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Ken Gibb: Unpacking Rent Pressure Zones

Scotland recently broke ranks with the rest of the UK over private renting by introducing a new standard tenancy which will mandate the grounds by which a landlord can end a tenancy; otherwise, they are open-ended and average tenancy lengths are expected to lengthen. While some see this as a revolution in the rental market; others are more sceptical. It certainly has been the case in recent years that average length of tenancies had been growing under the old rules, as well as evidence that more families are letting in the market. At the same time, others remain to be convinced by the new legislation. The new law is less than 6 months old and credible evaluation will take some time to surface and perhaps resolve these disagreements.

Alongside the tenancy reforms sit a new form of second degree rent controls in the shape of rent increase limitations in what are called local rent pressure zones (RPZ), designated and applied for by local authorities. These are approved by the Scottish Government on the basis that the councils in question provide credible evidence that there is a clear case for such limitation to stop excessive rent increases. It is worth noting two or three things: the proposed limitations do not interfere with the initial rent setting that takes place at the beginning of a tenancy (they are not controlled) and any subsequent limitations will be capped but above the rate of inflation (a minimum of CPI & 1% for up to five years). These new proposals are, all in all, relatively modest.

For me, the most important issue is what the Scottish Government requires in terms of credible and legitimate evidence from the council in question? Helpfully, the Scottish Government published a document which sets this out and I have just got round to reading it.

The first thing one is struck by in the guidance is that the evidence demands on a council are substantial. The early perception that many councils would be seeking such RPZs is clearly a misjudgement. Paragraph 7 of the document says:

‘Evidence of rent rises alone will not be sufficient to prove that they are rising by too much. Authorities also need to prove that rent rises in the proposed RPZ are causing undue hardship to tenants; and the rises are having a detrimental effect on the local authority’s broader housing system.’

The cap only applies to tenants operating under the new tenancy in the designated geography of the RPZ. The guidance says that such a zone may be at different geographies such as a street, postcode sector or data zone (but not necessarily a broad rental market area, as one might have intuitively expected). The guidance argues (para 18) that the provisions are intended to be used by a local authority to deal with excessively rapidly rising rents and where the Scottish Government consider that rents are rising too much, they are causing undue hardship to tenants, and, the council is coming under increasing pressure to provide housing  or subsidise the cost of housing as a consequence of rising rents (the Scottish Government expects the council to have plans to increase housing supply and to link these to their RPZ application).

This is expected to be a transparent process where councils must publish their case and their evidence for RPZ designation. The guidance says (para 23):

the evidence will be a mixture of quantitative analysis e.g. statistics which demonstrate rent increases and qualitative analysis e.g. consultation with tenants. Councils will have to gather specific/ new evidence themselves where they do not hold this information already or where national data collections do not provide the level of detail required for an application. As such, councils might consider contracting with a third party with statistical and research expertise’.

Annex 1 of the guidance (criterion 3-5) sets out what is expected: a profile of the stock, time series evidence of rent increases, sample information and clarity over analytical methods, data from existing tenants, evidence that they are experiencing hardship, evidence that this rent pressure has increased pressure to expand supply and deliver more subsidy.

It would seem likely that the extent of evidence required will deter councils from making multiple applications and so the geographies may be comparatively wide. Second, it will take time for the new tenancies to generate the evidence required so do not expect RPZ applications immediately.

So, is this a modest proposal that sends a signal that may give tenants some comfort (and indeed landlords since they would have certainty about greater than CPI rent increases and can still set market rents initially); or might it be the thin end of the wedge that opens the door to greater levels of intervention? I think it will be some time before we can assess the impact of RPZs.  Moreover, I think we need to place these reforms in a wider context of policy change for the private rented sector which go in different directions. These would include the adverse tax changes on landlords via Land and Buildings Transaction Tax (LBTT), capital gains taxation and the tax relief available on borrowing, as well as the ongoing welfare impacts of the Local Housing Association (LHA) cap and the treatment of younger single people (i.e. the single room rate). There is also the rental income guarantee pilot to encourage build to rent in Scotland.

And of course, the rental market is actually a series of more or less separate market segments on both sides of the market. We need to think through how these policy changes affect the different segments and the sector as a whole. Returning to the overall assessment of these interventions – rigorous analysis will have to both disaggregate the combined effects of these policies over time and ascertain their impacts across the multiple segments of the modern private rented sector –prs 1). All in all, we should be cautious about early evaluations telling us conclusively that the new system works or does not work later this year or even next.

Professor Ken Gibb is the Director and Principal Investigator of the UK Collaborative Centre for Housing Evidence. 

