Local Jobs for Local People

I see CLG announced new projects shortlisted for Kick Start funding yesterday.

When I last wrote about housing, I commented on my concerns about the move towards 'local homes for local people' as an allocation criteria for social housing. Interestingly, I noticed in the latest announcement for Kickstart that it will be a condition "of getting this Government money that all builders offer recruitment of local people".

So, in the housing market, we are moving towards a policy of local jobs for local people on the supply side and local homes for local people on the demand side? Most international economists argue that this kind of tit-for-tat behaviour at the national level makes everybody worse off, so how odd to see a national government encouraging it at the local level.

Taxing bank bonuses

Will taxing bank bonuses mean banks move away from the city of London?

It is highly unlikely. In 2004 Richard Baldwin and Paul Krugman provided an economic model which showed "that industrial concentration creates ‘agglomeration rent.’ The ‘core’ region can thus charge a higher tax rate without losing capital." More recent empirical tests suggests that the theory holds true in practice. One off taxes are just very unlikely to cause industrial concentrations (like the city of London) to unravel.

Or as Robert Peston puts it: "since the tax will last no longer than a year, it should not be sufficient to persuade the banks themselves to re-locate to Paris, Frankfurt or Geneva - which are still at a disadvantage to London in respect of skills and tech infrastructure."

Council Freedom on Housing Allocation

According to CLG "Housing Minister John Healey has today given councils more flexibility in how they manage their waiting lists. Councils have said they will use this extra flexibility to prioritise families with local connections [and] those seeking local employment".

Given that the project is 2m on housing waiting lists, you do wonder if this is the right time to weaken the housing need criteria. As I said back in July "in terms of equity 'local homes for local people' enshrines the right to live where you are born (residency criteria) or where you work (employment criteria). There is a debate to be had about whether these are sufficiently strong rights to weaken those around housing need (the current criteria). In terms of efficiency there is a strong argument that we need more mobility in the social housing sector not less. 'In' quickly when people are in trouble and 'out' when their long term situation improves. Further, from a spatial perspective, social housing acts as a very severe constraint on geographical mobility. As such mobility has an important role to play in adjusting to the changing economic geography of the UK economy 'local homes for local people' is surely a step backwards."

Carbon Footprints

Academics are sometimes accused of undertaking extensive research to "prove the bleeding obvious". It's nice to see that the media can manage that too - witness the BBC's headline that "the rich have the biggest carbon footprints in the UK".

I did have two questions after reading the article. First, the map made me wonder what would happen if you regressed carbon per household on socio-economic characteristics and tried to figure out whether there are place based effects? As the BBC kindly provide the data, one could go ahead and do this. I assumed someone would already have done it (given the kind of statements people make about how some kinds of urban spaces are more environmentally friendly than others) but I couldn't dig out a reference quickly on google scholar.

Second, why do people always suggest that taxing things has to cost poor people more? I get this kind of comment when talking about congestion pricing for roads. If the poor are already the lowest polluters this helps reduce the regressiveness of these taxes, not increase them (even if the BBC article implies the opposite). It's the share of these goods as the proportion of income and the details of any tax that will matter for whether or not environmental taxes are regressive.

Public Sector Job Relocations

It's a sign of the times that most of the discussion on public sector job relocation has been about the impact on the public sector finances. When the Lyon's report considered the issue in 2004 it highlighted cost savings, the efficiency of delivery and the impact on regional economies.

It is surprising how little we know about the last of these. The evidence considered by the Lyon's review comes in four forms. Some case study evidence, some multiplier analysis (where you use information on expenditure patterns to figure out how one job generates more jobs as local suppliers of goods and services react to increased local demand), some theoretical modelling and some correlations between local private employment and local public sector employment. I am not sure that I find any of this particularly convincing and am currently trying to figure out how to get at the effects in a more systematic manner.

I suspect, however, that the lack of any definitive evidence in either direction will not stop people presenting speculation about the effects as fact.

Population projections and housing affordability

The National Housing and Planning Advice Unit advises the government on housing provision and affordability (house prices to income). A couple of days ago, it published a note on how revised population projections might affect its supply advice to the government.

The answer, in short, is "not much". This partly reflects the fact that NHPAU were already using relatively cautious figures. But even if they had not been, the answer would have been fairly similar. Why? Because as my colleague Paul Cheshire argues in a recent SERC policy paper evidence suggests that 'the overwhelmingly more important driver of the demand for housing is not household numbers: it is rising real incomes.'

