All that fuss about the National Planning Policy Framework and the need for more housing and then we find out that house prices are falling anyhow. Surely these house prices falls undermine the case for more housing?
If only things were that simple. First, because the volume of house prices sales is currently low, fluctuations in these indices (which are based on sales) are less informative than usual. Second, taken at face value, the figures might tell us something about the current state of the economy but they are not a good indicator of long run conditions in the housing market. Why? Because economies that fail to build enough houses tend to experience high house price fluctuations. As argued by Philippe Bracke in this post from November last year this has certainly been true historically for the UK and there's no reason to think things should be any different this time round.
As Philippe argues: "Ups and downs are an intrinsic feature of all economic series but booms and busts are not, and this is where the UK compares unfavourably with other countries. Even by US standards, UK house prices look like a rollercoaster: they more than doubled in real terms since the mid nineties; before that, they fell by almost 40% from 1989 to 1995. For prices to vary so much, quantities must be very sticky. Indeed, a recent OECD working paper shows that the number of new housing units built in the UK is low compared to other nations. A report by the Department of Communities and Local Government suggests that strict planning regulations hold back housing supply and make prices more volatile. [...] It might seem strange to advocate more house building in a period where house prices are falling. However, the current decline in house prices represents a cyclical adjustment that is not due to abundance of housing units. If this were the case, we wouldn’t see the current rent increases."
[NB: Economies that tend to build way too many houses can also experience high fluctuations but for different reasons. However, house price to income ratios show that the UK is certainly not building too many houses. It's hard to see that the recent NPPF will have such a radical impact as to move us from one extreme to the other.]
CEP Urban and Spatial Programme Blog (formerly SERC)
Thursday, 29 March 2012
Tuesday, 27 March 2012
NPPF? Plus ça change ...
Some of the details may be different, but my overall reaction to the NPPF is essentially unchanged. From my reaction to the draft in July last year:
"Setting aside the details, I think that the draft gets some big issues right, some wrong. Minor caveats aside, I support the presumption in favour of sustainable development. It cannot possibly be right that local bureaucrats and politicians get to say yes or no to development on a case-by-case basis. Instead, the presumption means that they have to say yes to things that are consistent with their local plan. Many other countries successfully run systems that are (at least) this permissive. But if, as this government does, you believe in localism then you have to give people a strong say in the development of their local plan to make the 'presumption' consistent with localism. The draft framework does this and again, caveats aside, I think this is a good idea. Finally, the government recognise that local authorities will need to be given incentives to agree to new development and have introduced a range of measures to provide these incentives. Whether these incentives will be large enough in practice is still open to debate, but I support the general principle.
So much for the positives, what about the things it gets wrong? I think a fundamental problem is that the planning framework is backward not forward looking. We have a growing population and changing industrial structure and yet the draft framework works to limit us to living and working within an urban footprint that we inherited from the 1940s (if not before). This is particularly evident in terms of policy towards the Greenbelt. Towns expand in to cities by building on countryside and merging with outlying towns and villages. We are told that the Greenbelt policy is specifically intended to prevent this. In other words, the urban system we have now is what we have to work with. This severly hampers the ability of our set of cities to adjust to fundamental structural changes. It assumes that growing cities can expand by recycling old land, but many of the places that have strong growth potential are not existing cities, but larger towns. In short it makes the planning system about redevelopment more than new development. I understand the politics behind this (c.f. the natural trust) but the restrictions come at a cost in terms of economic growth.