Author: Professor Ken Gibb
Published 08/04/18, Brick by Brick

Housing: New Realpolitik Needs a New Real Economics

Managing the pressured housing markets of cities such as Sydney and Melbourne poses a major challenge to governments at both state and Federal levels. As has become increasingly clear, such trajectories are wreaking serious damage for younger aspiring homebuyers and for broad swathes of the lower income population. As yet less well-recognised, however, is the wider hit to urban productivity that results from poorly functioning housing systems. Smarter policymaking is eminently possible in this area but will require that Ministers and their advisers resist the lure of simplistic ‘blame the planners’ analyses and adopt cleverer and better-informed approaches to the problem.

The Shaping Housing Futures Group, an international collaboration of academics and housing industry experts, has been reviewing experiences of pressured metropolitan housing markets in Australia, Canada and the UK. Our research on the problematic consequences that can result supports many of the arguments recently put by Ross Gittins about the need for a constructive rethink on entry to home-ownership. But it also argues for expanded affordable rental provision for lower income groups.

The present difficulties of the metropolitan areas covered in the SHFG study, in Australia and the other countries, largely stem from their success in creating and capturing the benefits of agglomeration – the economic gains that arise from co-location of firms and ‘thick’ labour markets. These growth dividends for major cities, and their un-linking from wider regional housing markets, raise two difficulties for housing and other infrastructure policies.

First, at the federal scale, the divergent house price patterns of pressured metropolitan versus other areas weakens the scope for use of monetary/ financial policy instruments in growth management. National governments have been quicker to respond to the financial stability aspects of house price changes than to their productivity consequences. It is worrying that Federal administrations have so little comprehension of how housing and land markets play out in these major chunks of space that provide more than half of national output.

The second concern is that, alongside its benefits, growth also generates congestion costs and shortages. Prolonged scarcity within housing markets arises not just because supply systems are inelastic but because rising prices often tend to boost market demand rather than to suppress it. Housing is, for many, most effectively allocated by market mechanisms. But, rather than resorting to economics 101 explanations, policymakers need a housing economics that identifies where sluggish housing markets fail; a housing economics that can guide a fix for such problems. The key policy failure across the cities and countries involved in SHFG, from Sydney to Vancouver though London and back to Melbourne starts by failing to see housing as essential economic infrastructure within an inherently sticky supply system.

The metropolitan housing markets examined by SHFG (Brisbane, Melbourne, Sydney, Vancouver, Toronto, Halifax, London, Manchester, Edinburgh) appear to have had three common phases to their post-2000 dynamics. Metropolitan economies prospered in the long boom after the mid-1990s. Rising incomes boosted housing demand, not least preferred home-ownership, as Gittins observes. Tax arrangements and political stances reinforced the demands for housing as an asset, not simply to accumulate by steady saving but to shape nations of speculators.  The rising housing wealth gains of the baby boomers, allied to favourable rental investment taxation, then drove increases in rental investor acquisition as a retirement provision, shaping a rental sector that was inefficiently financed and managed. It also sustained the upward drive in metropolitan housing prices. That exacerbated the homeownership exclusion of the 25-40 somethings and, increasingly attracted overseas investors to these ‘safe’ metropolitan places.

The sustained upward shift in prices, as Gittins notes, was shaped by policies and largely nationally driven demand pressures. Overseas investment is a small froth on an increasingly bitter-made brew. Recent research on the London housing market shows overseas investors paying similar prices and purchase behaviours to London locals and Toronto evidence reveals Chinese investor contribution to property market inflation in that city to have been very localised and small in scale. Meanwhile, in Vancouver, two years after restricting overseas demand upward pressures have resumed. It is time for the great cities to focus on policies that will facilitate the economic infrastructure that will forestall rising congestion costs. These costs may now be driving firms and skilled labour away from their most productive long-term locations.

The consequences of housing pressures go well beyond the displacement of younger Australians into rental homes (with the problem of deposit formation masking the persistence of a historically low cost of capital for housing owners). The same pressures have exacerbated homelessness and have imposed acutely high rental payment burdens on lower-income households (as the stocks of non-market rental housing have failed to keep pace with population growth).

The increasing concentration of lower-income households and a shift of low-income housing to the outer suburbs are shaping more difficult housing futures for Australia and Canada. Economic policy interest has been focused on financial stability. Yet the research evidence for Australia and elsewhere is that a range of housing outcomes are hampering productivity growth and attracting the concern not just of poverty lobbyists but business leaders. Small, poor-quality housing and unstable housing tenancies with frequent moves for kids impairs their educational performance. In adulthood, many outer metro workers face long commutes from the ‘affordable edge’. These damage productivity, wellbeing and environmental quality. Chains of connection between poor housing outcomes and reduced human capital capacity can be matched with similar logic chains of how housing outcomes shape small firm formation and growth. More obviously, the restricted consumption that results from higher housing payments has a damaging effect on Australian output and productivity (through scale economy effects). Housing outcomes have driven, in Australia, not just the major shifts in wealth and income (after housing costs) highlighted by Thomas Piketty, but they now threaten the Glaeser agglomeration gains.