In addition, to the extent that household numbers do matter, the planning system is somewhat responsive to projected increases in housing numbers. Unfortunately, historically, it has been completely unresponsive to house prices (this may surprise some) and hence ignores effects from rising real incomes. NHPAU is the government's vehicle for trying to address this problem but it is unclear whether it can be successful. Local Authorities still face few incentives to allow development and use a planning framework that ignores the role of real incomes in driving demand for housing.

San Francisco versus Birmingham Part II

Just to clarify, in my post earlier this week I was talking about Birmingham, England not Birmingham, Alabama. It appears that muddling the two is an easy mistake to make.

I gave a talk at the San Francisco Federal Reserve Bank yesterday and something that came up concerned the impact of land use controls on fluctuations in prices. Conventional wisdom is that more restrictive supply leads to greater price fluctuations. So, if you take San Fran (with very restrictive land use) and compare it to Columbus OH (with plenty of open land) you see price fluctuations around trend that are far more marked for San Fran.

But some of the highest price falls in the US have been seen in places (like Las Vegas) that have seen huge building booms. Presumably this is because housing supply is inelastic once houses are built (unless you knock them down again) but I am not totally clear why this should have lead to larger house price falls in those markets (unless speculative demand played more of a role there than elsewhere and that component of demand has now collapsed).

[Thanks to Christian Hilber for the figures]

San Francisco versus Birmingham

I am in San Francisco for work. I am reminded of research by my colleagues Paul Cheshire and Christian Hilber that reports that commercial rents in Birmingham are twice those in San Francisco (mostly because Birmingham's planning restrictions are more restrictive than San Francisco - itself a highly regulated city for the US).

Rather than risk offending anyone, let me simply finish with a couple of pictures for you to compare and contrast for yourselves.

Birmingham:

San Fran:

Manchester-Leeds Linkages

We launched our research for the NW on links between Manchester and Leeds yesterday.

The research finds that closer integration between Manchester and Leeds could bring economic benefits to much of the North. However, any impact would depend on changes in the industrial structure and in the composition and skills levels of the population. My worry is that such changes may be mostly compositional (i.e higher educated workers moving in to the two cities) in which case existing residents who don't up-skill could actually be worse off (because rising average incomes might drive up e.g. house prices).

That worry brings us back, yet again, to the question of whether people or places are the most crucial objective for policy. For some policy makers raising average incomes in the North is a suitable objective even if that just comes from moving already better paid workers around. As I have said before, I think the main focus should be on directly helping the disadvantaged.

But if you are someone who believes in helping places per se, focusing on relatively successful places within less successful regions at least has the advantage that you are working more with market forces than against it. Manchester and Leeds certainly meet those criteria so focusing interventions on improving the performance of those two economies may not be such a bad thing, conditional on existing government objectives.

Kickstart

Having got terribly confused the last time housing numbers were discussed it was nice to see so much data being presented by CLG on projects funded through Kickstart.

Once again, however, the amounts of expenditure involved for relatively modest amounts of house building convince me that government intervention of this kind is not a long run fix for the underlying problems of high house prices and poor supply responses.

New Deal for Communities?

New Deal for Communities (NDC) is a 10 year Area Based Initiative (ABI) spending £400 per household per year in 39 of the most deprived areas of the country. I think that new evidence on its impact to date is disappointing.

According to the summary: "NDC areas are experiencing positive change, some of which is over and above that occurring in the comparator areas." However, "once individual-level socio-demographic factors and also starting position are taken into account, those in NDC areas saw significantly greater improvement than those in comparator areas for only one indicator: thinking the area has improved in the last two years." What the summary doesn't tell you but the full report does (see p.91) is that (controlling for socio-demographic factors) individuals in NDC areas did worse on somewhere between 2/15 and 7/15 indicators (depending on the time period).

What I take from this is the following: Based on the best evidence that we have available a reasonably well funded ABI has not, on average, improved individual outcomes in targeted areas.

