Well, at least she hasn’t made things worse: on Theresa May’s latest housing speech

What a subtle background. Image: Getty.

There’s an idiosyncratic subgenre of the political speech that Theresa May tends to excel in. She’ll begin by cogently and persuasively diagnosing a problem – before immediately laying out a series of solutions that are very obviously not going to solve it, and may in fact make things worse.

Today’s speech on housing and planning, then, feels like a close relation of last week’s, “Brexit will make this country worse – here’s my plan for it” effort (which Stephen covered over at the mothership here).

The Prime Minister did a very good job of expressing the frustration felt by those, mostly young, people who are locked out of home ownership. But the best one can say about the policies she proposed to address this is that they probably won’t actually make things worse. This may not sound like much – but it is actually a genuinely improvement on the Cameron/Osborne approach to this stuff, so let’s give credit where it’s due.

I’m not going to annotate the entire speech – it’s nearly 4,000 words long, and nobody wants that, frankly. But some extracts follow, with my commentary.

On my first day as Prime Minister, I spoke on the steps of Downing Street about my desire to make this a country that works for everyone.

A country where, regardless of where you live, your race or religion, or what your parents do for a living, you have a fair chance to get on and build a life for yourself and your family.

It’s a philosophy that shapes everything this government does

This will no doubt come as a surprise to EU citizens, other migrants, Remain voters, public sector workers, and pretty much anyone who doesn’t vote Conservative, but never mind that now.

Talking to voters during last year’s election campaign, it was clear that many people, particularly younger people, are angry about [housing].

Angry that, regardless of how hard they work, they won’t be able to buy a place of their own. Angry when they’re forced to hand more and more of their wages to a landlord to whom their home is simply a business asset. Angry that, no matter how many sacrifices they make to save for a deposit, they’ll never be able to compete with someone whose parents have released equity from their own home to help their children buy.

They’re right to be angry.

Theresa May says you’re allowed to be angry, young people: please update your records accordingly.

Actually, we shouldn’t be too down on this bit – because this is as good as it’s going to get.

I still vividly remember the first home that I shared with my husband, Philip. Not only our pictures on the walls and our books on the shelves, but also the security that came from knowing we couldn’t be asked to move on at short notice.

And because we had that security, because we had a place to go back to, it was that much easier to play an active role in our community. To share in the common purpose of a free society.

This is where the wheels start to come off.

The personal anecdote feels like a very deliberate choice – May is not a politician prone to public displays of emotion. And it speaks to a real, and once widespread, experience, too. Perhaps the fact that a home is owned, not rented, rationally shouldn’t change the way it feels… but it very clearly does. Even with a quite absurd mortgage attached, home ownership brings a sensation of security, of being rooted in a particular place.

And yet – there are things the government could do to change the balance here a little, to give tenants more security: longer tenancies, stronger rights for renters, changing the law to allow tenants to redecorate or keep pets or have children…

Very little of that is on offer in this speech (longer tenancies are touched upon, but no detail is given). One suspects that this is because the corollary of stronger rights for tenants is weaker ones for landlords.

Now, this government is already taking action to help hard-pressed buyers. We’re putting an extra £10bn into Help to Buy, giving another 135,000 families a step up the property ladder. We’re scrapping stamp duty for 80 per cent of first-time buyers, and looking at ways to make the whole process of buying and selling homes quicker, easier and cheaper.

Both of these policies mean pumping more money into the housing market. What exactly does the prime minister imagine this will do to house prices?

But to stop the seemingly endless rise in house prices, we simply have to build more homes – especially in the places where unaffordability is greatest.

Good.

So this Government is rewriting the rules on planning. With the major overhaul being published today, we’re giving councils and developers the backing they need to get more homes built more quickly.

Less good. Almost before she’d finished speaking, the Local Government Association put out a statement describing the speech as “unhelpful and misguided” and suggested that removing council borrowing caps would do a lot more good. This does not sound like giving councils the backing they need to get more homes built.

We’ve changed the rules so authorities facing the greatest affordability pressures can access the finance they need to build more council homes for local people.

See above.

