Monday 28 July 2014

Time for a more rational debate on 'mixing' in new developments?

[Posted by Prof Henry G. Overman]

I may have made this point before, but I would love to see more sensible discussion of policy around mixed housing developments. I was reminded of this by the Guardian headline on Saturday about 'Poor doors' which highlighted the segregation that goes on in some of these developments. Personally, I find such stories unpleasant, but not at all surprising. If you share that sentiment surpress, for a moment, your outrage and ask yourself the following question - if the uncomfortable truth is that wealthy people don't want to mix with their poor neighbours (and can't be forced to do so) then what, exactly does this policy achieve?

The first reason for encouraging such mixing draws on the literature about neighbourhood effects. The underlying theory is that this kind of mixing improves outcomes for poorer families. Unfortunately, the empirical evidence on this is surprisingly weak. There is evidence that families do better when they live in mixed neighbourhoods. But establishing that the causality runs from mixing to better outcomes (rather than the other way round) has proved difficult. The evidence that forcing mixing at such micro-scales (e.g. within the same blocks) improves outcomes is thin to non-existant. Perhaps not surprising when you start to think about the realities of mixing as highlighted by the Guardian article.

The second reason for forcing mixed units is that it allows local authorities to extract 'development' rents from the private sector. In other words, by forcing them to provide some social housing in exchange for permission to develop you increase the supply of social housing. But mixing per se need play no part in this. Indeed, the irony is that you could increase the amount extracted from private sector developers if we didn't insist on social units being delivered in the very same development as the private sector units. This in turn would allow us to fund more social housing provision than we achieve with the current arrangements.

In short, if forced mixing at the site level doesn't deliver clear benefits and reduces the 'tax' we can extract from developers - should we persist with it?

A few decades ago, we were providing poor quality social housing on large estates, often in areas poorly served by public transport and far away from employment opportunities. We clearly do not want to see a return to that. But policy now seems to have swung to the opposite extreme where it insists on having a mix of social and private housing in every single new development. There is little strong evidence to support such a policy - which suggests that the optimal policy may lie somewhere between these two extremes. Perhaps it's time we had a sensible debate that tried to figure out where the appropriate balance might lie?

Monday 14 July 2014

Improving Voter Turnout

I don't have a strong view on police and crime commissioners. But looking at a recent article on the West Midlands by election I was intrigued to notice that "the Home Office has chosen to spend an extra £1 million on a pilot programme sending publicity booklets to every household in the region in an attempt to drum up interest in one of the coalition’s flagship policing policies."

Wearing my 'what works hat' I am spending a lot of time thinking about how to evaluate different kinds of policy so I wondered what the Home Office was trying to achieve with these booklets. Jim Waterson (who authored the original article) kindly sent me a link to the legislation that explains all:

"This trial will allow the Government to evaluate whether the delivery of election booklets to residential premises significantly raises voter awareness about the candidates standing in a PCC election."

This sounds potentially interesting - after all we'd like to know whether providing information to households improves awareness, perhaps even increasing their chances of voting. In order to figure that out we'd need to provide information to some households and not others and follow up to see whether households that got information had better awareness, voted more, etc. A second best alternative might be to have some areas receive leaflets others not. We would, of course, need to randomise this because selecting specific households or areas might give some candidates an advantage over others. However, with a big enough election randomising the provision of information shouldn't favour one candidate over another, but should increase turnout in the group getting leaflets relative to those that don't (if providing information helps).

Unfortunately, it appears that the 'pilot' in the West Midlands by-election won't allow us to do any of this because the leaflets are going to all residential addresses. Without a comparison group it will be impossible to figure out whether providing information has an effect on voter awareness or increases turnout. Even before and after comparisons for a sample of households won't tell us anything much given that coverage of the election should increase voter awareness over time.

I have no idea whether the electoral commission would allow randomisation of election information (there's a case that they should). Either way, in the absence of a suitable comparison group, it's difficult to see how the £1m pilot in the West Midlands can tell us anything useful.

Wednesday 9 July 2014

Building on Greenbelt land: so where?

[Posted by Prof Paul Cheshire]

Almost every reasonable person must now accept the case that we need to build on some parts of currently designated Greenbelt land. Not everyone is, of course, reasonable; and many are reasonable but have special interests, indeed assets, to protect. Particularly because the value of these assets in part depends on local Greenbelt designation, moving from the general to the particular – where should we build – almost inevitably causes controversy. One of my favourite slogans is from a group called CLASH in St Albans ‘No to Greenbelt Development – HERE’. It is so nakedly honest in its NIMBYism. But here goes: the particular.