The report gives supporters of ABI wriggle room. Perhaps there are ABI's going on in the comparison areas that are just as successful (although it seems unlikely that they could be as costly as NDC so we should be doing whatever they are doing instead of NDC). Alternatively "There can be no assumption that 'success' is best measured in relation to what happens to individuals as opposed to what happens to these areas over time". I find that argument simply baffling (I thought 'no place left behind' was means to an end - i.e. helping poor people - not an end in itself). Next, 'it's still early days'. Fair enough, although the research suggests that the largest gains came first. Finally, ABI's might be good delivery vehicles. I think this last one has legs, but raises questions about whether the holistic nature of NDC fits with the need to target spatial concentrations of particular problems.

As the report says "assessing the success of neighbourhood level interventions is contested territory" but my feeling is that for the moment the evidence emerging from NDC is more negative than positive.

The educational divide

Catching up with news after a long period of unexpected leave. The first thing I came across was a story about the educational divide: "Britain is becoming increasingly divided along educational lines with degree blackspots springing up in the poorest areas of the country as graduates flock to the capital" according to the Guardian reporting on research from the lecturer's union UCU.

The analysis involves looking at the proportion of working age population with degrees in every parliamentary constituency. What it tells us is that graduates choose to live in some areas (Richmond Park 63% graduates) and not others (Hodge Hill, Birmingham 9.9%). Whatever the newspapers say, it doesn't tell us anything about widening participation (that is about flows into education, not location decisions afterwards) and on whether this pattern is a good or bad thing for people who do not graduate.

High Speed Rail

Last week Network Rail made its business case for a new high speed line. Greengauge 21 will follow shortly, while HS2 will report next year.

Here is what I think we will know after these exercises. The direct user benefits (i.e. the benefits to people making journeys) are potentially quite large. Unfortunately, so are the costs. Both costs and benefits are highly uncertain. The wider benefits - e.g. 'regenerating the north' - are even more uncertain. I suspect the only thing we can say with any certainty is that they are likely to be overstated (there's a long history of this in terms of 'transformative' transport schemes).

Two things where we have a bit more certainty. First, the environmental impacts are not large and could well be negative. Most of the journeys on high speed rail will be additional (or transfers from other lines). Extra/faster journeys generally require more energy not less. You get some savings on car trips and air trips (offset if you use freed up slots for other flights; or if you make getting to Heathrow easier and so generate additional numbers on other routes). The overall impact will depend on what you assume about how electricity is generated. Expect to see generous assumptions using average, not marginal, carbon figures. The second certainty is that any new route will not be commercially viable and will need large government subsidies.

A final thought. Congestion charging has fairly certain costs that are outweighed by clear and certain benefits (the social costs of congestion are very high; and it also helps with carbon). Road pricing has more uncertainty over costs but the benefits are also fairly clear. Yet the strong political support from all three parties is for high speed rail not road or congestion charging. Go figure ...

New homes are too small

CABE are talking about new homes. According to a new survey they are too small and CABE are suggesting that it is all the fault of developers: "Housebuilders often protest that people won’t be able to afford houses with more space. In fact, the barrier is the profit margin that publicly limited companies feel obliged to make. By building the smallest homes in Europe, they’re not giving people the choice. Homebuyers deserve well designed homes that allow them to choose how they live."

The solution, according to CABE chief executive Richard Simmons?: "We need local planning authorities to ensure much higher space standards before giving developments the go-ahead"

I am completely baffled by this. We have a planning system that strongly restricts the supply of land for housing (especially in places where people want to live). This drives up land prices - upwards of £8m per hectare in the most popular parts of the South East - which, in turn, tends to reduce the size of houses (because you have to buy the land before you can build on it). Additional land use regulation - in the form of density requirements and brownfield restrictions further compound this effect (the former directly; the latter because remediation costs mean that you need to get a higher return per unit than if you build on greenfield). In other words, our land use planning system unintentionally generates huge incentives to build small houses with small gardens. [i.e. "Rabbit hutches on postage stamps"]

And somehow the solution to this is to have yet another piece of the planning apparatus which refuses planning permission unless developers build houses of a minimum size? It clearly won't solve the problem. But, if even partially implemented, it would presumably mean less houses and higher house prices. Not sure that this will help in meeting government objectives on "affordability" ...

Devolving public expenditure cuts

I see that my colleague Tony Travers, writing with Simon Jenkins, is calling for greater devolution to local authorities as a way of effectively implementing cuts to public expenditure.

They suggest two principles. The first concerns true delegation of responsibility which they argue leads to experimentation at the margin. What they don't point out is that it also leads to greater competition amongst local authorities, something which economists generally argue is a good thing.

