UK Cities: From recession to recovery

Centre for Cities has published its Cities Outlook 2010. As in previous years, the report provides plenty of interesting facts and figures and there is much to agree with:

• Recession has reinforced disparities between places
• Places with lots of skilled workers have been least hard hit and will bounce back quickest

More open to debate are the assertions that:

• Giving cities greater flexibility will allow them to respond to local conditions (probably true) and drive growth (highly debatable)
• The next government needs to fix the basics - like improving schools (probably true) and public transport (debatable) - so they can attract new business and jobs (highly debatable)

Sorry to be skeptical, but I remain unconvinced that devolution plus fixing the basics will be sufficient to reverse long term decline. We need to face that reality if we are to develop urban policy which stops failing people who happen to live in "failing places".

BTW - a minor niggle, but this picture does not show regional growth rate differences are widening:

Empty Homes

Someone pointed out to me that the Lib Dems have been talking about empty homes: "There are over 760,000 empty properties across England which are no longer used as homes but can be brought back into use with some investment."

According to CLG, only around a third of these homes (c300,000) are empty for more than six months. The government target is for 240,000 new homes to be built per year.

The detailed figures are available here. They show that only 28,000 of these long term empty homes are in London, with another 36,000 in the South East. That is, in high demand areas, very few houses are empty.

Using empty homes will (sometimes) make sense. But it will not do much to solve Britain's housing problem.

Frozen Britain

Given the recent cold weather, it's interesting to ask whether climate has a role to play in explaining the UK's spatial disparities.

Within countries, urban economists argue that bad weather tends to be offset by high real wages (so either high wages or low costs of living). In the US, where spatial differences in temperature and precipitation can be very large, this is potentially very bad news for cold places like Detroit. While they had auto manufacturers they could pay high real wages to compensate for bad weather. With that industry's decline it's hard to see what could replace it that could pay suitable compensation for the bad weather - and this is reflected in the large outflows of population.

In Britain, climatic disparities are far smaller and so weather should play less of a role. Still, my colleague Paul Cheshire has some evidence that even within European Union countries (including Britain) places with nicer weather (i.e. warm, but not hot) grow faster. These effects aren't necessarily that large but within Britain are another factor (mildly) favouring the Southern over the Northern regions.

More Affordable Housing?

According to reports "Property is now affordable for first time buyers in nearly four out of 10 areas of the UK".

Unfortunately, as the BBC notes, this isn't the case if
- you want to live in London ("unaffordable [...] in all local authority areas")
- you need to borrow money ("many first time borrowers have been unable take advantage [...] because of tighter lending criteria")

Further, first time buyers are usually young which means that they tend to have lower than average incomes (because incomes rise over time). They are also increasingly likely to be unemployed.

Finally, house prices are already picking up while income growth is likely to remain relatively flat.

In short, the temporary downward price adjustment as the result of recession is not going to solve Britain's long term housing problems.

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."