Well almost here goes, because in fact this blog starts with some of the salient general arguments about why we must build on Greenbelt land. Ever since Kate Barker’s 2003 review of housing supply it has been well understood that the supply of housing in Britain in general and in the South East in particular is morbidly inelastic. Rising prices just do not produce more house building in England and one of the results is ever more price volatility. We know we have an accumulated shortfall of supply over the past 20 years of some 1.6 to 2.3 million units and that in so far as we have been building houses they have been of the wrong type and in the wrong locations to meet demand.

It is true that there are several factors in this critical shortage of supply but the most fundamental problem is the restriction of land supply and the insistence on building on brownfields sites.

Back in 1999 Steve Sheppard and I did some work commissioned by the then DETR (later ODPM, now DCLG) to estimate the impact on house prices of alternative land supply scenarios, building up from individual observations of house transactions and households to estimate the structure of demand for housing attributes, including space inside houses and outside space in gardens. Since the incoming government had recently adopted – with no evidential basis at all – the target that 60% of new houses should be built on ‘brownfield’ sites we thought we should include that as one of our land release policy scenarios. The purpose of the model was to estimate impacts of various land supply options on the change in real house prices between 1996 and 2016 given the then current household number projections and trend increases in real incomes. According to our model the 60% brownfield target would generate a 132% increase in real house prices by 2016. In fact the 60% brownfield target has been exceeded although luckily (you might ironically say) trend real income growth has been a bit lower than we assumed.

There would seem to be two main lessons from this. The first is that to stabilise, even to slow the rate of increase of un-affordability – highlighted recently by the Deputy Governor of the Bank of England as posing the biggest single risk to the British economy – we have to build on Greenfield sites. That necessarily means parts of the Greenbelt particularly, since the strongest demand for housing is near to jobs and near to where houses are the most expensive.

The second – less obvious lesson – is that it is rising real incomes that really drive the increase in house prices, because the demand for space rises so rapidly as incomes rise. The 132% increase in real house prices assumed both the then forecast rate of increase in household numbers and the trend rate of increase in real incomes. Re-running the model with the same increase in household numbers but now assuming real incomes did not rise at all produced an estimate of only a 4.4% increase in real house prices over the same period 1996-2016. In other words almost all the action on house prices came from the increase in real incomes.

We all want incomes to rise. That means we have to accept that the demand for houses and particularly housing space, will continue to rise and unless we supply enough space to build houses the problems in the housing market, and likely the British economy, will become completely unmanageable. And in the long run the outcome – already highly inequitable – would be catastrophic.

So release land where? Being an academic I will again start from the general principles. First we need to get rid of the completely outmoded designations of land as ‘greenfield’, Greenbelt or ‘brownfield’. These do not correspond to the underlying environmental or amenity value of land and it is this with which public policy should concern itself. This was exactly the conclusion of the official enquiry into land use futures Designations provide a handsome income for planning lawyers who can argue about whether a particular parcel is legally green or brown field till the cows come home; for example over the ex-MOD land I blogged about here.

The policy issue should not be the simplistic designation but the value of the land to the community in its present use over and above any market value of the land. So we need to get rid of these artificial legal designations and instead focus on preserving valuable habitats properly, improving the bio-diversity of land, preserving land with public access - indeed improving access where practicable - and preserving scenically valued land although this is already well protected in most cases by National Park status or being designated an Area of Outstanding Natural Beauty (a designation we should stick with even if sometimes fanciful on the margin). In summary – there is a strong welfare economics case for preserving large tracts of land in an unbuilt state, especially where there is public access or it has special habitat value.

The next set of general principles would seem to be first that the land is suitable for building – not in a floodplain or suffering from noxious pollution from past industrial activities. The second would be that the location gives good access to jobs and house prices are high, reflecting a local scarcity. A case on these grounds would be stronger still if the wider community had recently invested in improving local transport infrastructure. Finally the land should have low environmental or amenity value.

These simple principles quickly point to a plentiful – almost inexhaustible – supply of suitable land. Barney Stringer of QUOD generated a beautiful map recently identifying all the land in London’s 514,000 ha Greenbelt which was within 800 metres of a station (a ten minute walk), was not built on and had no marker of environmental quality beyond being in the Greenbelt. Barney calculates these simple criteria give us 19,334 hectares of highly buildable land with good access to the highest paying jobs in Europe and no identifiable environmental cost at all. I am no fan of mechanical densities especially since one of the problems with making land so expensive is that houses and gardens are much too small; but applying the current norm of 50 houses to the hectare this would give us space for 996,700 houses.