Gittins is right that policy failure, as much as market failure, is at the heart of these growing difficulties. Policy choices have failed to manage housing change for the Australian economy. Creating the framework for a more flexible and fair housing system for Australia requires some fundamental shifts. Part of the problem is the major vertical fiscal imbalance at the heart of Australian metropolitan growth. Productivity growth is primarily metropolitan, but the tax revenues flowing from that growth and the autonomies to use them lie elsewhere, as metropolitan governance is weak. Australian governance arrangements match neither the geographies of potentials nor problems. Too often the multi-level structure of government is used as an excuse not to fix the problem.

Viewed from outside Australia, the recent Commonwealth government attempt to encourage better quality and strategic state housing strategies was a sensible measure but it has been frustrated as states cried ‘compromised control’.  Perhaps Australia should move housing support to a ‘housing deals’ format that aligns the strategic and resource interests of different levels of government. State governments need to identify the housing and infrastructure packages (otherwise known as places) that will be home to rising numbers of Australians. Housing infrastructure and transport need to be jointly planned and financed. Within state governments there is a serious need for a major injection of applied housing economic capacities (economics 101 is even more dangerous in the corridors of power than in the press), and some serious evidence building and modelling.

This latter point is well illustrated in the emergent policy debate. Ross Gittins is right, wheels are squeaking, and so are the pips. Housing affordability is looming as a major political issue across the OECD. One line of response from those who take a naively optimistic (and theoretically or ideologically driven) view about the functioning of housing markets is that the essential problem is one of supply and that problem arises from regulation/planning.  We can all agree that the dominant problem is about supply (although demand-side boost from first-owner grants and tax advantages matter too). We do however need a more informed view about what causes supply inelasticity. Inelastic supply can reflect planning decisions and processes but infrastructure shortages may deter developers from using zoned, available land. In Sydney, for instance, there is a substantial stock of land with permissions that remains undeveloped. The development industry, where it owns stocks of land in inflating markets, may have firm management incentives that do not involve maximising the short-term flow of new housing. An efficient Australian housing market cannot be assumed into existence but needs to be shaped by evidence-informed policies.

Other key policy ideas need to be trialled that would make for change. From a productivity standpoint inclusionary zoning is an effective housing policy for producing affordable housing as it produces homes from the ‘scarcity rents’ of already wealthy landowners. It does not reduce productive output. Tax financed grants and subsidies to produce the same housing would, somewhere in the Australian economy, reduce productivity and growth. Naturally, a settled policy regime is essential. Involving non-profits in owning houses built (as in London and Vancouver) retains the uplift gains for lower income households in the longer term.

For almost two decades some Australian states have dilly-dallied in the social housing space. Most have resolutely failed to invest in new public housing and they have fashioned non-profit sectors that they have then simply failed to support and grow. There is an almost delusional quality to debate within state governments on this issue. UK experience has shown how such organisations can be client oriented, careful investors with patient capital. They have provided low-income rental housing, dealt with special needs, brought together different sectors of interest required to renew communities and they have, with effective regulation and acquired scale, made strong, safe connections to national capital markets. Now they are dealing with market failures and helping create new routes into home ownership and exit from it in later life stages. Some major states have preferred to sit unmoved on their public housing assets leaving a major housing equity unlevered and strategically unused. Transfers could be transformative.

Australia has the ideas and the opportunities to shape a new, better housing system. It need not cost governments more but it will require them to think how housing markets really work and how these outcomes can be improved by strategic policy decisions. Australia needs to move beyond blaming planners and relying on separated chunks of short-term policies for homeless and first home buyers to shape efficient market and governance systems for cities, states and the nation.

Shaping Futures has been a knowledge co-production project led by the University of Glasgow and involving UNSW and the University of Toronto working with 21 cities, government departments, non-profits and others to think through better housing futures for Australia, Canada and the UK.

Authors: Professor Duncan Maclennan (University of Glasgow and UNSW), Dr Laura Crommelin (UNSW), Ryan van den Nouwelant (UNSW), Professor Hal Pawson (UNSW)
Published: 22 March on Pearls and Irritations

 

UK Housing Debate: Housing for All?