More money is available to councils – but it’s a pot they have to bid for, and central government gets the final say. Lifting the borrowing cap, allowing councils to borrow against future income streams, would allow them to bypass Whitehall. This would speed things up – but it would also add to government debt and more to the point would bypass Whitehall, so Whitehall doesn’t like it.

Anyway. Local government does not, by and large, expect this speech to change very much.

But it’s also time for builders and developers to step up and do their bit.

The bonuses paid to the heads of some of our biggest developers are based not on the number of homes they build but on their profits or share price. In a market where lower supply equals higher prices that creates a perverse incentive, one that does not encourage them to build the homes we need.

This is where things get really crazy.

I mean… yes, that’s how capitalism works, isn’t it? Apple executives are not paid based on how many people they can provide iPhones for, but on how much money they can make by selling those iPhones.

So I have some sympathy with the idea that – if we want to bring house prices down – we shouldn’t rely on a bunch of companies with an interest in keeping house prices high to do it. But that’s not what May is saying, and however annoying she may find the volume housebuilders’ behaviour, they’re always going to pay less attention to her than they are to their shareholders.

Oliver Letwin is currently reviewing the causes of the planning permission gap. If he finds evidence of unjustifiable delay, I will not rule out any options for ending such practices.

Oooh, I’m so scared.

That may include allowing councils to take a developer’s previous rate of build-out into account when deciding whether to grant planning permission. I want to see planning permissions going to people who are actually going to build houses, not just sit on land and watch its value rise.

That might help a bit, I guess? Developers claim that land banking isn’t a thing, but, well, they would, wouldn’t they?

Still, I’m not sold on the idea it’s going to make a huge difference. Because if it did, house prices would fall, house building would become less profitable, and those volume house builders would just stop buying land for fear they’d lose money on it. And…

Where councils are allocating sufficient land for the homes people need, our new planning rulebook will stop developers building on large sites that aren’t allocated in the plan – something that’s not fair on residents who agree to a plan only to see it ignored.

…reducing the sites on which building can happen probably isn’t going to help either. That, to me, seems likely just to bid up the price of the land included in local plans, which will make the homes built on them more expensive, too.

There are good arguments for stopping developers from ignoring local plans – but, “It’ll make them build more houses!” is absolutely not one of them.

And, by ending abuse of the “viability assessment” process, we’re going to make it much harder for unscrupulous developers to dodge their obligation to build homes local people can afford.

How? How you going to do that? Oh, you’ve already moved on.

This is not an overcrowded nation. Only around 10 per cent of England has been built on. We are not faced with a zero-sum choice between building the homes people need and protecting the open spaces we treasure. That’s why the answer to our housing crisis does not lie in tearing up the Green Belt.

I am shocked. This is my shocked face.

Also why would you quote the figures pointing out how little land has been built on if your conclusion is, “So we mustn’t build on any more”? What’s the logic here?

Planning rules already say that Green Belt boundaries should be changed only in “exceptional circumstances”. But too many local authorities and developers have been taking a lax view of what “exceptional” means. They’ve been allocating Green Belt sites for development as an easy option rather than a last resort.

To prevent this, we’re strengthening existing protections so that authorities can only amend Green Belt boundaries if they can prove they have fully explored every other reasonable option for building the homes their community needs.

Councils do not generally build on their green belts lightly, because doing so is about as popular as scrofula. That makes me suspect that those which do are largely doing so because they don’t have any other options.

So I bet those other reasonable options are getting a lot more explored than May suggests here.

We’ll expect any development, whether in the Green Belt or outside it, to look first at sites that have previously been built on rather than opting immediately for virgin countryside. I’d rather see an ugly, disused power station demolished and replaced with attractive housing than a wood or open field concreted over – even if the former is in the Green Belt and the latter is not.

Well, so would most people. But demolishing an ugly, disused power station, cleaning up the land it sits on and then building attractive housing to replace it is generally an expensive business. Even if developers are up for that, it’ll push them to build more expensive, not more affordable, housing.