The other area where the framework is more backward than forward looking is in its approach to retail. Specifically, the government has decided to place a strong emphasis on town centre first policies. As regular readers will now, evidence suggests that these restrictions imposes substantial costs on households in terms of higher shopping bills. They also have the unintended consequence of creating more clone towns (as chains forced downtown drive out smaller retailers). Sequential needs tests then further limit competition with adverse impacts on employment and the cost of living. As with restrictions on Greenbelt development, these restrictions are also based on a 'zero sum' assumption - if we restrict out of town development than we will automatically get town centre development. But 20 years from now isn't it likely that the internet will fundamentally change the way we shop? Why shouldn't these restrictions on out of town developments hasten the move towards online shopping? Indeed, it is clear that this is already playing a role in what is happening in the high street. Overall, town centre first policies have costs as well as benefits and are based on a (possibly) outdated retail model. As I said, this feels more backward than forward looking and, once again, makes the planning system about redevelopment more than new development."
If anything, the revised version has slightly reinforced the bad (with it's focus on brownfield first) at the expense of the good. But to this reader that was already quite strongly enshrined in the draft (even if the hysterical reactions from some countryside campaigners would make you think otherwise). And at least national brownfield targets have not been reintroduced with LAs now given the power to set those locally instead (something which SERC pushed in its assessment of the NPPF).
Given the politics of all this, expect to see strong claims of great influence and radical changes - but on first pass (for this reader) it's a case of the more things change, the more they stay the same.
"Setting aside the details, I think that the draft gets some big issues right, some wrong. Minor caveats aside, I support the presumption in favour of sustainable development. It cannot possibly be right that local bureaucrats and politicians get to say yes or no to development on a case-by-case basis. Instead, the presumption means that they have to say yes to things that are consistent with their local plan. Many other countries successfully run systems that are (at least) this permissive. But if, as this government does, you believe in localism then you have to give people a strong say in the development of their local plan to make the 'presumption' consistent with localism. The draft framework does this and again, caveats aside, I think this is a good idea. Finally, the government recognise that local authorities will need to be given incentives to agree to new development and have introduced a range of measures to provide these incentives. Whether these incentives will be large enough in practice is still open to debate, but I support the general principle.
So much for the positives, what about the things it gets wrong? I think a fundamental problem is that the planning framework is backward not forward looking. We have a growing population and changing industrial structure and yet the draft framework works to limit us to living and working within an urban footprint that we inherited from the 1940s (if not before). This is particularly evident in terms of policy towards the Greenbelt. Towns expand in to cities by building on countryside and merging with outlying towns and villages. We are told that the Greenbelt policy is specifically intended to prevent this. In other words, the urban system we have now is what we have to work with. This severly hampers the ability of our set of cities to adjust to fundamental structural changes. It assumes that growing cities can expand by recycling old land, but many of the places that have strong growth potential are not existing cities, but larger towns. In short it makes the planning system about redevelopment more than new development. I understand the politics behind this (c.f. the natural trust) but the restrictions come at a cost in terms of economic growth.
The other area where the framework is more backward than forward looking is in its approach to retail. Specifically, the government has decided to place a strong emphasis on town centre first policies. As regular readers will now, evidence suggests that these restrictions imposes substantial costs on households in terms of higher shopping bills. They also have the unintended consequence of creating more clone towns (as chains forced downtown drive out smaller retailers). Sequential needs tests then further limit competition with adverse impacts on employment and the cost of living. As with restrictions on Greenbelt development, these restrictions are also based on a 'zero sum' assumption - if we restrict out of town development than we will automatically get town centre development. But 20 years from now isn't it likely that the internet will fundamentally change the way we shop? Why shouldn't these restrictions on out of town developments hasten the move towards online shopping? Indeed, it is clear that this is already playing a role in what is happening in the high street. Overall, town centre first policies have costs as well as benefits and are based on a (possibly) outdated retail model. As I said, this feels more backward than forward looking and, once again, makes the planning system about redevelopment more than new development."
If anything, the revised version has slightly reinforced the bad (with it's focus on brownfield first) at the expense of the good. But to this reader that was already quite strongly enshrined in the draft (even if the hysterical reactions from some countryside campaigners would make you think otherwise). And at least national brownfield targets have not been reintroduced with LAs now given the power to set those locally instead (something which SERC pushed in its assessment of the NPPF).