Knowledge Exchange Associate, Dr Chris Foye, gives an overview of the recent UK Housing Debate, which took place at the RICS on 14th February. The event was organised by in the Society of Professional Economists (SPE), in partnership with the RICS and the UK Collaborative Centre for Housing Evidence.

In February the RICS, Society of Professional Economists (SPE) and CaCHE organised a debate on the state of the housing market entitled ‘Housing for all?’. Chaired by Dame Kate Barker, the evening was centred around two talks by Jeffrey Matsu (Senior Economist at the RICS and CaCHE Co-Investigator) and Neal Hudson (independent residential analyst), followed by a Q&A session and networking reception. The audience consisted of approximately 70 people including financial analysts, asset managers, industry, government and civil society.

After an introduction by Kate, Jeff started proceedings by reviewing Theresa May’s record on housing so far. He started with the positives; better defined Local Authority plans and permitted development rights to name two, before moving onto identify some areas for improvement. The first area was housebuilding, which, as Jeff noted, has become an increasingly concentrated industry, with the large housebuilders absorbing up more and more of the market share. UK rates of housebuilding are low by international standards, and Jeff set out a number of reasons why this may be so. This included the gap between permissions granted and developments completed developments, which the Letwin Review is setting out to address, and the lack of sufficient financial incentives for councils to encourage more housebuilding (although the fact that 44 councils had bid for the Continued Infrastructure Fund was cited as grounds for optimism). Jeff then went onto review some of RICS’s recent data on the housing market. Overall, he forecasted a modest increase in UK house prices, with rises expected in the East Midlands and other regions, but falls expected in London: yet another reminder that the UK has not one but many housing markets. He concluded with a review of housing transaction and mortgage approval data, again painting a regionally nuanced picture, with both indicators down in London but up in other regions.

Neal’s talk, titled ‘The Housing Crisis’ was an extremely wide-ranging and informative summary of the mess that we find ourselves in. Neal started with a familiar slide, showing the rise of the UK house price: income ratio over recent decades, but his presentation was forensic in examining the drivers of this growth and the implications for society. On the supply-side, he discussed how the post-1970’s decline in local authority housebuilding occurred partly because the population was forecast to decline, leading to a lack of demand for housebuilding funds among local authorities. That past seemed like a foreign country, as Neal demonstrated how the private housebuilding sector’s profits (and bonuses) had boomed, fuelled most recently by the Help to Buy scheme. He was sceptical of demand-side subsidies or more liberal mortgage-lending as solutions to declining home-ownership, pointing out that in the long-term, these policies would only continue to push house prices up, making home-ownership even less affordable. But he also pointed out that increases in housing supply would need to be huge and sustained over time if they were to even make a dent in affordability. Perhaps one of the most pertinent points that Neal made was that the real victims of the housing crisis are renters, and particularly the growing numbers of private renters who often have to pay large proportions of their income on rent for housing which can be poor-quality and let on a short-term basis, and there seemed to be something of a consensus in the room, or at least among the speakers, that the PRS could be better regulated.

The growth in the PRS was one of the main issues raised in the Q&A discussion, with one audience member concerned that people growing old in the PRS would have no asset to draw from to pay for social care in later life. Another audience member asked how we might incentivise or make it easier for people to downsize in older age. The removal of financial obstacles (namely, stamp duty) and the sufficient supply of appropriate housing were two proposals advanced, but I was struck by the suggestion of one audience member that in the UK there is perhaps a cultural barrier to downsizing in later life, a perception that downsizing is symbolic of ‘growing old’, that we need to better understand.

Dr Chris Foye is Knowledge Exchange Associate for the UK Collaborative Centre for Housing Evidence.

Author: Dr Chris Foye
Published: 28/03/18

Evaluating housing outcomes

Prof David Clapham and Dr Chris Foye, outline the CaCHE exemplar project Wellbeing as a tool for evaluating housing outcomes and housing policy impacts, which commenced in February 2018.

“What Would Success Look Like?”. That was the question posed in a recent blog post by residential analyst Neal Hudson. “Without a framework for what we need and want from housing,” Hudson argued, “our ability to understand and fix it appropriately will be compromised.” The question of how to judge success permeates all scales of housing policy and practice; from the local housing association trying to define and estimate their Social Return on Investment (SROI) to the policymakers in Whitehall evaluating Help to Buy.

To an extent, the question of what constitutes success is obvious and uncontroversial: thousands of people homeless on the street is not success. However, we can only go so far in painting a feasible picture of success before we start to reach areas of conflict. If a regeneration project increases average incomes, but also increases levels of income inequality, then does this constitute success?