The second principle is that devolution must not disadvantage poor areas. They argue that this can be achieved through redistribution of local revenue. Unfortunately, this is a very narrow interpretation of "must not disadvantage poor areas". If, however, you take a broader definition this leads down a long slippery slope to opposing any differences across places because "postcode lotteries" are unfair.

Focusing instead on poor people helps avoid this problem. My local authority might decide to increase local taxes rather than, say, cut funding to my local art gallery. My love of art and my vast disposable income (this is a hypothetical example) mean I can live with this. In the neighbouring authority poorer households decide they would rather forgo the art and prefer to see their taxes cut.

More generally, when expenditure is devolved the overall pattern more closely represents local preferences. In turn, this closer link between preferences and local expenditure increases the incentives of people to live with others who share their preferences. As these preferences are likely highly correlated with income or education we get more segregation. We end up with some local authorities housing mainly poorer households and providing the kind of local services that they want. Other communities are richer and provide more (or maybe less) local services. These differences make all individuals better off, but you might never guess this by looking at the effect on poor areas.

Community Cohesion

CLG has been talking about the economic benefits of community cohesion. It is suggested that new figures show that increasing cohesion by 1 per cent across the country can potentially save up to £530m in reduced crime.

This figure is arrived at by pulling together two numbers. One is on the costs of crime (I haven't looked at this in detail). The other is on the correlation between crime and some measures of cohesion. The correlation comes from data on 20 areas (effectively 40 wards out of England's approximately 8,000). Crucial assumption number one is therefore that these areas are representative. A 0.5% sample is unlikely to achieve this. That aside, the crucial thing is whether or not these numbers capture a causal relationship from cohesion to crime.

Concluding that the relationship was causal would require us to rule out the possibility that the correlation was not just picking up some other characteristics of neighbourhoods that are correlated with both crime and measured cohesion (say, for example, the income level of the neighbourhood). At the very least, we would want to rule out some of the more obvious possibilities. Unfortunately, the original research didn't do this so we have no way of knowing what causes this relationship. Research that is more careful suggests that it is very difficult to attribute any differences in outcomes that we care about to the causal impact of these kind of community variables.

Cohesion is a bit like motherhood and apple pie. What reasonable person could be against it? Spending public money to achieve it may well be a good thing. But, whatever the claim, this research doesn't help improve our understanding of the wider economic benefits of doing so.

Housing Numbers part 3

I see that CLG have announced the short listing for the first round of Kick Start.

At the end of June, the HCA press release around Building Britain's Future said: "Up to £500 million to kickstart stalled housing and regeneration schemes [...] In view of the new funding, and the high level of bids already received, the Agency anticipates taking forward more than £400 million worth of schemes from the initial bidding round"

They certainly seem to have managed to do that as they are now talking about spending £925m on the first round alone. The fact that this is more than the £900m allocated in June is explained by the fact that Kick Start accounts for £156m of the £0.6bn that will be spent in 2011/12 (CLG report the split as £572m / £332m / £156m in each of the next three years).

I think it is fair to say that how all of this is funded is still a little unclear.

Eco Towns

It appears the first eco towns will be announced later today. I have to confess that my reaction is mostly one of indifference (I don't live near one).

It is clear that the scheme as it stands will not make a huge difference to housing supply. Because it doesn't do a lot for housing supply it can't do much for the environment (only a small % of the population will live there). The direct differential benefits (i.e. due to the house itself) of "eco-town-new-build" over "standard-building-regs-new-build" will be positive but not huge. Overall, the new build will only make up a tiny proportion of existing stock. If you want to seriously tackle the carbon footprint of homes you need to tackle problems relating to the latter.

If the savings aren't large on housing, then most of the benefits need to come from transport via changing travel patterns (shorter journeys) and mode choices (fewer cars). At face value it seems like these might be easy to influence, but in practice the relationship between built environment and transport decisions is uncertain on many dimensions.

To get some perspective, new towns accommodate about 2 million people (4% of the population). Are they the "balanced self contained communities" they were planned to be? They are reasonably self-contained in the sense that a lot of people live and work in the town. Of course, this is true of most towns new or not. They may be less geographically self-contained than intended [1]. They also tend to be more auto-orientated [2]. More growth in new towns is likely to reinforce the dependency on auto leaving journey times unchanged [3].

