Tackling the Supply and Affordability of Housing: Lessons from London

tackling housing

Thoughts on an article by Alex Steffen in the Guardian and an old BBC Documentary.

A thought provoking article flashed across my screen today from Alex Steffen from the Guardian (click on image below for article). And by chance I also came across a surprising BBC VIDEO this week that explains a lot about the UK housing industry.  The two are fantastic as a pair of bookends to some of my recent thinking on housing supply on this little island. I’ve posted the video at the end of this article for your viewing pleasure.

From my vantage in London UK, and my place in the development industry and as a prospective homeowner, I feel this issue quite personally. Housing supply in global cities is a complex, wicked problem. We need to look at the the housing supply systemically and cohesively from the beginning of the supply chain right to the end.

Unaffordable

I find the winds of housing policy unpredictable here in the UK – clumsy, blunt and often cross-purposes. The market and industry is not functioning properly – how else can one explain Greater London’s anemic supply of less than 20,000 new units for year, every year for the past decade – in the face of net in-migration of 100,000+ people per year? My hometown of Vancouver BC – a quarter of London’s population – produces about 20,000 units for about 30,000 to 40,000 new migrants annually.

Steffen writes that regional and local government needs a step change in how they plan and review development applications:

“In order to build that kind of housing we need efforts that are new not only in scale, but in approach. We can build some housing incrementally, without changing the skyline or cityscape, but not anything like enough. To produce enough homes to matter, fast enough, we’re going to have to fundamentally alter parts of our cities. That, of course, demands a local government willing and able to plan and permit such widespread change. It also takes an array of home-builders doing the actual work, often in more innovative and low-cost ways …”

Steffen also begins to address some facets of the wicked problem mainly from a design perspective but he stalls at form, forgetting other complex systemic pieces of the puzzle:

Combine compact development on a large scale with a push for more sustainable urbanism, and we can see the outlines of cities that will work in the 21st century take form. We can enable low-consumption lives through better public services and sharing systems. We can convert excess roads and parking lots into great streets, green spaces and parks, making denser neighborhoods nicer to live in then they were before and more resilient to weather extremes. We can promote green building and more sustainable water and energy infrastructure, making rising prosperity even more ecologically frugal. We’re only just glimpsing how much hope for the planet rests on getting cities right.”

What’s missing?

  • A vibrant productive market housing development industry … given the demand, why is the UK’s private development market so stunted? Perhaps it has something to to with the regulatory environment and a history of state intervention in the market over the decades following the Post WWII housing emergency  …. watch the video at the end of this story!
  • Simplify Land and Housing Purchases – Why should a land assembly or home purchase take 6 months or more to process before you have a firm deal and a fixed purchase price?!!! End the insanity and unpredictability of Gazumping (see funny article on same) for land assemblies and for housing purchases. The UK should move to the system we have in Canada and Scotland. Simple, binding agreements of purchase and sale with “subject to” conditions to protect the buyers. The system in the UK is hopelessly tilted in favour of sellers.
  • Foster a Pre-Sale Culture: Pre-sales reduce risk for developers and offer purchasers supply and choice provided there are commensurate protections for buyers (ie. developers bound to deliver what is promised in the marketing agreements). To reduce risk in a business environment where many people do not buy “off-plan”, most developers in the UK build in small phases and trickle units onto the market. This is a major factor in the anemic supply of housing in the UK and in other cities.
  • Reconsider Stamp Duties: These are major extractions from UK homeowners, much higher than those in other developed countries.
  • Move to a “Specific Performance” system for property purchases – Pre-sales need to be backed by enforceable agreements where the purchaser is responsible to close as agreed. Purchasers who enter into binding agreements must put more than their deposits on the line if developers are to take bigger risks and build in larger phases to house more people in less time. Reduced risk = lower costs, faster development timelines and more choice for home hunters.
  • Simplify Section 106 requirements (“Community Amenity Contributions” for my Vancouver friends)
    National and Local governments have progressively downloading their responsibility to invest in social housing to private developers. Tower Hamlets in Greater London for example has a policy requiring 50% social rent units in a development … really?! Who do you think is paying for that at the end of the day? …. you, the end user. Developers DO need to pay their fair share for new physical and social infrastructure, but there needs to be some reasonable quid pro quo system for providing amenities commensurate with intensity. 

But be wary of large State-Driven Housing Development

I am hearing major moves to have local governments and housing management associations jump en masse at scale into the development business to solve the nation’s housing crisis.  Is this a wise idea? I’ll let you decide, but history shows that it’s not their core business.

Housing supply in global cities is a wicked complex problem. We need to look at the problem systemically and cohesively.

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