Evolutionary Housing Policy in the UK 1 Lanson Zhang 23 Jan. 2014.

Evolutionary Housing Policy in the UK

1

Lanson Zhang 23 Jan. 2014

OUTLINEI. Key Problems in Housing

II. Roots

III. Solutions ?

IV. Enlightenment for Shanghai

2

[I]Key Problems

[I] Key Problems

Rocketing Prices and Deteriorated

Affordability

Increasing Gap Between Demand

and Supply

Severe Shortage of Social Housing

4

1. Rocketing Prices and

Deteriorated Affordability

5

Housing price is close to an all-time high, the average housing price rises by 5.5% to ₤247,000, while the average price in London soars to ₤437,000

[I] Key Problems

1. Rocketing Prices and

Deteriorated Affordability

[I] Key Problems

7

2. Gap between Demand and Supply

‘we have not built enough new homes for more than a generation’. In 2009/10, there were 115,000 completions in England. Meanwhile, the latest projections suggest that the number of households will grow by 232,000 per year

[I] Key Problems

8

3. Shortage of Social Housing

There are 1.8 million people on England's social housing list, 1 million in 1997

[I] Key Problems

[Ii]

Roots of Problem

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Home-owning Society

Austerity Policy

Privatization of Public Sector

Liberalization in Private Sector

Shortage of Decentralization

[II] Roots of Problem

1. Home-owning Society: Main Characters


Tenure: Ownership is dominant

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Tenure: Ownership is dominant


13

Strong willingness to invest in housing

Age Employer Pension

Personal Pension

Stocks Shares

Property Investment

High-rate Saving Others

18-34 7% 4% 10% 56% 10% 13%

35-49 13% 5% 8% 57% 7% 10%

50-69 12% 6% 8% 49% 7% 18%





Housing industry has become a crucial sector


Housing industry has become a crucial sector


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2. Austerity Policy

So far the coalition has cut spending on public services by 8%; by 2018-19 the target is a cut of 20%


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Reform of Social Housing: Turning Point

CouncilHousing

SocialHousing

AffordableHousing

Social Rent Affordable Rent1 Rents at 50% of

market rent Rents at up to 80% of market rent

2 Life time tenancies Fixed term tenancies at least 2 years

3 Existing Tenants New Tenants

‘The final nails in the coffin were driven into the great visionary project of council housing’

2. Austerity Policy


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Housing Benefit is one of the cornerstones of welfare. The

expenditure accounts for around 1.5% of GDP, increasing

from 11 billion in 1999/2000 to 21.4 billion in 2010/11, and

predicted to reach 24 billion by 2015/16

2. Austerity Policy

Reform of Housing Benefit


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Reform of Housing Benefit

Bedroom tax

Benefit cap

Cut by a fixed percentage:14% , one extra bedroom; 25%, two or more extra bedrooms

Limits are: £500 per week for families with children; £350 per week for individuals

2. Austerity Policy


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3. Privatization of Public SectorRight to Buy (RTB)

This scheme is the most successful and controversial policy which gives secure tenants of council and social houses legal right to buy, at a large discount, since 1980

40% of council houses were sold through this scheme. Housing tenure structure and social Classes were changed dramatically


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3. Privatization of Public SectorRight to Buy (RTB)


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Large Scale Voluntary Transfer(LSVT)

LSVT involves the local Authority transferring the ownership of its stock with the agreement of the tenants, to meet the Decent Homes Standard

The policy has led to the transfer of 1.2 million(20%) council housing to social landlords

3. Privatization of Public Sector


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Large Scale Voluntary Transfer(LSVT)

3. Privatization of Public Sector


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4. Liberalization in Private Sector

Without effective interventions, How to iron out the Boom

and Bust of housing

Deregulation – Speculation

Free Pricing – Rocketing housing price


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5. Shortage of Decentralization

One size cannot fit all

Unbalanced right and responsibility between central and local government

Local Council gets about 70% of money funded by central government


[IIi]

Solutions ?

Bridging the Gap between Demand and

Supply

Reasonable Intervention in Market

Localism and Decentralization

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[III] Solutions

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1. Bridging the Gap between Demand and Supply

On Supply Side

The government has committed nearly £4.5 billion investment

in new affordable housing, providing up to 170,000 affordable

homes by 2015

[III] Solutions

A) Investing Affordable homes

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Affordable Houses:17.5% Low-cost Houses: 12 %

Total: 29.5%Bannerbrook Park near City of Coventry


On Supply Side

[III] Solutions

A) Investing Affordable homes

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There is huge untapped potential. Only one in ten new

homes are custom built

The Government wants to make this way a mainstream

option –to create up to 100,000 additional Custom Build

Homes


On Supply Side

[III] Solutions

B) More Custom Build Homes

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Over 700,000 homes in England are empty. How to push them

out to be effective supply?

From 1 April 2013, local authorities can charge a premium on

the property that has been unoccupied and unfurnished for

two years or more. The premium can be up to 50% of the

council tax


On Supply Side

[III] Solutions

C) Tackling Empty Homes

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Buy your home with at least 75%

of the cost met by a mortgage,

interest rate up to 5% and a

deposit of at least 5% of the

purchase price. The rest (20%) is

paid for by the government

through an equity loan


On Demand Side

[III] Solutions

A) Help to Buy Scheme

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2. Reasonable Intervention in Market

Such a tax could be tailored to exclude owner-occupiers and

tapered so that it was levied at his highest on properties

"bought and sold over very short periods”

How to curb the speculation, to prevent the price from rocketing?

Whether to Levy ‘a property speculation tax’?

[III] Solutions

34

3. Localism and Decentralization

The Localism Act:

New freedoms and flexibilities for local government, decisions

about the housing are to be taken locally

Social housing allocations reform

Social housing tenure reform

Council housing finance reform

[III] Solutions

[Iv]

Enlightenment for Shanghai

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Shanghai is one of the most densely populated mega-cities, with 24 million people and 6,400 square kilometers land

[IV] Enlightenment for Shanghai

Holistic Policy Design

Innovation of Financial Policy

Fair Allocation of Social Housing

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The government has

planned to provide

almost 1 million social

houses to the shanghai

citizens during 2011-

2015, which accounts for

almost 20% of shanghai

households

Government also

planned to build

200,000 units of public

rental housing for the

immigrants


1. Holistic Policy Design

Social Housing

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Price has risen quickly in

recent years too. the

average price of new

houses has reached

20,000 RMB per square

meter (a flat of 100 sqm

values 2million RMB)


1. Holistic Policy Design

Housing Market

The regulatory policies

like property tax, income

tax and purchasing

restriction should be

enhanced to prevent

bubble

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2. Innovation of Financial Policy

To make preferential policy to help the first time buyers, Like Help to Buy scheme could be helpful

To encourage the poor households to buy the houses step by step, the Shared-ownership scheme can be introduced in Shanghai

To enforce the empty houses into effective supply, a sort of property tax premium scheme could be launched


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The property and

household size standard,

eligibility, banding

priorities, bidding process,

complaints and appeal

procedures are all well

designed

Social homes should not

be allocated to people

who are not qualified; to

find effective ways, like

raising rents, to fight

against tenancy fraud


3. Fair Allocation of Social Housing

Coventry ‘Homefinder’ system

Tackling tenancy fraud

42

Thanks!

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Evolutionary Housing Policy in the UK 1 Lanson Zhang 23 Jan. 2014.

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