Evolutionary Housing Policy in the UK Lanson Zhang

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

OUTLINE I. 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 Supply Severe Shortage of Social Housing 4

[I] Key Problems 1. Rocketing Prices and Deteriorated Affordability 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 5

[I] Key Problems 1. Rocketing Prices and Deteriorated Affordability

[I] Key Problems 2. Gap between Demand 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 7

[I] Key Problems 3. Shortage of Social Housing There are 1. 8 million people on England's social housing list, 1 million in 1997 8

[Ii] Roots of Problem

[II] Roots of Problem Home-owning Society Austerity Policy Privatization of Public Sector Liberalization in Private Sector Shortage of Decentralization 10

[II] Roots of Problem 1. Home-owning Society: Main Characters Tenure: Ownership is dominant

[II] Roots of Problem 1. Home-owning Society: Main Characters Tenure: Ownership is dominant 12

[II] Roots of Problem 1. Home-owning Society: Main Characters Strong willingness to invest in housing Age Employer Personal Pension Stocks Shares Property High-rate Others Investment Saving 18 -34 7% 4% 10% 56% 10% 13% 35 -49 13% 5% 8% 57% 7% 10% 50 -69 12% 6% 8% 49% 7% 18% 13

[II] Roots of Problem 1. Home-owning Society: Main Characters Housing industry has become a crucial sector

[II] Roots of Problem 1. Home-owning Society: Main Characters Housing industry has become a crucial sector

[II] Roots of Problem 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% 16

[II] Roots of Problem 2. Austerity Policy Reform of Social Housing: Turning Point Council Housing Social Housing Affordable Housing 1 Social Rents at 50% of market rent Affordable 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’ 17

[II] Roots of Problem 2. Austerity Policy Reform of 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 18

[II] Roots of Problem 2. Austerity Policy Reform of Housing Benefit Bedroom tax Cut by a fixed percentage: 14% , one extra bedroom; 25%, two or more extra bedrooms Benefit cap Limits are: £ 500 per week for families with children; £ 350 per week for individuals 19

[II] Roots of Problem 3. Privatization of Public Sector Right 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 20

[II] Roots of Problem 3. Privatization of Public Sector Right to Buy (RTB) 21

[II] Roots of Problem 3. Privatization of Public Sector 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 22

[II] Roots of Problem 3. Privatization of Public Sector Large Scale Voluntary Transfer(LSVT) 23

[II] Roots of Problem 4. Liberalization in Private Sector Deregulation – Speculation Free Pricing – Rocketing housing price Without effective interventions, How to iron out the Boom and Bust of housing 24

[II] Roots of Problem 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 25

[IIi ] Solutions ?

[III] Solutions Bridging the Gap between Demand Supply Reasonable Intervention in Market Localism and Decentralization 27

[III] Solutions 1. Bridging the Gap between Demand Supply On Supply Side A) Investing Affordable homes The government has committed nearly £ 4. 5 billion investment in new affordable housing, providing up to 170, 000 affordable homes by 2015 28

[III] Solutions 1. Bridging the Gap between Demand Supply On Supply Side A) Investing Affordable homes Bannerbrook Park near City of Coventry 29 Affordable Houses: 17. 5% Low-cost Houses: 12 % Total: 29. 5%

[III] Solutions 1. Bridging the Gap between Demand Supply On Supply Side B) More Custom Build Homes 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 30

[III] Solutions 1. Bridging the Gap between Demand Supply On Supply Side C) Tackling Empty Homes 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 31

[III] Solutions 1. Bridging the Gap between Demand Supply On Demand Side A) Help to Buy Scheme 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 32

[III] Solutions 2. Reasonable Intervention in Market How to curb the speculation, to prevent the price from rocketing? Whether to Levy ‘a property speculation tax’? 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” 33

[III] Solutions 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 34

[Iv ] Enlightenment for Shanghai

[IV] Enlightenment for Shanghai is one of the most densely populated mega-cities, with 24 million people and 6, 400 square kilometers land 36

[IV] Enlightenment for Shanghai Holistic Policy Design Innovation of Financial Policy Fair Allocation of Social Housing 37

[IV] Enlightenment for Shanghai 1. Holistic Policy Design Social Housing The government has Government also planned to provide planned to build almost 1 million social 200, 000 units of public houses to the shanghai rental housing for the citizens during 2011 - immigrants 2015, which accounts for almost 20% of shanghai households 38

[IV] Enlightenment for Shanghai 1. Holistic Policy Design Housing Market Price has risen quickly in The regulatory policies recent years too. the like property tax, income average price of new tax and purchasing houses has reached restriction should be 20, 000 RMB per square enhanced to prevent meter (a flat of 100 sqm bubble values 2 million RMB) 39

[IV] Enlightenment for Shanghai 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 To enforce the poor households to buy the houses step by step, the Shared-ownership scheme can be introduced in Shanghai empty houses into effective supply, a sort of property tax premium scheme could be launched 40

[IV] Enlightenment for Shanghai 3. Fair Allocation of Social Housing Coventry ‘Homefinder’ system Tackling tenancy fraud The property and Social homes should not household size standard, be allocated to people eligibility, banding who are not qualified; to priorities, bidding process, find effective ways, like complaints and appeal raising rents, to fight procedures are all well against tenancy fraud designed 41

Thanks! 42