Notes on an oligopoly: What did we learn from the Lords' report on the housing crisis?

The good old days. Image: Hulton Archive/Getty.

House of Lords select committee reports are not always the most the riveting of reads. Friday’s, however, from the economic affairs committee was the exception to the rule.

“Building more homes” is a truly devastating assault on recent Whitehall orthodoxy regarding housebuilding, and reveals in great detail much of what has been going wrong. Many of the points contained in the report have been made before – but not often with the authority and heft of a cross-party parliamentary committee.

It is also brilliantly timed (more luck than judgement, one supposes) given that we have a new prime minister and a new communities & local government secretary. If Theresa May and Sajid Javid want to finally get to grips with the endemic undersupply of new homes, they would do well to start with this report.

Here are some of the highlights:

England needs 300,000 homes a year – not 200,000

The government’s commitment to building 1m homes by 2020 (equivalent to 200,000 a year) will not be enough to meet future demand and tackle the backlog after years of undersupply. “To meet that demand and have a moderating effect on house prices, at least 300,000 homes a year need to be built for the foreseeable future,” the committee says. “Otherwise the average age of a first time buyer will continue to rise.”

Note too that the government is nowhere near hitting even 200,000 a year. Completions last year were just 155,000, just over half what is now recommended.

The large housebuilders restrict output to optimise profits

Private developers alone have neither the ability nor the motivation to build all of the homes we need. The housebuilding market is “oligopolistic”: its business model is to restrict the volume of housebuilding in order to maximise profits.

The government’s reliance on the private sector to meet its housebuilding targets is therefore misguided. “To achieve its target the government must recognise the inability of the private sector, as it is currently incentivised, to build the number of homes needed,” the peers say.


Land hoarding should be penalised to stimulate quicker building

There is also too big a gap between the number of planning permissions granted and the number of homes which are built. Councils should therefore be given the power to tax developments that are not completed within an agreed timeframe. 

“We recommend that local authorities are granted the power to levy council tax on developments that are not completed within a set time period,” the report argues. “This time period should be negotiated when planning consent is sought and be varied according to the size and complexity of a development.”

Local authorities should be allowed to borrow build social housing

The government is too fixated on home ownership at the expense of other tenures, and the current cap on council borrowing to invest in social housebuilding is “arbitrary” and should be scrapped.

The committee points to the government’s recent abandonment of its target to achieve a fiscal surplus in 2019-20 and the current low cost of borrowing. “There is no set limit on the amount a local authority can borrow to build a swimming pool,” it notes. “The same should apply to housing.”

Councils should also be encouraged to enter partnerships with housing associations, whose efforts to build more homes have been undermined by reductions in social rents.

Public land is not being released quickly enough

There is surplus public sector land enough in London for at least 130,000 homes – across England there could be enough for 2m. But the government’s efforts to release this for residential development have so far been “ineffective”.

The report recommends that a senior Cabinet minister should be put in charge of this process in future, and the National Infrastructure Commission given responsibility for keeping tabs on the number of homes that are actually built on it. Importantly, the requirement to achieve the best possible market price – often the cause of delay – should be “relaxed”, the committee says.

 

How likely is the government to adopt any of these ideas? On Monday, in her last speech before becoming prime minister, Theresa May spoke of the need to do “far more” to build more homes, which sounds like she may be amenable to a change of strategy. It is not difficult to imagine her getting much more tough on the release of public sector land. And there have been hints already that the new chancellor, Philip Hammond, might be prepared to borrow to invest in infrastructure.

The biggest challenge will come from the major housebuilders, and their many hangers on in the housing and planning industry, who will fiercely resist any effort to make them build faster than they are already. There are many interests vested in the status quo. Whether they are overcome may depend, in the end, on Mrs May’s level of determination.

Daniel Bentley is editorial director of the think tank Civitas and the author of “The Housing Question: Overcoming the shortage of homes”. He tweets @danielbentley

 
 
 
 

Was the decline in Liverpool’s historic population really that unusual?

A view of Liverpool from Birkenhead. Image: Getty.

It is often reported that Liverpool’s population halved after the 1930s. But is this true? Or is it a myth?

Often, it’s simply assumed that it’s true. The end. Indeed, proud Londoner Lord Adonis – a leading proponent of the Liverpool-bypassing High Speed 2 railway, current chair of the National Infrastructure Commission, and generally a very influential person – stood on the stairs in Liverpool Town Hall in 2011 and said:

“The population of Liverpool has nearly halved in the last 50 years.”

This raises two questions. Firstly, did the population of the City of Liverpool really nearly halve in the 50 year period to 2011? That’s easy to check using this University of Portsmouth website – so I did just that (even though I knew he was wrong anyway). In 2011, the population of the City of Liverpool was 466,415. Fifty years earlier, in 1961, it was 737,637, which equates to a 37 per cent drop. Oops!