I would not stop at 800 metres though. The Dutch have shown the way in integrating cycling with using the train. The most modest cyclist can manage 2 kms in 10 minutes and still have time to lock up their bikes if the station has proper cycle facilities. I have not done the precise calculations but the laws of geometry being as they are using a 2km (10 minute) cycling distance would give one a total area 6.25 times bigger than Barney’s 800 metre radius. Some of the extra space would be environmentally valuable or not sensible to build on for other reasons and there would likely be just a little double counting but even so extending to 2 kms would more than double - probably triple - Barney’s estimate of 19,334 hectares available to build houses on in any sensible policy world. So even as things stand a sensible reappraisal of Greenbelt designation would solve the South East’s shortage of housing land overnight; and still leave London with at least 90% of the existing area covered by Greenbelt designation unbuilt on!

This, however, is based on the existing transport system. One of the sensible functions claimed for planning is the need to co-ordinate development with infrastructure provision. Presently we are building a major piece of new transport kit for the region: Crossrail. This is costing us £18 billion and will bring places like Iver or Taplow in Bucks or Shenfield in Essex within 30 to 40 minutes of central London (compared to the existing journey times of an hour to an hour and quarter). Have a look on Google Earth at the areas around these existing stations. The land around Iver in particular does not look too special. There is waste land aplenty, the M25 cuts through it and there is at least one golf course nearby. There is land around Taplow which looks to have environmental or scenic value but plenty which does not. Again Google Earth shows not one but two golf courses close by. The area around Shenfield is similar but here there seems to be more horseyculture than golf in the immediate vicinity.

Nothing wrong with golf or horsey culture but what we have to understand is that Greenbelt designation gives those land uses a massive subsidy. House building cannot compete for agricultural land but golf and horses can. I recently discovered another reason why we have so many golf courses around our cities: they are substitutes for landfill sites. It costs £80 a ton to dispose of ‘inert material’ in registered landfill sites but nothing if it goes into building bunkers! To quote Paul Robinson, Derby Council’s Strategic Director for Neighbourhoods, in defending the potential to capitalise on the value of the sites of the Councils two golf courses: "Effectively you go out to the waste industry and you say we will allow you to put your inert waste in our golf course…So you create mounds and bunker areas using the waste and at the core of those is inert waste." . This is one factor which underlies the proliferation of golf courses close to sources of builders’ waste and on land where there is no competition from houses. As noted in The Economist there is a serious oversupply of them. So the combination of Greenbelt designation and landfill costs means we can build as many golf courses as the market demands at their subsidised price but we cannot build houses. It is time to start turning some of our excess supply of golf courses into gardens; with houses on them!

The underlying logic here is that not only should there be good access but the land should have low environmental value. These criteria point to another good site for houses: outside Oxford to the north east of the by-pass beyond Marston. Why here? Houses and building land in Oxford are, after London, the most expensive in England; we may not be linking Oxford to London with Crossrail but we are electrifying the railway line without so far expanding housing. And the site I would build on is well above the flood plain and is mainly used for high intensity arable (as is 44% of Oxford’s Greenbelt). As we argued in our recent book  intensive arable land has no value beyond its market price for farming (and even its market price is grossly inflated by subsidies and advantages for tax avoidance) since intensive farming imposes net environmental costs and the land used for it, apart from being nearly devoid of wildlife, has little access apart from viable rights of way.

So while we are looking for suitable sites for building we should not forget Cambridge. 74% of Cambridge’s Greenbelt is in intensive arable use and the local economy is thriving. Indeed some would claim it is one of the real showpieces of Britain’s future economic success. But lack of new housing shuts people out of this prosperity and labour shortages are a problem. There are plenty of locations to choose from but Google Earth suggests north and south of the axis from Cherry Hinton to Fulbourn would be as good as anywhere. It is elevated by the standards of the Cambridge area and - amazingly - has a large golf course ready for houses as well as many hectares of land used for intensive arable farming.

No doubt many people who live close to the locations identified here would rabidly oppose building or a loss of their Greenbelt protection. That is more or less inevitable given the system we have constructed. But it is close to insane to spend £18 billion on Crossrail and not take advantage of the tracts of land that will suddenly be within a short commute of Central London because in 1955 – before Crossrail was dreamt of, when London was staggering back to its feet after WWII and car ownership was less than a tenth as common as now – all the land around the outlying stations was declared off limits sine die. And after all houses on the Crossrail route or in Oxford are being made even more valuable because of the public investment in transport infrastructure. Maybe if the 1,584 citizens of Taplow are unwilling to accommodate more housing they should be taxed the increased value of their houses.