Given the politics of all this, expect to see strong claims of great influence and radical changes - but on first pass (for this reader) it's a case of the more things change, the more they stay the same.
Planning reform
For those interested in the revised National Planning Framework (due to be published today):
- SERC policy paper 'What we know (and don't know) about the links between planning and economic performance'
- SERC policy paper 'Assessing the government's proposals to reform the UK planning system'
- CLG select committee report on planning: The good, the bad and the ugly
- Radical 'solutions' to the housing crisis (or why we need more housing)
- Why older people and empty bedrooms are not to blame for the housing crisis
- The problems with brownfield first
- LSE London planning policy roundtable
- Cities and economic growth
- National Trust's Inexpensive Progress: Two steps forward, one step back
Monday, 26 March 2012
What does daylight-saving time actually save?
Posted by Dr Felix Weinhardt, SERC and LSE
On Sunday Britain turned the clocks forward an hour - and summer time officially began. Mornings will be darker, evenings lighter. BST and other daylight-saving schemes are thought to reduce demand for energy (lighting in particular). But do they?
Putting this into a map, we can see how the annual average times of sunrise vary over space. Moving from the East to the West, places get daylight later until we hit a time zone boundary. (Irregularities are because of time zone boundaries, or because particular states had different daylight-saving policies in the early 2000s). I can then identify communities with, say, different solar time, but the same ‘official’ time or daylight-saving policies.
1) Counties that get earlier daylight in the North have lower annual residential electricity consumption.
2) In the South, on the other hand, early daylight is associated with higher electricity consumption.
I am still trying to get my head around what might be causing these patterns. In the South I think it’s higher electricity consumption for cooling that is not offset by lower demand in the evenings. For the North I’m less clear. The policy implications are potentially profound, however - for example, if we’re interested in reducing energy use, perhaps the American North and South should each have their own time zones, or their own time-shifting policies.
On Sunday Britain turned the clocks forward an hour - and summer time officially began. Mornings will be darker, evenings lighter. BST and other daylight-saving schemes are thought to reduce demand for energy (lighting in particular). But do they?
It turns out we know very little about the real effects of ‘time shifting’. This is because most research that looks at daylight-saving, or time zones more generally, involves speculating what kind of effects could occur if we changed the policy – rather than taking actual measurements to quantify real impacts.
A few researchers have tried to measure actual effects, mainly by focusing on what happens a few days before or after a time change. Two recent studies looked at daylight-saving time changes in the US state of Indiana (energy use went up) and in Australia (no effect). There also is some evidence regarding a reduction in road accidents and some (contested) work that looks at stock market fluctuations.
In my current research on time-shifting and energy consumption, I make use of the fact that the United States spans multiple time zones, and that time-shifting arrangements also vary across space. I calculate the solar times of sunrise and sunset across the US, then combine this with information on different time zones and daylight-saving regimes.
Putting this into a map, we can see how the annual average times of sunrise vary over space. Moving from the East to the West, places get daylight later until we hit a time zone boundary. (Irregularities are because of time zone boundaries, or because particular states had different daylight-saving policies in the early 2000s). I can then identify communities with, say, different solar time, but the same ‘official’ time or daylight-saving policies.
So how does all this shape energy consumption? I first look at US counties in the same time zone. I compare energy use in Western and Eastern areas of the zone – both have the same ‘official’ day but the latter get the sun earlier. Next, I compare counties on each side of a time zone border. Here, ‘solar’ time is the same but ‘official’ days differ because of policy factors.
Comparing the North and the South of the US, I find that:1) Counties that get earlier daylight in the North have lower annual residential electricity consumption.
2) In the South, on the other hand, early daylight is associated with higher electricity consumption.
I am still trying to get my head around what might be causing these patterns. In the South I think it’s higher electricity consumption for cooling that is not offset by lower demand in the evenings. For the North I’m less clear. The policy implications are potentially profound, however - for example, if we’re interested in reducing energy use, perhaps the American North and South should each have their own time zones, or their own time-shifting policies.
