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

 
 
 
 

To see how a city embraces remote work, just look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”