In fact, the City of Liverpool’s peak population was recorded in the 1931 Census as 846,302. Its lowest subsequent figure was recorded in the 2001 Census as 439,428 – which represents a 48 per cent decline from the peak population, over a 70 year period.

Compare this to the population figures for the similarly sized City of Manchester. Its peak population also recorded in the 1931 Census as 748,729, and its lowest subsequent figure was also recorded in the 2001 Census, as 392,830. This also represents a 48 per cent decline from the peak population, over the same 70 year period.

So, as can be seen here, Liverpool is not a special case at all. Which makes me wonder why it is often singled out or portrayed as exceptional in this regard, in the media and, indeed, by some badly briefed politicians. Even London has a similar story to tell, and it is told rather well in this recent article by a Londoner, for the Museum of London. (Editor’s note: It’s one of mine.)

This leads me onto the second question: where have all those people gone: London? The Moon? Mars?

Well, it turns out that the answer is bit boring and obvious actually: after World War 2, lots of people moved to the suburbs. You know: cars, commuter trains, slum clearance, the Blitz, all that stuff. In other words, Liverpool is just like many other places: after the war, this country experienced a depopulation bonanza.


So what form did this movement to the suburbs take, as far as Liverpool was concerned? Well, people moved and were moved to the suburbs of Greater Liverpool, in what are now the outer boroughs of the city region: Halton, Knowsley, St Helens, Sefton, Wirral. Others moved further, to Cheshire West & Chester, West Lancashire, Warrington, even nearby North Wales, as previously discussed here.

In common with many cities, indeed, Liverpool City Council actually built and owned large several ‘New Town’ council estates, to which they moved tens of thousands of people to from Liverpool’s inner districts: Winsford in Cheshire West (where comedian John Bishop grew up), Runcorn in Halton (where comedian John Bishop also grew up), Skelmersdale in West Lancashire, Kirkby in Knowsley. There is nothing unique or sinister here about Liverpool (apart from comedian John Bishop). This was common practice across the country – Indeed, it was central government policy – and resulted in about 160,000 people being ‘removed’ from the Liverpool local authority area.

Many other people also moved to the nearby suburbs of Greater Liverpool to private housing – another trend reflected across the country. It’s worth acknowledging, however, that cities across the world are subject to a level of ‘churn’ in population, whereby many people move out and many people move in, over time, too.

So how did those prominent images of derelict streets in the inner-city part of the City of Liverpool local authority area come about? For that, you have to blame the last Labour government’s over-zealous ‘Housing Market Renewal Initiative’ (HMRI) disaster – and the over enthusiastic participation of the then-Lib Dem controlled city council. On the promise of ‘free’ money from central government, the latter removed hundreds of people from their homes with a view to demolishing the Victorian terraces, and building new replacements. Many of these houses, in truth, were already fully modernised, owner-occupied houses within viable and longstanding communities, as can be seen here in Voelas Street, one of the famous Welsh Streets of Liverpool:

Voelas Street before HMRI implementation. Image: WelshStreets.co.uk.

The same picture after HMRI implementation Image: WelshStreets.co.uk. 

Nonetheless: the council bought the houses and ‘tinned them up’ ready for demolition. Then the coalition Conservative/Lib Dem government, elected in 2010, pulled the plug on the scheme. 

Fast forward to 2017 and many of the condemned houses have been renovated, in a process which is still ongoing. These are over-subscribed when they come to market, suggesting that the idea was never appropriate for Liverpool on that scale. 

At any rate, it turns out that the Liverpool metropolitan population is pretty much the same as it was at its peak in 1931 (depending where the local borough boundaries are arbitrarily drawn). It just begs the question: why are well educated and supposedly clever people misrepresenting the Liverpool metropolis, in particular, in this way so often? Surely they aren’t stupid are they?


And why are some people so determined to always isolate the City of Liverpool from its hinterland, while London is always described in terms of its whole urban area? It just confuses and undermines what would otherwise often be worthwhile comparisons and discussions. Or, to put it another way: “never, ever, compare apples with larger urban zones”.

In a recent Channel 4 documentary, for example, the well-known and respected journalist Michael Burke directly compared the forecast population growths, by 2039, of the City of Liverpool single local authority area against that of the combined 33 local authority areas of Greater London: 42,722 versus 2.187,708. I mean, what bizarre point is such an inappropriate comparison even trying to make? It is like comparing the projected growth of a normal sized-person’s head with the projected growth of the whole of an obese person, over a protracted period.

Having said all that, there is an important sensible conversation to be had as to why the populations of the Greater Liverpool metropolis and others haven’t grown as fast as maybe should have been the case, whilst, in recent times, the Greater London population has been burgeoning. But constantly pitching it as some sort of rare local apocalypse helps no one.

Dave Mail has declared himself CityMetric’s Liverpool City Region correspondent. He will be updating us on the brave new world of Liverpool City Region, mostly monthly, in ‘E-mail from Liverpool City Region’ and he is on twitter @davemail2017.