As academics say, this is work in progress. Comments are welcome!
Thursday, 22 March 2012
Urban policy and budget 2012
I'd highlight three urban policy issues arising from budget 2012.
First, planning. The National Policy Planning Framework (and plenty of discussion) to follow next week. We are told that the presumption in favour of sustainable development will come and that the text remains short. But what this means in practice will depend on the details. Garden cities were also flagged pre-budget. The emphasis on gardens and pretty houses clearly appeals, but the extent to which the economics of this are much different to Labour's growth areas remains to be seen.
Second, confirmation that the government wants to move towards local pay in the public sector. I have laid out the arguments on this earlier in the week (I am, on balance, in favour).
Third, a city deal for Manchester, including an earn back scheme for tax revenues generated by additional infrastructure investment funded locally. Again, I laid out the arguments in favour of this deal earlier. One concern with the earn back scheme is the extent to which additional tax revenues come as a result of displacement of activity from elsewhere. This is a genuine concern, but the evidence seems to suggest that it is a much bigger issue for small areas such as Enterprise Zones. On that, more of these were announced in the budget but I remain deeply sceptical about the likely impacts. [Disclosure: I sit on the Economic Advisory Panel that helped draw up the Manchester Growth Plan]
First, planning. The National Policy Planning Framework (and plenty of discussion) to follow next week. We are told that the presumption in favour of sustainable development will come and that the text remains short. But what this means in practice will depend on the details. Garden cities were also flagged pre-budget. The emphasis on gardens and pretty houses clearly appeals, but the extent to which the economics of this are much different to Labour's growth areas remains to be seen.
Second, confirmation that the government wants to move towards local pay in the public sector. I have laid out the arguments on this earlier in the week (I am, on balance, in favour).
Third, a city deal for Manchester, including an earn back scheme for tax revenues generated by additional infrastructure investment funded locally. Again, I laid out the arguments in favour of this deal earlier. One concern with the earn back scheme is the extent to which additional tax revenues come as a result of displacement of activity from elsewhere. This is a genuine concern, but the evidence seems to suggest that it is a much bigger issue for small areas such as Enterprise Zones. On that, more of these were announced in the budget but I remain deeply sceptical about the likely impacts. [Disclosure: I sit on the Economic Advisory Panel that helped draw up the Manchester Growth Plan]
Monday, 19 March 2012
The case for local pay
The weekend papers full of coverage on the move to regional pay. Some thoughts:
1. Public servants in poorer regions to get lower pay we are told by the Guardian. Misleading, at best, but captures the sentiment of many. In fact, what details we have suggest that this will be local, not regional and that pay will not be cut. Instead, once the pay freeze stops there will be higher wage increases in some areas than others. One way to do this would be to look at areas where it's difficult for the public sector to recruit high quality staff and allow wages to rise more there. Another would be to use finer grained data on (increases) in costs of living. Either of these would be better represented as 'public servants in high costs areas to get more pay'.
2. The most direct impact will be to raise the quality of public good provision in high cost areas. Colleagues at CEP, for example, suggest that low public sector wages in high costs areas lead to worse outcomes in the NHS. More preliminary evidence finds the same effect for schools and policing. Of course, addressing this through higher pay increases in high cost areas raises the possibility that these services would deteriorate in the poorer areas. Again, evidence from the NHS suggests this may not be a major concern because the effect is 'non-linear'. The bad effect of national wages in high cost areas are not offset by better outcomes in low cost areas (probably because higher quality staff in the high cost areas move to the private sector, rather than moving to the public sector elsewhere in the country).
