New Geography

Category: planning

  • Britain’s Housing Crisis: Causes and Solutions

    British house construction has remained at a low level for a decade.   Total new house and flat completions for all tenures last year were 113,670 for England, 17,470 for Scotland, and 6,170 for Wales. Excluding Northern Ireland that is 137,310 for Britain. Under 140,000 homes a year is low for a nation of 60 million.

    We are nearly at the lowest level of housing production since reliable records began in the 1920s. (Note 1)  

    Anyone expecting British house building to pick up soon will be disappointed, even as the housing market inflates into another bubble. Grant Shapps,  the Coalition government’s Housing and Local Government Minister, is also hoping that house price inflation will not return to make the present housing predicament worse.  

    He will be disappointed, too. Shapps wants modest deflation and more houses to be built. However, he is powerless to make that happen while his government sustains the national denial of Freehold development rights that in Britain defines the planning system. By denying landowners the right to build on any land they own, the system works against significant levels of housing production.

    The renewal of house price inflation

    The low level of production all but guarantees renewed house price inflation. According to estate agency Savills, inflation-adjusted house prices grew by 68 per cent in the decade up to 2010, even after the British housing market finished wobbling during the sub-prime mortgage finance crisis. Savills told readers of The Telegraph that house prices will inflate by 40 per cent in real terms over the next decade.  

    Britain’s vast majority of home owners will be relieved. Most people have felt uneasy with financial dependency on the debt and equity in their home. For most British households wages and pensions are insufficient.

    At the root of the problem lies the peculiar nature of Freehold in Britain. The government enjoys an effective national instrument in their effort to protect the housing market. An old innovation of the post-war planning system, this ensures cheap farm land can never come onto the market to allow the building of low cost homes in great volume, sufficient to precipitate a housing market crash worth having. Planning as a denial of development rights works very well to protect the members of the Council of Mortgage Lenders.

    This keeps house building volume low.   Britain’s former volume house builders have begun to make the painful adjustment to work within the Coalition’s planning system. It will not be easy for them.

    The national denial of development rights is sustained, and in many ways the problem is worse under the Conservative-led coalition than under New Labour.

    The house builders have been stripped of New Labour’s national target of 240,000 net additional homes a year, but that was an unmet and inadequate target.   Even more troubled are plans to develop 50 proposed “eco towns” also proposed by Labour, itself a small, even deluded, enterprise that is pathetic compared to development elsewhere in the world.

    Urban expansion and new settlements – whether in Britain or elsewhere – require land. And Britain, contrary to popular belief has land aplenty. The restraints placed on builders can best to described in the words of Sir Peter Hall, as a “Land Fetish”.   

    The planning system also is host to an eco-fetish that the Coalition appears willing to sustain regardless of housing need.

    Inevitably some house builders will have subscribed to the idea that the environment is too precious to allow much land to be developed, but not all.  This leaves no centralised attempt to satisfy the demand for new household formation following from population growth, the needs of immigrants, or to encourage the replacement of the worst housing stock. For greens of the more misanthropic persuasion, opposition to both population and production makes sense. They don’t want humanity to reproduce either biologically or industrially. They don’t want a world that is always about advancing human interests through industry.

    Yet the need for new homes won’t so easily go away.

    A three sided predicament

    This contemporary British housing trilemma will not be easily resolved. The country seems to accept expensive, inadequate housing and mortgage debt as a fact of life.  

    Yet this leaves us with no solution for future needs.

    Something needs to change.  Hugh Pavletich and Wendell Cox publish as Demographia have found – for the seventh year running – increasing unaffordability of British housing.  

    The Solution: 250 New Towns

    The only reasonable solution is to tear down the current planning structure. What we need is an audacious move to build some 250 new towns.

    This movement would try to replicate past successes. In the brief inter-war period, 1918 to 1938, popular owner occupation flourished, with economically struggling farmers keen to sell their Freehold land to house builders.  

    How long will Britain live with low levels of construction, increasingly higher prices and consistently low levels of affordability? The increasing drag of house price inflation on household incomes and the acceptance of poor quality British housing in short supply cannot be sustained indefinitely.  

    How long will Britain sustain housing unaffordability as a financial opportunity, protected by a weak government?  

    The British collective obsession with inflating house prices must end sometime, unless we are to lose all sense of housing primarily as somewhere useful to live.  

    The freedom to build on your own land will deflate the housing market, dramatically in some locations.  Giving all landowners their Freehold right to build will liberate the commercial construction industry from the burden of inflated land prices, allowing disruptive advances in industrial production.  

    If Britain faces the house price inflation projected by Savills in the next 10 years there are many home owners dependent on housing equity who will not object. Neither will the house builders object too much as they build a low number of luxury eco-homes, to the undoubted applause of the architectural press. They may enjoy the praise for their greenness. Farmers might subsist as environmentalists. Greens will be sufficiently deluded to imagine there was some point to all this. The City will make a healthy return.

    The green zealots are conspicuous, and need to be confronted by industrialists with a sense of humanity. Now is no time to let them get away with their anti-humanism.

    Britain certainly is capable of more than is currently being discussed. National housing output had peaked in 1968 at 413,714, more than twice the current rate.

    We have to answer the question: Who will organise to better explain and end the housing predicament in low wage industrial Britain? We are hoping the 250 new towns club can start the ball rolling.

    —-

    Note 1 – Marian Bowley, ‘Table 2, Numbers of Houses Built in England and Wales between January 1, 1919 and March 31, 1939’, in Housing and the State 1919-1944, London, George Allen & Unwin, 1945, p 271

    Ian Abley, Project Manager for audacity, an experienced site Architect, and a Research Engineer at the Centre for Innovative and Collaborative Engineering, Loughborough University. He is co-author of Why is construction so backward? (2004) and co-editor of Manmade Modular Megastructures. (2006) He is planning 250 new British towns.