One of the reasons why we disagree over whether a housing intervention was a success or not is because the evidence is ambiguous or misunderstood. For example, it may not be clear what effect regeneration projects have on the existing residents’ housing situation, health, income, and well-being. The other source of conflict is to do with values. Constructing a framework for success inevitably requires us to make value-based judgements. But different organisations and individuals prioritise different values – equality, economic efficiency, liberty – and this can lead to conflicting value-based judgements.

Against this background, the objectives of this CaCHE exemplar project are twofold. First, we will examine the extent to which the framework for success adopted really matters when evaluating outcomes. If well-being, health, equality, income, education… – those things that we value as a society – all move together, then it does not really matter which framework for success we adopt so long as we measure the outcomes accurately. However, there is quite a lot of existing evidence that suggests that this might not always be the case. For example, although there is a clear positive relationship between income per capita and life expectancy, the graph below shows there are several countries below which buck this trend. Iceland, for example, has higher life expectancy than the USA despite having much lower income per capita; and Cuba, Greece, China, Sri Lanka, and Iceland all have higher life expectancy than the much wealthier Saudi Arabia (data is taken from 2016 UN Human Development Index).  How does this picture look for housing outcomes in the UK? Are increases in the average size of living space correlated with housing satisfaction? These are just some of the questions we will be addressing.

blog - life expectancy

If these different measures do not all correlate then we face the dilemma of choosing which one(s) to prioritise: is it more important avoid overcrowding than to improve housing satisfaction? This prioritisation process inevitably requires us to make a value-based judgement, and the second question we pose in this project is: can we make better ­value-based judgements when defining our framework for success? On first impressions, the idea of making better value-based judgement might seem like naïve idealism. A common perception in policy, practice and academia, is that value-based judgements are purely ‘subjective’ and therefore cannot be subject to reasoned debate in the same way that evidence can. However, we can all agree that particular value-based judgements are unreasonable – no one could reasonably claim that homelessness is a good thing, nor could anyone reasonably claim that health outcomes are irrelevant when assessing housing outcomes. Therefore, in this second stage, we critically evaluate the value-based judgements which underpin several commonly adopted frameworks for success questioning the extent to which they are reasonable.

It is all very well criticising existing frameworks but the third question we need to ask is ‘what are the alternatives’? Our current thinking is that subjective well-being measures represent a good framework for success, but these need to be supplemented with a more ‘objective’ measure like Amartya Sen’s capabilities approach. Realistically though, we can only develop a better framework for success in collaboration with housing organisations: academics are good at evaluating whether a framework is philosophically and theoretically coherent, but they are much weaker at understanding whether it is implementable and user-friendly. Therefore, a large part of this project involves identifying existing good-practice in evaluating housing outcomes.

If you are a housing organisation who is interested in how best to evaluate housing outcomes, then we would like to hear from you. You may be a Local Authority who has developed an innovative way of assessing the social-value of a regeneration project, or a house builder who wants to better estimate the social value of a new development. In any case, please get in touch: chris.foye@glasgow.ac.uk

Prof David Clapham (University of Reading) is a Co-Investigator with the UK Collaborative Centre for Housing Evidence and Dr Chris Foye is Knowledge Exchange Associate for the UK Collaborative Centre for Housing Evidence, based in London.

Author: Prof David Clapham and Dr Chris Foye
Date: 27/03/18

Housing Placemaking: What is the value of design?

The impact of housing and neighbourhood design quality on wellbeing is achieving increasing recognition (Klienert and Horton, 2016), but there is little evidence to back up these claims in a format that is useful to decision makers (Samuel et al., 2014). The UK Collaborative Centre for Housing Evidence (CaCHE) is seeking to change this with a new strand of research on understanding and evidencing design value.

The need for standardised design guidance and consistent design control across local authorities has been recognised, for example, with a recent consultation document on ‘planning for the right homes in the right places’ (UK Gov, 2017) and, more broadly, in the academic literature on design governance and placemaking (e.g. Carmona 2016; 2017; White 2015).

Currently, decision makers suffer from an absence of coherent evidence to enable built environment professionals in the public and the private sector to make decisions about new housing and neighbourhoods on anything other than economic grounds (Fujiwara, 2014). This is not surprising when Post Occupancy Evaluation (POE) – revisiting buildings and neighbourhoods to see how well they work – is extremely rare (Hay et al., 2017). It is also problematic considering the potential positive effects of good urban design on the everyday life of the citizens, which goes well beyond purely economic concerns.

We believe that we can contribute to our contemporary understanding of the role of design in place-making and housing practice by developing a shared working definition of design value. To do this we will consider the extant literature and produce of an evidence base for understanding the value of design. We also anticipate that producing such an evidence base might have the potential to contribute to the development of more consistent design control in policy and practice.