Monday 7 July 2014

The irresistible pressure of economic fundamentals: Radical planning reform moving into the mainstream – but still need to get the details right

[Posted by Prof Paul Cheshire]

It was excellent to see concern and rational debate about the English housing crisis and its causes getting coverage in the mainstream press over the weekend. There was an ‘exclusive’ in the Sunday Express on 6th July, linking concerns about housing supply and the shortage of land produced by two generations of ‘urban containment’ with the Deputy Governor of the Bank of England’s warning that the housing market now posed the greatest single threat to economic recovery. Much of the piece was based on a phone conversation I had with the Whitehall correspondent, Marco Giannangeli.
No concerns about his representation of my basic message. But there were some issues with the details! Maybe it is the academic’s inner pedant; or the form of Chinese whispers which a phone conversation to a reporter, however skilled, who then writes his story which is then edited and subedited by people who have not heard the original conversation and finally cut to fit the space available given daily news pressures. Maybe the problem was that the season is not yet silly enough so there is still an awful lot of serious stuff happening in the world squeezing out other subjects.

Whatever. Here is a blog to alert readers to the interest of the Sunday Express in SERC research and correct a few misrepresentations in the story as it appeared in the paper compared to the conversation with Marco!
  1. The first was a classic confusion. There are 1.6 million hectares of Greenbelt land in England, not 1.6 billion. I think that 1.6 billion hectares is a good bit bigger than the entire USA.
  2. The published piece had me condemning the Help to Buy scheme out of hand as just inflating house prices. I was a bit more nuanced about HTB but these got lost. There are 2 separate schemes or elements to HTB. The first is aimed only at those buying new build houses. This may slightly increase supply. So it will not only have the effect of increasing house prices. But there is another separate scheme supporting anyone buying any house costing less than £600 000. That will have the effect of mainly increasing house prices. Together they certainly have the effect of increasing house prices and it is possible – we do not yet know because we do not have the evidence - that the net effect will be to make housing yet less affordable (i.e. not help, but hinder, buying; that depends on whether overall the increase in house prices the two schemes generate outweighs the help to the particular people who take advantage of the schemes). I first blogged about HTB immediately after the 2013 Budget.
  3. The published piece suggested I was arguing that we should release land for housing along the line of the proposed HS2 . I hope I was being more immediate and practical than this. HS2 will not increase the supply of land with good access to jobs in London much because – if built – it will have few stations. It might increase commuting from Birmingham to London of course. As SERC has warned ‘roads run two ways’. In the phone discussion about housing land I was talking about Crossrail . This is costing enough - around £18 billion to expect some community gain and is actually being built. From its opening in 2018 places like Iver or Taplow in Bucks or Shenfield in Essex will move to within 30 to 40 minutes of central London compared to the present journey times of 60 to 75 minutes. All three of these stations are within London’s Greenbelt. This means – despite the vast investment in a useful piece of infrastructure - no houses can be built close to them . So a potentially very useful and major piece of infrastructure will generate much less gain for the community than it should in any rational world. And this is despite the fact that there is plenty of environmentally pretty useless land close to the stations and the fact that the reduced journey times to London will substantially increase the value of houses close to the Crossrail stations.[ By the way I plan a blog shortly on where exactly one should be thinking about building houses in the Greenbelt and these three will certainly feature.]
  4. The Sunday Express piece did correctly report me as saying that 20% of the GLA area is covered by Greenbelt designation. But the idea we could build 1.6 million houses on this area of Greenbelt within London is far too mechanical. The total area of Greenbelt within the GLA boundary is 32,500 has. Currently expected densities (which are too high) are 50 houses to the ha so if every single m2 of Greenbelt land within the GLA was built on that would add to about 1.6 million houses but it is not at all reasonable to think that every available ha could or should be built on . We do need green spaces!
  5. There was also a confusion between Greenbelt area within the GLA (32,500 ha) and London’s Greenbelt. This stretches out to Aylesbury and Southend and covers about 514,000 ha in total – i.e. most of the Home Counties. It is this much bigger area (514,000 ha) that contains nearly 20,000 of Greenbelt land within 800 metres of a station not built on and not in an Area of Outstanding Natural Beauty or covered by a Site of Special Scientific Interest protection or any other indication that it is land which is environmentally valuable or amenity rich. Thanks to Barney Stringer for this statistic.