So, overall, a small benefit from housing. Small populations mean any potential benefits from transport are small (and because there is lots of uncertainty there could end up being large costs). The brownfield/greenfield debate is the usual red-herring. Finally, they might act as examples, but for what? The huge number of new towns we are going to build next decade? They are an interesting experiment, but a marginal story compared to the major questions of housing supply and climate change.

[1]: R. Cervero, Urban Studies, 1994
[2]: Those numbers not peer-reviewed
[3]: Titheridge and Hall, Journal of Transport Geography, 2006.

Local homes for local people

The "local homes for local people" debate has reignited as a result of a report for the EHRC.

I can't see mention of this in Building Britain's Future, but here, from Hansard is what Gordon Brown said on 29th June: "[...] we can now also reform social housing allocation, enabling local authorities to give more priority to local people whose names have been on waiting lists for far too long. [...] We want to see a bigger role and responsibility for local authorities to meet housing needs of people in their areas."

John Healey (7th July) is pushing the increased Local Authority autonomy side of this: "In some areas, they may want to give people who have waited the longest preference. In some areas, they may want to give preference to people who have moved to take up work.They may want, in rural areas, to give preference to those with local connections or their preference may be to reduce overcrowding or attract skilled workers"

Personally, I don't like the politics of this. That aside, in terms of equity "local homes for local people" enshrines the right to live where you are born (residency criteria) or where you work (employment criteria). There is a debate to be had about whether these are sufficiently strong rights to weaken those around housing need (the current criteria). In terms of efficiency there is a strong argument that we need more mobility in the social housing sector not less. "In" quickly when people are in trouble and "out" when their long term situation improves. Further, from a spatial perspective, social housing acts as a very severe constraint on geographical mobility. As such mobility has an important role to play in adjusting to the changing economic geography of the UK economy "local homes for local people" is surely a step backwards.

Housing numbers part 2

I wrote yesterday that I found the housing numbers a little confusing. CLG have kindly provided clarification. So, here goes:

Existing commitments (i.e. before Monday 29/06)
Affordable housing provision (completions) for 09/10 & 10/11: 90,000
Cost 09/10&10/11: £6.4bn

The "housing pledge" gives:
Additional affordable housing starts 09/10 & 10/11: 20,000 with completions not later than 2011/12.
Additional expenditure: £1.5bn in 09/10&10/11 and the remaining £0.6bn in 2011/12 (for a grand total of £2.1bn)

I haven't tried to figure out the details of how the extra £2.1bn is funded.

Housing numbers (numbers numbers)

Just catching up with the news around housing numbers.

Here is BBC news: "investment in housing would be trebled to £2.1bn, funding 110,000 new affordable homes to rent or buy over the next two years and creating 45,000 jobs in construction" Same "extra 110,000" figure in the Guardian

Contrast that with the 2020 group from March calling for "a house building fiscal stimulus package [of] £6.35bn to fund the building of 100,000 social homes over the next two years".

CLG: "£1.5 billion boost will deliver an additional 20,000 new affordable energy efficient homes over the next two years - and a further 10,000 homes delivered through the private sector".

Building Britain's Future: "We have already committed to investing an extra £1.2 billion this year to build new houses. But to ensure that we meet the needs of young families across the country, we will expand this building programme by investing a further £1.5 billion over the next two years to deliver 20,000 additional energy efficient, affordable homes to rent or buy."

So, the 2.1bn figure is £1.5bn announced yesterday plus £400m for kick start and £100m for LAs (the latter two announced in the budget) plus some unidentified 100m? (Or a bad typo on the 1.2bn?) . It could involve the extra £500m for kick start mentioned on the HCA website.

I am not sure where the 110,000 figure comes from. It could be the total figures for next year. I don't think it can be extra numbers funded off the back of the most recent announcements.

All a little confusing ...

Youth unemployment "hotspots"

A new report from the Centre for Cities on youth unemployment makes for depressing reading. Youth unemployment stands at around 900,000 and is set to top the 1m mark. The spatial distribution of increases in youth unemployment is quite uneven.

The report discusses the role of the government's new Future Jobs Fund in tackling rising youth unemployment. Centre for Cities argue that, given the short term nature of the jobs created, this fund is best aimed at places suffering unexpectedly high short run increases in youth unemployment. Other policy initiatives should then continue to focus on longer term structural problems. This seems sensible.