To this end, the research project will examine existing evidence on what is known about design value from an interdisciplinary perspective. We will, in particular, investigate:

  • existing definitions of design value,
  • different methodologies for defining design value,
  • the value of design in relation to housing and neighbourhoods, and
  • the contribution of good urban design to users’ experience of urban space.

The outcome of our research will be series of recommendations for further focused research on design value and its evaluation in practice, as well as the best format for presenting advice on design. This will be presented in the form of a written evidence review.

If you’d like to learn more about our aims and objectives, to be kept informed, or to engage with the project team, please email chris.foye@glasgow.ac.uk

Prof Flora Samuel (University of Reading), Dr James White (University of Glasgow), and Tom Kenny (RTPI) are Co-Investigators with CaCHE; Dr Bilge Serin is a Research Associate with CaCHE; Dr Chris Foye is a Knowledge Exchange Associate with CaCHE

Authors: Dr Bilge Serin, Dr James White, Tom Kenny, Prof Flora Samuel and Dr Chris Foye
Published: 22/03/18

Monitoring the Private Rented Sector in Scotland after Tenancy Reform: A partnership between SPICE, CaCHE and UBDC

The private rented sector (PRS) is the most dynamic part of the housing system. It has benefited from the decline in home ownership and social renting since 2000, fuelled by mortgage restrictions on buyers, insufficient social housing and the expansion of buy to let. The sector is controversial but poorly understood. While there are undoubtedly problems in parts of private renting today, at least as important a problem is the failure to understand how the sector functions. It is in practice a series of loosely connected segments or submarkets (see below) catering for different groups provided for by a range of suppliers – mainly small-scale individual buy to let landlords, but also build to rent corporate landlords and housing associations. Parts of the sector work well; other segments in specific places, less so.

Fig. 1: The PRS is a series of loosely connected segments or submarkets

prs_blog

Our work with the Urban Big Data Centre (UBDC) aims, overall, to assess the data requirements for, and to conduct preliminary monitoring analysis of, the PRS in the UK (including Northern Ireland). We are also pleased to announce that we have received a Scottish Parliament Academic Fellowship and will, therefore, be working in partnership with the Scottish Parliament Information Centre (SPICe) to determine the Scottish requirements of PRS monitoring, providing an overall policy briefing on change and reform, and a template for initial and ongoing assessment of tenancy reform in the Scottish PRS.

In Scotland, the PRS has more than doubled in size to 14% (330,000 households) over the period 2001 to 2014. Recent policy change in Scotland has included: mandatory security deposit schemes, landlord registration and the Private Housing (Tenancies) (Scotland) Act 2016 (the latter reducing grounds for ending the tenancy, creating a more open-ended tenancy, and local rent pressure zones which could in time limit rent increases). At the same time, the Scottish Government followed the UK Government by adding 3% to all Land Building Transaction Tax rates for purchase of new properties by landlords. UK tax changes reducing mortgage interest tax relief and retaining higher rates of capital gains tax have also been applied to private landlords. Finally, Scotland is piloting a partial revenue guarantee to encourage investment in build to rent (the Rental Income Guarantee Scheme).

The Scottish PRS legislation was enacted in December 2017. It is important that we can use sensible evidence with which to assess the impact of these reforms. As indicated above, the sector is complex and data below the aggregate level is fragmented, partial and often not in the public domain. Much of what we know about the PRS comes from sources like the census or the Scottish Household Survey (SHS) but the detailed picture provided by the census is only available every 10 years and SHS data are not available for small areas. They also look at the sector through the lens of the renter; relatively little is known about private renting from the perspective of the landlord.

In addition to census and SHS data, UBDC has Zoopla data going back to 2012, and have validated the data against several data sets. While these data provide only a partial picture they do represent change and trends within the sector. We can also use aggregated data provided by City Lets to verify the Zoopla analysis. We have recently received landlord registration data from Aberdeen and Edinburgh which allow us to carry out detailed case study analysis. With specialist expertise working with SPICe, we are in an excellent position to contribute to a greater understanding of the PRS, both in Scotland and the rest of the UK.

Understanding how the contemporary housing system fits together is a critical necessary condition for assembling and using evidence to make better housing policy. We believe this partnership – between CaCHE, UBDC and SPICe – can make an important difference in addressing the shortcomings in contemporary housing policy debate on private renting.

Our findings will be presented in Holyrood and at the first CaCHE Scottish housing policy conference, supported by Policy Scotland, which is due to take place in June. In the meantime, get in touch if you would like to learn more about this area of work or engage with the project team.