But while ownership is a wonderful thing, there is nothing inherently wrong with renting your home. More than a third of English households rent at present, and almost all of us will do so at some point in our lives – I know I have. (…)

Whether you’re renting by choice or necessity, you’re not any less of a person for doing so and you should not be treated as such.

This is such a ludicrously obvious comment that the fact she felt the need to include it feels a lot more telling than the message itself.
Renters, one suspects, know they’re not any less of a person simply because they’re renters. This comment is instead aimed at landlords who think otherwise.

In 2018, in one of the world’s largest, strongest economies, nobody should be without a roof over their head. This isn’t just a British problem – in recent years homelessness has risen across Europe – but it is source of national shame nonetheless.

That’s why we pledged in our manifesto to halve rough sleeping by 2022 and eliminate it altogether by 2027.

Funny story: the last Labour government effectively did eliminate rough sleeping. Last January, we found out it had risen for the seventh year running.

Can anyone think of anything that might have happened in 2010 that could have caused that reverse?

But the size of the challenge is matched only by the strength of my ambition to tackle it. More home ownership. A rental market that works for tenants. Greater fairness for all.

That is what the people of this country need. That is what will make this a society that truly works for everyone. And, as Prime Minister, that is what I am determined to deliver.

The weird thing is: I sort of believe her. I think Theresa May is genuinely concerned about this, and understands that the housing crisis is a major problem both for the nation and for her party.

Yet there is nothing – nothing! – in this speech to suggest she is prepared to do any of the things that might actually led to a radical increase in build rates. No land reform. No stronger compulsory purchase rules, to enable densification. No council borrowing. Nothing here seems likely to change anything much.


Then again, at least she hasn’t actively made things worse, so for that, at least, we can only be grateful.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and Facebook as JonnElledgeWrites.

Want more of this stuff? Follow CityMetric on Twitter or Facebook.

 
 
 
 

A new wave of remote workers could bring lasting change to pricey rental markets

There’s a wide world of speculation about the long-lasting changes to real estate caused by the coronavirus. (Valery Hache/AFP via Getty Images)

When the coronavirus spread around the world this spring, government-issued stay-at-home orders essentially forced a global social experiment on remote work.

Perhaps not surprisingly, people who are able to work from home generally like doing so. A recent survey from iOmetrics and Global Workplace Analytics on the work-from-home experience found that 68% of the 2,865 responses said they were “very successful working from home”, 76% want to continue working from home at least one day a week, and 16% don’t want to return to the office at all.

It’s not just employees who’ve gained this appreciation for remote work – several companies are acknowledging benefits from it as well. On 11 June, the workplace chat company Slack joined the growing number of companies that will allow employees to work from home even after the pandemic. “Most employees will have the option to work remotely on a permanent basis if they choose,” Slack said in a public statement, “and we will begin to increasingly hire employees who are permanently remote.”

This type of declaration has been echoing through workspaces since Twitter made its announcement on 12 May, particularly in the tech sector. Since then, companies including Coinbase, Square, Shopify, and Upwork have taken the same steps.


Remote work is much more accessible to white and higher-wage workers in tech, finance, and business services sectors, according to the Economic Policy Institute, and the concentration of these jobs in some major cities has contributed to ballooning housing costs in those markets. Much of the workforce that can work remotely is also more able to afford moving than those on lower incomes working in the hospitality or retail sectors. If they choose not to report back to HQ in San Francisco or New York City, for example, that could potentially have an effect on the white-hot rental and real estate markets in those and other cities.

Data from Zumper, an online apartment rental platform, suggests that some of the priciest rental markets in the US have already started to soften. In June, rent prices for San Francisco’s one- and two-bedroom apartments dropped more than 9% compared to one year before, according to the company’s monthly rent report. The figures were similar in nearby Silicon Valley hotspots of San Jose, Mountain View, Palo Alto.

Six of the 10 highest-rent cities in the US posted year-over-year declines, including New York City, Los Angeles, and Seattle. At the same time, rents increased in some cheaper cities that aren’t far from expensive ones: “In our top markets, while Boston and San Francisco rents were on the decline, Providence and Sacramento prices were both up around 5% last month,” Zumper reports.

