On Your Bike (Policy Exchange no Longer Insane)

It's interesting to see the government raising the issue of helping people move to take advantage of job offers, given the way they got their fingers burned when Policy Exchange suggesting something very similar sometime before the election.

I think the evidence on this is clear. Some places are better at generating job opportunities than others. For many years policy has tried to fix this by creating more job opportunities in places that are not generating enough employment. This policy has not worked very well. Therefore, it seems sensible to put more focus on helping people to move to jobs (rather than moving jobs to people). Two important caveats. First, it's important not to overstate the likely impact. Where you live is far less important a determinant of job market outcomes than who you are. Unemployment in London remains a big problem for those at the lower end of the labour market. Second, high house prices in better performing areas are a crucial economic barrier that prevent people from moving to take advantage of opportunities. It is still unclear how government intends to address the question of providing LAs with adequate incentives to address this problem.

Housing and the budget

John Muellbauer, of Oxford University (and a SERC affiliate) has a nice Guardian comment piece on housing.

John is one of the economists who did "see it coming" in the sense that he has been talking about problems in the housing market for a long period of time. Unfortunately, while the coalition government's decentralisation plans are surely welcome, it's still unclear (as John points out) what, if anything, they are going to do to provide appropriate incentives to LA's to allow residential and commercial development.

Well, that's one (brownfield) target met

In 1998, approximately 50% of development occurred on brownfield land (a figure that had been remarkably stable for long periods of time). The Labour government committed itself to a target of 60% of new development on brownfield land by 2008. The target had been met by the early 2000s. In 2005, 73% of new development was on brownfield land.

Brownfield land is expensive to build on. It is often re-developed at high density to meet national targets. Lots of it is in ex-industrial cities where demand for housing is low. Large pieces of land that become available (ex MOD of NHS sites) are some way from existing settlements (working against stated objectives on densification). Worse, as highlighted by the coalition government today, a large proportion of building on "brownfield" land has been building on private residential gardens.

In short, top down targets for brownfield land haven't delivered the kind of housing people want in the places where they want to live. They have also been terribly unpopular with local residents. If top down planning doesn't appear to be making anyone happy*, then you have to welcome today's announcement to localise decision around building on private gardens.

But, all of this comes with a very big caveat: It is still unclear how the coalition government is going to ensure local residents in popular places are offered sufficient incentives to say "yes" to new housing. Partly the existing brownfield target was met because not many houses were being built (and not just in the recession). Prevent building on gardens and supply falls further. Lower supply means higher prices and greater price volatility. We are promised more reform of the planning system, if we are not to make the same mistakes as the last government, it has to tackle the incentive problem head on.


*[I guess it makes planners happy - by some figures the sixth fastest growing occupation in the England in the past decade]