, that is the problem.


This means that, as any industrial strategy that is place-based needs to do by definition, a very different approach will be needed in these places to both boost productivity and exports.

The number one objective will be to improve skills. Knowledge-based businesses, be they in manufacturing or services, require high-skilled workers. But those cities in Quadrants B and C tend to have fewer degree-educated people living in their cities and higher shares of people with no formal qualifications relative to their more successful counterparts.

To do this will require prioritising both improving performance within schools and an improvement of the skills of the existing workforce, with a particular focus on numeracy and literacy in both cases. This should be a key priority for both local and national leaders, particularly in the Industrial Strategy, if they are to succeed in extending job opportunities and increasing wages for people in cities across the country.

 Paul Swinney is senior economist at the Centre for Cities, on whose blog this article was first published.

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