This is only one of multiple projects and research plans concerned with the private rented sector in CaCHE. We are already conducting a project (led by Dr Kim McKee, University of St Andrews) on those generation rent households in private renting but often wanting to be in other tenures. We also hope to undertake research looking at the sharp end of landlord-tenant relations, including dispute resolution practice across the different UK jurisdictions.

Professor Ken Gibb is the Director for the UK Collaborative Centre for Housing Evidence, and Dr Gareth James is Knowledge Exchange Associate for the UK Collaborative Centre’s Scotland KE Hub. 

Authors: Dr Gareth James and Professor Kenneth Gibb
Published: 07/03/18

Progress in meeting Scotland’s ambitious affordable housing targets shows that the housing sector can deliver

This blog was originally posted on the Shelter Scotland Blog on 26 February 2018. 

For decades housing campaigners, including Shelter Scotland, have insisted that a significant increase in the supply of affordable homes was critical to tackling the housing crisis in Scotland.

Of course, more homes alone won’t solve all the problems but, on the other hand, it is hard to see any real improvement without more affordable and social rented homes providing a platform for all the other good work to take place.

So, in 2015, Shelter Scotland, along with the Scottish Federation of Housing Associations and the Chartered Institute of Housing in Scotland, commissioned a landmark report which set out the need for a housing programme of 12,000 affordable homes over 5 years: 60,000 in total.

The Scottish Government, following its re-election in 2016, committed to building 50,000 affordable homes over the lifetime of the current parliament (2016-2021), with at least 35,000 of them to be for social rent. While a little short of the estimated need, a programme of this size is the largest of its kind in Scotland since the 1970s.

That is the easy bit, however.  How many worthy targets – in health, education, transport, energy and almost every policy area – have been set with good intentions but then hit the sands?  So, in setting such an ambitious target the Scottish Government will have been well aware that delivery is what counts and that delivery depends on dozens of organisations – councils, housing associations and others – pulling in the same direction.

That is why we are so encouraged that our latest report published today, drawing on councils’ own information on housing programmes, shows that the 50,000 target is within reach, with estimates for affordable housing delivery ranging from 45,387 to 49,773.

For the first time in almost four decades the total stock of socially-rented homes in Scotland is projected to rise in significant numbers, by up to 25,000 in total, reversing what seemed like an inexorable decline over recent years.  The big challenge ahead is converting those numbers into the homes which people need, where they need them. For people in cramped, damp, temporary, insecure, poorly-repaired or rip-off living conditions the only thing that matters is whether (and how) those homes are actually built.

From that point of view the report also exposes some rough edges.  It is hard to get a detailed handle on what exactly is being produced, for whom and where.  For a programme of this size, with billions of pounds being spent, that needs to be improved.

Shelter Scotland regularly hears concerns that a plan with this level of ambition is hard to square with all the other nuances of good housing – placemaking, user-control, locally appropriate design, meeting specific needs and contributing to regeneration, to name only a few. There is definitely some resonance in these observations.

But here’s the crux. The current programme of 50,000 homes isn’t a one-off ‘fix-it and tick-it’ project.  It should – and must – be the beginning of a new higher plane for housing policy, with government already planning how the next batch of 50,000 or 60,000 affordable homes, after 2021, is delivered.  As part of that, we need to see improvements in tracking and planning tools to make sure that the homes built today will best serve the many thousands of people in Scotland that desperately need an affordable home tomorrow.

For now, let’s reflect on a job that is getting done, that needs redoubled effort to do as well as possible, and a determination to show that if challenging targets on housing are set and backed with required financial support, they can be delivered.

Rosemary Brotchie is Policy and Research Manager for Shelter Scotland and a member of the CaCHE Knowledge Exchange Hub in Scotland. 

Author: Rosemary Brotchie, Policy and Research Manager, Shelter Scotland
Published: 26/02/18, Shelter Scotland Blog

Land and housing supply: it’s about more than just build out rates

Perhaps one of the biggest political and societal challenges of our time is housing supply. Even the UK Government thinks the housing market is broken and our biggest housebuilders say they alone won’t be able to deliver the number of homes necessary to meet policy ambitions. In England, the growing lag between planning approvals and housing completions is given as one explanation for the sluggish speed of housing delivery and is of increasing political and popular interest. Yet, build out rates form only one part of a much more complex set of processes that determine the speed and mode of speculative housing delivery. How housebuilders interact with land markets, make product selection choices and manage construction programmes are also likely to influence supply outcomes.

Our market-led housing system relies heavily on the private sector to deliver new homes. These private housebuilders, motivated primarily by profit and return on capital, are key delivery agents of new homes, producing anywhere between 70 and 80% of the total housing output in any given year. To deliver new homes at an acceptable profit, housebuilders must draw assumptions on the quantity, price and sales rate of new homes many years before they are built in order to generate competitive land bids and secure their raw material. Once planning permission is granted and the land purchased, housebuilders must wait until the houses are constructed and sold, hopefully at the rate and price predicted many years before, to achieve their desired profits. Any rise in underlying land prices between site purchase and eventual house sales can boost profits significantly.

