No longer seen as ‘safe as houses’, there has been a recognition following the financial crisis, that the housing market is inextricably linked to the health of the wider economy. When the bubble bursts for housing, the effects are felt widely. A recent report: Forever Blowing Bubbles, by the Institute of Public Policy Research (IPPR) makes the link between the fate of the housing market and the fate of the economy very clear. It suggests a number of solutions:
- Increase the supply of housing – ‘clearly necessary…, but alone it is insufficient and slow to take effect’
- Explicit consideration of house prices in monetary policy
- and fiscal policy too – ‘but arguably tangential,… and politically highly fraught’
- Regulation of credit – is suggested by IPPR as the key area of focus (and they state this also what IMF and OECD want to focus on).
IPPR does also suggest ‘improving the strength of substitutes to owner occupation’ through, for example, reform of the private rented sector, improve market pricing, and to prevent ‘moral hazard’ (e.g. the assumption that house prices can only go up).
But is there another way? The IPPR suggestions are still framed in the discourse of ‘market knows best’ and that we should tweak the regulation of markets to mitigate the effects of housing bubbles and the after-effects of them bursting. This persistent orthodoxy of the markets (in addition to suggesting a collective amnesia of the banking crisis that preceded the recession) prevents more radical solutions being mooted.
In her blog, below, Adele Reynolds, also seems frustrated at the pervasiveness of the orthodoxy that the principles of private sector markets still rule the discourse of local government. Adele’s analysis of KPMG’s concept of what a ‘Brilliant Council’ should look like demonstrate the need for us to boldly offer alternative ideas.
An idea that is worth examining in more detail in the provision of housing and the avoidance of overblown bubbles, is the idea of de-coupling the vagaries of the market and the provision of affordable homes. One example of this is the Community Land Trust (CLT) model in the United States of America. At a recent National Housing Federation conference the example of providing homes through CLTs was provided by Dev Goetschius and John Emmeus Davis who urged us to “take a stand on the land”.
In the USA, and very important to the success of the CLT approach, the value of the property is not linked to value of land, it is independent of the market. It is linked instead to average income and earnings in the area. In a number of schemes the leasehold of the home is available to the occupier, but the freehold of the land is retained by the Trust – the land itself always remains debt free and detached from market prices. There are varying models in U.S – but the key is that the resale value of homes is independent of land value.
There are some excellent examples of CLTs closer to home, at High Bickington in Devon affordable homes are being provided’ and at Lyvennet in Cumbria the model is being expanded to include a village pub and other community resources. In the U.K these CLT models share many of the values of their U.S counterparts, but the value of land and property is still wedded to the market. Successful CLTs in this country are dependent on generous landowners gifting land, charitable organisations providing start-up capital funding, or public sector agencies providing land and support for projects.
CLTs are an exciting part of the solution to provide affordable homes following a recession. There are some excellent home-grown examples. However, perhaps it is time to think more radically about how we value land and property – there may be some scope for the model from the U.S.A where the value of the home is linked to average incomes, rather than over-inflated market prices which have a tendency to balloon and then burst.