Note, however, that the fund identifies "hotspots" as those places where the rate of unemployment is more than 1.5% above the national average. If Centre for Cities are right, this focus on levels instead of changes is not very useful for identifying places where the policy intervention is most likely to benefit young people.

Is this another example where policy gets it wrong by focusing on places rather than people?

Digital Britain

There is a strong spatial component to the proposals in the Digital Britain reported published yesterday. A 50p a month levy on fixed telephone lines will be used to generate a national fund to ensure universal access to broadband by 2012. A big chunk of this money will be spent on rolling out broadband to rural areas.

Providing high fixed cost public goods to sparsely populated areas often requires government intervention. No individual is going to pay the fixed cost if others can just free-ride on their investment. Of course, broadband is actually quasi-public in that you can restrict access to subscribers. This should make provision easier if the aggregate benefits to rural communities outweigh the costs. A tax on rural communities where this is the case can then be used to provide broadband and solves the public good problem.

What if the aggregate benefits to rural communities do not outweigh the costs of provision. There are then two arguments for doing so. One is an efficiency argument. That there are positive externalities to access to broadband. In aggregate, networks certainly demonstrate these kind of externalities (the internet is more useful now more people use it) but the effects of adding small numbers of people are, well, small. You can try some kind of economic development argument (although remember that the individual benefits to businesses directly affected weren't enough to outweigh the costs, so you are looking for some kind of externality).

Alternatively, you can resort to arguments around equity not efficiency. As I have discussed before, spatial policy is often not a very good tool for tackling equity issues. In the case of broadband we have a fixed rate levy (which is certainly a regressive tax within the group of consumers that have fixed lines and I would assume regressive overall) going to subsidise rural broadband that will benefit a lot of very well off people (as well as helping some rural poor).

One wonders if this is another case where worries about "postcode lotteries" ends up squashing serious debate about spatial policy?

Catching up (with the Regeneration Framework)

It was SERC's annual conference last week (see what you missed here) and I have been tied up with organising that as well as pushing forward some of our long term research. As a result I haven't been keeping up with the policy debate as much as usual lately (nor with this blog).

Taking the opportunity of late Friday afternoon to catch up, I read through "Taking forward the regeneration framework" published earlier this week.

Let's start with a definition: "the Government’s view is that regeneration is a set of activities that reverse economic, social and physical decline in areas where market forces will not do this without support from government". Then an ambition: "Regeneration is central to our ambition to create sustainable places where people want to live, work, and raise a family". So far, so good. Government has an important role to play in urban development. It should help correct for market failures and provide public goods, and some regeneration projects may play this role.

But here's the thorny issue: "[investment will be] targeted – not trying to transform everywhere – but investing where it will have most impact by supporting those communities where the most severe poverty and worklessness persists and where there is the opportunity to deliver long-term change". Despite the assertion that: "[The framework is] built on what we know works" the second part of this (long term change) sounds, at least to this reader, like wishful thinking.

To repeat: It is very unclear that regeneration policy (helping poor areas) makes for good social policy (helping poor people). As the recession means that we now have a lot more of the latter it is important to have a serious debate about whether spending £6.5bn on the former is the right policy response.

Strong Foundations?

The conservatives published their thinking on housing policy yesterday.

The biggest issue that housing policy needs to address is housing supply. They propose to do this by scrapping regional plans and replacing them with increased incentives to develop. The latter part of this is certainly a step in the right direction. But the incentives seem small (central government will provide matched funding of council tax on new properties for 6 years and as this is part funded by scrapping HDPG it is not all additional). It also doesn't address the crucial question of how one could convince local authorities in, say, South Manchester to build more housing that might have large benefits for the city-region as a whole. Some kind of higher level body is needed in these circumstances to internalise the (potentially large) cross boundary externalities and provide the right incentives.

At the same time, the proposal is that back gardens will cease to be brownfield while local communities will get to redefine their own green belt. I imagine the overall effect of these two changes will be to reduce the supply of land and it is not clear whether the incentives would be sufficient to overcome this.

There are proposals involve Local Housing Trusts building houses for local people. Community size can be increased by 1% per year if 90% of the local population is in favour. I assume this is aimed at rural communities. Theoretically this could help with very localised problems, although there will be strong disincentives for existing home owners that border the new development to object, so the 90% criteria could be pretty tough. I also think that local houses for local people is a very unappealing principle.