This process of speculative housing provision requires risk taking and profit making by market actors yet is subject also to intervention and regulation by the State. The ability of government policy to shape market behaviour, together with the influencing effect of broader structural changes in the economic, demographic and political contexts of housing provision, mean that a diverse range of factors can shape supply outcomes. This may go some way to explaining why the housing supply question remains so difficult to address. Yet, these dynamic state-market relations, with their theoretical and empirical pluralism, are the very reason why we are interested in the behaviours and attitudes of speculative housebuilders. Indeed, without an understanding of how speculative housebuilders acquire, process and build out housing land, policy-makers cannot fully address the UK’s housing supply problems.

It is for these reasons that we have chosen to focus our exemplar project on a systematic review of existing evidence around how the speculative housing supply system currently works and consider the limitations to its current operation. In doing so, we will be able to evaluate whether, and to what extent, the speculative housebuilding industry is able to address new demands in the supply side of the housing market and reflect on how policy solutions brought forward to address housing supply problems have been effective or otherwise.  To achieve this task, we intend to establish a comprehensive knowledge and evidence base on the speed and mode of speculative housing delivery. We are particularly interested in understanding how speculative housebuilders engage with land markets, their product selection choices and the time they take constructing new homes. This will allow us to consider what new policy interventions may be necessary to ‘speed up’ housebuilding and overcome the precarity of provision we currently face.

We aim therefore to examine existing evidence on how speculative housebuilders acquire, process and build out housing land to ascertain how these factors contribute to the speed and mode of housing delivery. If you’d like to learn more about our aims and objectives, to be kept informed, or to engage with the project team, please get in touch.

Professor David Adams and Dr Sarah Payne are Co-Investigators, Dr Bilge Serin is Research Associate, and Dr Gareth James is Knowledge Exchange Associate, for the UK Collaborative Centre for Housing Evidence.

Authors: Professor David Adams, Dr Sarah Payne, Dr Bilge Serin & Dr Gareth James
Published: 19/02/18

CaCHE and HSA announce strategic partnership to support future generations of housing researchers

We are happy to announce that the Housing Studies Association (HSA) and UK Collaborative Housing Evidence Centre (CaCHE) have formed a strategic partnership to support the housing researchers of the future.

HSA, the UK’s longstanding membership organisation for housing researchers and practitioners, provides a forum for housing-related debate, promotes the study of housing, and seeks to encourage the practical application of research in policy and practice. During the HSA’s 2017 Annual Conference it was announced that Professor Ken Gibb and a multi-disciplinary, cross-sector consortium of partners had received funding from the Economic and Social Research Council, Arts and Humanities Research Council, and Joseph Rowntree Foundation to establish a centre for housing evidence.

CaCHE aims to influence and transform housing policy and practice through better problem diagnosis, policy evaluation and appraisal of new opportunities, and generate improved housing outcomes for all. Since launching at the end of last year, a series of exemplar research projects have commenced, four PhD researchers have started their work, and an evidence-mapping exercise across seven key themes has been started. Five Knowledge Exchange Hubs and resident voice focus groups are also being set up across the UK which will co-create CaCHE’s future priorities.

Core to CaCHE’s programme of work and HSA’s aims as a learned society is to create a legacy of new housing researchers with multi-disciplinary and multi-methods expertise to the address the housing problems of the future. It is on this task that the CaCHE/HSA partnership will focus.

The HSA’s annual conference in Sheffield on 11-13th April this year provides the first opportunity for us to work together on these shared aims. The conference is renowned for it’s supportive and vibrant Early Career Research (ECR) Workshop stream, and this year the stream will be supported by CaCHE. CaCHE are providing financial support for a number of bursaries enabling early career housing researchers to attend and members of the CaCHE team will attend the ECR sessions to support and give feedback on ECRs research.

Professor Gibb, Director of CaCHE will also be chairing the conferences opening plenary on the Politics of Housing Policy featuring Keith Jacobs (University of Tasmania), Brian Lund (Manchester Metropolitan University), Marisa Gerstein Pineau (Frameworks).

We hope to see you at the conference in April and look forward to working together on our shared aims in the future.

Professor Ken Gibb is the Director of the UK Collaborative Centre for Housing Evidence and Dr Beth Watts is the Chair of the Housing Studies Association. 

Authors: Professor Kenneth Gibb and Dr Beth Watts
Published: 12/02/18