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]