Piloting "right to move" for existing social tenants sounds interesting. Proposals for more complex intermediate shared ownership schemes are less convincing.

Finally, they will scrap HIPS but retain energy performance certificates. These will now only need to be produced once the sale is agreed but somehow it is claimed that this will still change behaviour. I would suggest more that is needed on that particular line of reasoning.

Overall, then, a mixed bag. Some interesting ideas, some marginal and a few odd ones.

Manchester: top of the league?

I was in Manchester yesterday for the launch of the Manchester Independent Economic Review (MIER).

The review argues that Manchester is the city in the North most likely to be able to raise its growth rate and, by doing so, drive growth in the North. To achieve this, it needs to make difficult policy decisions (some of which are not devolved at the moment)

I agree that there's a case for thinking that a few resurgent cities might help achieve regional growth objectives. The work on productivity differences that we did for the MIER is certainly consistent with Manchester being one of those cities (although, note, not THE city - but that's cautious academics for you).

So, to those hard policy decisions. The review identifies skills as a priority. I'm sure that's true but it is difficult to know what role local authorities might play. I think those in Manchester assume devolution here would mean control over the existing skills budget. I don't have a strong position on this (as yet), although at a minimum they could take some local expenditure which is wasted (e.g. on too many shiny new buildings) and spend more of it on skills.

Talk of shiny new buildings brings us to land use planning (for housing, commercial and transport). On housing, in particular, the local authorities have decision making power but need to come up with some credible method of collaborating. They then, within reason, need to build the kind of houses people want to live in, in the places where people want to live. (Ditto for office space). This means less brownfield and more building in South Manchester. This will be politically difficult (and also raises questions about the extent to which national planning guidelines would prevent this anyhow).

On transport, they need some strong political leadership on congestion charging. I also think that they, probably, want to convince the government that their £2.5bn of TIF projects represent much better value for money than £25bn on high speed rail (more on this in the near future). Again, both politically difficult decisions.

Do they, as the report suggests, need increased powers at city region level to achieve this? I'm not sure that the MIER makes the case for this one way or the other. Collaborative agreements, the new regional plans, and less binding national guidelines might be enough on many of the policy areas. Others would strongly disagree. I am increasingly convinced that the available evidence does not answer this question either way so expect to hear lots of people claiming the opposite.

Overall, the MIER highlights the ambitions of (some) in the city. I understand there will now be some kind of response as well as a strategic plan to take things forward. It will be interesting to see how things develop from here.

Housing Lists

More gloomy reading from the housing market from the National Housing Federation who are predicting that waiting lists for social housing are set to soar by 2011.

They (along with others in the 2020 group) are calling for a "house building fiscal stimulus package [of] £6.35bn to fund the building of 100,000 social homes over the next two years". If you are going to spend large amounts of money on a fiscal stimulus it seems sensible for at least some of it to go towards buying things that you are pretty certain to want in the long term. And we will want more housing long term (regardless of what is currently happening to the housing market).

Two caveats, however. First, something odd seems to be happening with the construction sector where the number of people employed has not fallen as fast as people where expecting. This might weaken the case for the fiscal stimulus side of the argument. (Although, if the explanation is that they are all building the Olympics - rather than reducing hours - it does make you wonder what will happen to house building as 2012 approaches). Second the NHF is predicting 2 million people on housing waiting lists and a £6.35bn stimulus builds 100,000 homes. Given the public sector fiscal position, the long term housing supply response will have to come from the private sector and this means sorting out the planning system so that private developers can build more.

Latest Housing Figures

The latest housing figures issued yesterday make for very depressing reading:

A few "highlights":
- Annual housing completions in England totalled 141,900 in 2008, down by 19 per cent compared with 2007
- Private enterprise housing completions (non-seasonally adjusted) were 32 per cent lower in the December quarter 2008 than the December quarter 2007. In contrast, housing completions by Registered Social Landlords (non-seasonally adjusted) rose 10 per cent.
- Private enterprise housing starts (non-seasonally adjusted) were 64 per cent lower than the December quarter 2007. Housing starts by Registered Social Landlords (non-seasonally adjusted) fell 5 per cent.

It is very unclear what the government can do about this. Michael Parkinson makes some suggestions in his recent report on the credit crunch.