In San Francisco, some property owners have begun offering a month or more of free rent to attract new tenants, KQED reports, and an April survey from the San Francisco Apartment Association showed 16% of rental housing providers had residents break a lease or unexpectedly give a 30-day notice to vacate.

It’s still too early to say how much of this movement can be attributed to remote work, layoffs or pay cuts, but some who see this time as an opportunity to move are taking it.

Jay Streets, who owns a two-unit house in San Francisco, says he recently had tenants give notice and move to Kentucky this spring.

“He worked for Google, she worked for another tech company,” Streets says. “When Covid happened, they were on vacation in Palm Springs and they didn’t come back.”

The couple kept the lease on their $4,500 two-bedroom apartment until Google announced its employees would be working from home for the rest of the year, at which point they officially moved out. “They couldn’t justify paying rent on an apartment they didn’t need,” Streets says.

When he re-listed the apartment in May for the same price, the requests poured in. “Overwhelmingly, everyone that came to look at it were all in the situation where they were now working from home,” he says. “They were all in one-bedrooms and they all wanted an extra bedroom because they were all working from home.”

In early June, Yessika Patapoff and her husband moved from San Francisco’s Lower Haight neighbourhood to Tiburon, a charming town north of the city. Patapoff is an attorney who’s been unemployed since before Covid-19 hit, and her husband is working from home. She says her husband’s employer has been flexible about working from home, but it is not currently a permanent situation. While they’re paying a similar price for housing, they now have more space, and no plans to move back.

“My husband and I were already growing tired of the city before Covid,” Patapoff says.

Similar stories emerged in the UK, where real estate markets almost completely stopped for 50 days during lockdown, causing a rush of demand when it reopened. “Enquiry activity has been extraordinary,” Damian Gray, head of Knight Frank’s Oxford office told World Property Journal. “I've never been contacted by so many people that want to live outside London."

Several estate agencies in London have reported a rush for properties since the market opened back up, particularly for more spacious properties with outdoor space. However, Mansion Global noted this is likely due to pent up demand from 50 days of almost complete real estate shutdown, so it’s hard to tell whether that trend will continue.

There’s a wide world of speculation about the long-lasting changes to real estate caused by the coronavirus, but many industry experts say there will indeed be change.

In May, The New York Times reported that three of New York City’s largest commercial tenants — Barclays, JP Morgan Chase and Morgan Stanley — have hinted that many of their employees likely won’t be returning to the office at the level they were pre-Covid.

Until workers are able to safely return to offices, it’s impossible to tell exactly how much office space will stay vacant post-pandemic. On one hand, businesses could require more space to account for physical distancing; on the other hand, they could embrace remote working permanently, or find some middle ground that brings fewer people into the office on a daily basis.

“It’s tough to say anything to the office market because most people are not back working in their office yet,” says Robert Knakal, chairman of JLL Capital Markets. “There will be changes in the office market and there will likely be changes in the residential market as well in terms of how buildings are maintained, constructed, [and] designed.”

Those who do return to the office may find a reversal of recent design trends that favoured open, airy layouts with desks clustered tightly together. “The space per employee likely to go up would counterbalance the folks who are no longer coming into the office,” Knakal says.

There has been some discussion of using newly vacant office space for residential needs, and while that’s appealing to housing advocates in cities that sorely need more housing, Bill Rudin, CEO of Rudin Management Company, recently told Spectrum News that the conversion process may be too difficult to be practical.

"I don’t know the amount of buildings out there that could be adapted," he said. "It’s very complicated and expensive.

While there’s been tumult in San Francisco’s rental scene, housing developers appear to still be moving forward with their plans, says Dan Sider, director of executive programs at the SF Planning Department.

“Despite the doom and gloom that we all read about daily, our office continues to see interest from the development community – particularly larger, more established developers – in both moving ahead with existing applications and in submitting new applications for large projects,” he says.

How demand for those projects might change and what it might do to improve affordable housing is still unknown, though “demand will recover,” Sider predicts.

Johanna Flashman is a freelance writer based in Oakland, California.