3. What about the indirect costs on the local economies of disadvantaged areas? Here, we have very little evidence. In the short term, you could argue that the major issue in these areas is demand rather than supply. But these are not short term changes we are talking about - the differentials will tend to emerge only in the long term (as small differences in pay increases work through). It's also reasonable to suggest that longer term higher public sector salaries do create a local distortion that works against the private sector. Here there is a clear tradeoff. Higher public sector wages provide a demand stimulus to local service sectors. This likely offsets the distortion on the supply side (which comes from the fact that they have to pay higher wages to compete with the public sector). On the other hand, manufacturing (and other tradable) industries which don't serve local markets lose out because they don't benefit from the demand stimulus, but do get hit by the supply side distortion. Preliminary evidence from my own research on public sector employment suggests that these effects can be economically important. In short, high public sector pay may 'distort' local economies (towards local services away from manufacturing) and make them more 'dependent' on the public sector than they would otherwise have been.
4. What about 'fairness'? Personally, I prefer to think in terms of equal reward for equal work - which means that wages should reflect the local cost of living (something this move tries to achieve). Others may have different views - although I am unclear in what sense equal pay is in any sense 'fair' in this specific context even if there may be other reasons for supporting it more generally (e.g. for male and female workers doing the same job at the same firm).
5. On the subject of fairness, it seems reasonable to think that the negative effects of national pay in high cost areas are disproportionately experienced by poorer families. Partly because they will be the ones earning this pay, partly because they can't opt out of poorly performing public sector services. Again, personally, I think this is a bad thing.
On balance, I think the case for local pay looks strong although, as the reaction of many make clear, the politics are likely to be nasty.
1. Public servants in poorer regions to get lower pay we are told by the Guardian. Misleading, at best, but captures the sentiment of many. In fact, what details we have suggest that this will be local, not regional and that pay will not be cut. Instead, once the pay freeze stops there will be higher wage increases in some areas than others. One way to do this would be to look at areas where it's difficult for the public sector to recruit high quality staff and allow wages to rise more there. Another would be to use finer grained data on (increases) in costs of living. Either of these would be better represented as 'public servants in high costs areas to get more pay'.
2. The most direct impact will be to raise the quality of public good provision in high cost areas. Colleagues at CEP, for example, suggest that low public sector wages in high costs areas lead to worse outcomes in the NHS. More preliminary evidence finds the same effect for schools and policing. Of course, addressing this through higher pay increases in high cost areas raises the possibility that these services would deteriorate in the poorer areas. Again, evidence from the NHS suggests this may not be a major concern because the effect is 'non-linear'. The bad effect of national wages in high cost areas are not offset by better outcomes in low cost areas (probably because higher quality staff in the high cost areas move to the private sector, rather than moving to the public sector elsewhere in the country).
3. What about the indirect costs on the local economies of disadvantaged areas? Here, we have very little evidence. In the short term, you could argue that the major issue in these areas is demand rather than supply. But these are not short term changes we are talking about - the differentials will tend to emerge only in the long term (as small differences in pay increases work through). It's also reasonable to suggest that longer term higher public sector salaries do create a local distortion that works against the private sector. Here there is a clear tradeoff. Higher public sector wages provide a demand stimulus to local service sectors. This likely offsets the distortion on the supply side (which comes from the fact that they have to pay higher wages to compete with the public sector). On the other hand, manufacturing (and other tradable) industries which don't serve local markets lose out because they don't benefit from the demand stimulus, but do get hit by the supply side distortion. Preliminary evidence from my own research on public sector employment suggests that these effects can be economically important. In short, high public sector pay may 'distort' local economies (towards local services away from manufacturing) and make them more 'dependent' on the public sector than they would otherwise have been.
4. What about 'fairness'? Personally, I prefer to think in terms of equal reward for equal work - which means that wages should reflect the local cost of living (something this move tries to achieve). Others may have different views - although I am unclear in what sense equal pay is in any sense 'fair' in this specific context even if there may be other reasons for supporting it more generally (e.g. for male and female workers doing the same job at the same firm).