The only short term thing I would add is that it makes sense to go back and reassess the costs and benefits of projects and downgrade any that claim large benefits from "transformational" impacts on the back of leveraged private sector development. Actually, a bit more scepticism on that front would not hurt with the long term evaluation of projects either.

It's also clear that the current model of partly financing regeneration through constraining land supply, increasing property prices and then using section 106 (to fund regeneration projects partly aimed at sorting out house price affordability caused by constraining land supply!) is not going to work in the short run. As it's not necessarily a great long run model either, perhaps it's a good moment to revisit that thorny issue?

Local Authorities and the Downturn

After my post on the geography of recession, I have been trying to clarify my thinking on the role of Local Authorities.

It is certainly the case that the recession will impact different places in different ways. Some of these differences are predictable, some not. However, it is a big leap from this observation to the conclusion that we need to further devolve economic decision making.

There are at least three separate issues here. The first concerns the role of local government spending as a complement to national monetary and fiscal policy. Here, local authorities face problems of timeliness, displacement and leakage that surely limit the extent to which policy variation makes sense. I am particularly unconvinced by suggestions that buying locally where-ever possible will (a) do much to stimulate local economies; (b) help cash strapped local council tax payers.

A second issue concerns local authorities role in helping mitigate social effects. Local authorities play a vital delivery role here. Ideally, policy should also vary with local conditions. Case study evidence from IDeA and LGA show that this is the case. Of course, this is one of the well known benefits of devolution, but it doesn't actually make the case for more devolution.

Another benefit of devolution is that it allows for experimentation. That seems to be the case in response to the recession. But it is important that this experimentation draws from past experience and from an understanding of current conditions (it's also important that lessons are learnt for next time). For example, my colleague Christine Whitehead suggests that in the last crisis advice and small scale assistance worked better to help maintain people in their homes and limit costs to the public purse than did either addressing the consequences of repossession through homelessness policies or transfer of stock to the social housing sector. It is hard to see this reflected in current policy experimentation in this area.

This brings us to the third issue regarding housing and planning. But this is already a long post and that is a big issue best left to another day.

The Geography of Recession (part II)

Back in October, I took issue with the way people were talking about the likely geographic impact of the recession. In short, it seemed to me that reports of the economic death of the "south" were greatly exaggerated. Past experience suggests that the gap between north and south might narrow, but is highly unlikely to be reversed. But I noted that even the first "prediction" - that the south was particularly hard hit in the last recession- is still the subject of some dispute.

Which brings us to some recent reports and figures. First, Centre for Cities City Outlook received wide coverage yesterday of its finding that cities in the north are seeing the highest increases in JSA claimants [NB: they also point out that the north-south divide language I am using here hides some important details - sorry for that]. Second, the ONS tells us that manufacturing made the largest contribution to the slowdown with a 4.6% fall last quarter, as opposed to a 0.5% fall for business services. This will clearly be bad news for those cities that rely on manufacturing more than services, and as we know those cities tend to be located in the north.

One final thing, the comment in my October post about "two quarters" now looks optimistic, but doesn't change my conclusion on the geographic impact. In short, it's grim everywhere.

Golden Handcuffs: Teacher Recruitment and Retention

One of the key problems for poor neighbourhoods is the bad educational outcomes for children that live there. As I have argued before, the evidence suggests that traditional regeneration programmes (with a strong focus on the built environment) don't do much to address this problem. So will the government's proposal to pay teachers more for working in the most disadvantaged schools (themselves generally in the most disadvantaged areas) fair much better?

The answer is that we don't really know. There isn't much strong evidence of a link between teacher pay and student outcomes. But these "golden handcuffs" are targetting recruitment and retention rather than pay per se. Unfortunately, we know even less about the extent to which this might affect educational outcomes. Intutively, it feels like it should matter, but there is little, if any, evidence to back up this intuition.

Even if the policy does work, it will not do much to affect the spatial concentration of poor educational outcomes. This is because about 60-70% of the variation in educational outcomes is down to pupil background, with only about 10% attributable to the school and even less, if any, to the neighbourhood. The fact that we have evidence that school matters more than neighbourhood at least argues that this is a move in the right direction. But the overwhelming importance of family characteristics and the spatial concentration of poor families, means that the targetting of disadvantaged schools can only ever do so much to improve poor education outcomes in disadvantaged neighbourhoods.