5. On the subject of fairness, it seems reasonable to think that the negative effects of national pay in high cost areas are disproportionately experienced by poorer families. Partly because they will be the ones earning this pay, partly because they can't opt out of poorly performing public sector services. Again, personally, I think this is a bad thing.
On balance, I think the case for local pay looks strong although, as the reaction of many make clear, the politics are likely to be nasty.
Thursday, 15 March 2012
Do city climate plans reduce emissions?
Interesting paper from the Journal of Urban Economics (May 2012) suggests that climate change plans tend to be introduced by 'greener' cities to codify things they would have done anyhow. This suggests that, e.g., forcing other cities to adopt climate change plans wouldn't have much impact on emissions.
From the abstract: "More than 600 local governments in the US are developing climate action plans that lay out specific measures to reduce emissions from municipal operations, households and firms. To date, however, it is unclear whether these plans are being implemented or have any causal effects on emissions. Using data from California, I provide the first quantitative analysis of the impacts of climate plans. I find that cities with climate plans have had far greater success in implementing strategies to reduce greenhouse gas emissions than their counterparts without such plans. For example, they have more green buildings, spend more on pedestrian and bicycle infrastructure, and have implemented more programs to divert waste from methane-generating landfills. I find little evidence, however, that climate plans play any causal role in this success. Rather, citizens’ environmental preferences appear to be a more important driver of both the adoption of climate plans and the pursuit of specific emission reduction measures. Thus, climate plans are largely codifying outcomes that would have been achieved in any case."
My SERC colleague Max Nathan suggests one possible objection. It could be that local preferences might be shaped by previous plans, or discussions of future plans, or more general ‘political leadership’ that helps shape public opinion over a long time period. In that circumstance, environmental preferences are 'bad controls'. Producing the plan (or earlier plans) changes preferences which explains both the plan and the actions to reduce emissions. That said, I don't know of any evidence to support this specific objection (although not my area of expertise). Personally, I'd give more weight to the empirical finding - of no effect of the plans - than to the theoretical objection.
[For those without journal access, I couldn't find a pre-print on the author's home page although he may be able to provide one.]
[Update: Adam Millard Ball - the author - points out to me that he did try testing for the 'preferences' possibility using historical preferences and got essentially the same result. That strengthens the argument that plans had no effect.]
From the abstract: "More than 600 local governments in the US are developing climate action plans that lay out specific measures to reduce emissions from municipal operations, households and firms. To date, however, it is unclear whether these plans are being implemented or have any causal effects on emissions. Using data from California, I provide the first quantitative analysis of the impacts of climate plans. I find that cities with climate plans have had far greater success in implementing strategies to reduce greenhouse gas emissions than their counterparts without such plans. For example, they have more green buildings, spend more on pedestrian and bicycle infrastructure, and have implemented more programs to divert waste from methane-generating landfills. I find little evidence, however, that climate plans play any causal role in this success. Rather, citizens’ environmental preferences appear to be a more important driver of both the adoption of climate plans and the pursuit of specific emission reduction measures. Thus, climate plans are largely codifying outcomes that would have been achieved in any case."
My SERC colleague Max Nathan suggests one possible objection. It could be that local preferences might be shaped by previous plans, or discussions of future plans, or more general ‘political leadership’ that helps shape public opinion over a long time period. In that circumstance, environmental preferences are 'bad controls'. Producing the plan (or earlier plans) changes preferences which explains both the plan and the actions to reduce emissions. That said, I don't know of any evidence to support this specific objection (although not my area of expertise). Personally, I'd give more weight to the empirical finding - of no effect of the plans - than to the theoretical objection.
[For those without journal access, I couldn't find a pre-print on the author's home page although he may be able to provide one.]
[Update: Adam Millard Ball - the author - points out to me that he did try testing for the 'preferences' possibility using historical preferences and got essentially the same result. That strengthens the argument that plans had no effect.]
Subscribe to:
Posts (Atom)