  • China Housing Market More Stable Than You May Think

    The sensationalist reporting of rising China tends to celebrate the country’s ascent. But there is one area where both economists and casual observers see a potential disaster: the real estate market.  Media reports of skyrocketing housing prices in first tier cities like Beijing and Shanghai and photo essays of Chinese ‘ghost cities’ inject sober skepticism into the otherwise bewildering reality of rapid growth.

    The claims about real estate, however, are as exaggerated as the breathless accounts of the country’s path towards world economic domination. It is absurd to argue that all it will take for China to fall would be a bust in the housing market. In reality, the country has too many economic fundamentals working for this one sector to wreak too much havoc.   

    Above everything, China remains a manufacturing powerhouse, providing the developed world with everything from children’s toys and athletic shoes to iPads and other electronic devices. Yes, the Great Recession did have a negative impact on China’s export business; this is why the Central Government took steps to direct massive amounts stimulus money towards infrastructure and real estate development.

    Far from being limited by exports, China is just beginning to unleash the power of its domestic consumer market. Imported goods (in reality, foreign brands, even if they are manufactured within China) are highly taxed, encouraging Chinese consumers to spend money on cheaper, local brands, thus keeping the money supply circulating through the domestic market.

    Yet this does leave China somewhat subject to real estate speculation. With   limited channels for investment, a risky domestic stock market, and little-to-no interest accrued by holding money in Chinese bank savings accounts, there is, for many individuals, nowhere else to spend their money but in the housing market.

    There are a few other forces at work here as well. Since the Chinese government still technically owns all of the land in the country, real estate developers are given the right to develop land based on a bidding process, with the rights going to the highest bidder. Auctioning of land for development typically happens at the municipal level. Once a developer is awarded the right to develop a piece of land, there is a time limit (usually no more than a few years) before it returns to the hands of the government.

    The purpose of this is two-fold: one is to manage the urban influx of new migrants and also to discourage land speculation by developers. As you can imagine, savvy developers often wait until the last minute to build a project to get the maximum profits from their projects.

    Since income taxes are low by international standards (and easily evaded through the preponderance of ‘grey money’ or hidden income) and property taxes are virtually nonexistent (up until recently at least), land auctioning is by far the largest source of income for local governments. This becomes the main way these governments fund infrastructure and public works projects.

    This same process is happening in cities across China. Why? Quite simply, the demand is there. The booming housing market is a revolution of sorts. This is really the reflection of the emergence of a true Chinese middle-class. The U.S. media, on the other hand, tends to remain focused on a massive China real estate bubble, perhaps as a projection of America’s own recent experience of real estate exuberance.

    Yet there are some major differences. For example, few Chinese purchase homes with little or no money down. Banks are not lending ‘creative mortgages’ such as ARMs to homebuyers. Government measures seek to discourage speculation.

    For instance, Chinese home buyers are limited to purchasing 2 homes and must put at least 30% down for the first home and 60% down for the second home. Investment by foreigners into the real estate market is strictly regulated in order to reduce the amount of ‘hot money’ coming into the country. Non-Chinese citizens are limited to purchase one home only and must hold onto it for 5 years before being allowed to resell it.

    Due to the massive size of China’s population, the majority of homes being purchased are flats in newly-built residential high-rise compounds. The size of these units might be a little too cozy for Americans or even Europeans, but to young Chinese homebuyers (of which most are first-time buyers), it represents an aspiration unimaginable only a few years ago.

    Take 26 year old Mei Li for example: late last year she, an administrative assistant at a construction company, and her husband, an IT professional, bought a home in the fast growing western district of Chengdu, between the 2nd and 3rd Ring Roads. The young couple put a 30% down payment on a 2-bedroom, 80 m² (860 ft²) flat on the 23rd floor of a tower that is part of a brand new residential development.

    At RMB 7,500/m², the total cost of their flat was RMB 600,000 (about $91,000 USD). As required, and with some help from their parents, Ms. Li and her husband put a down payment of 30%, or RMB 180,000, and qualified for a 30-year, 6% fixed-interest home loan from Bank of China. With a combined income ranging from about RMB 8,000-10,000 ($1,200 USD – $1,500 USD) per month, their monthly mortgage payment of RMB 2,500 ($380 USD) is easily manageable.

    Ms. Li and her husband are glad they got in when they did. Even though their new unit won’t be ready for move-in until the end of this year, they have already seen the value of their investment increase by 10%. Located adjacent to a planned stop for an underground metro line currently under construction, the value of their investment is bound to further increase due to its convenient access to public transportation. In the future, taking the subway will be just one of their transportation options as Ms. Li and her husband plan to buy their first car by the end of this year.

    Multiply Mei Li and her husband’s story by the millions and you have a better idea of what is really behind the China housing boom. To be sure, speculation certainly exists, but predominately it is middle-class aspiration that is fueling urbanization.

    In Chinese, the word for ‘family’ and ‘home’ are the same: jia (家). The family is the critical unit of Chinese culture, making ownership of a home a critical priority. For the world, middle-class home-ownership also promotes peace and stability in China, providing the basis for the evolution of a more consumer oriented, less predatory Chinese economy.

    Adam Nathaniel Mayer is an American architectural design professional currently living in China. In addition to his job designing buildings he writes the China Urban Development Blog.

  • Why Duany is Wrong About the Importance of Public Participation

    One of the news stories circling lately is an interview with Andres Duany where he asserts that public participation requirements are too onerous to enable great work to be done.   Early in my career I worked as a public historian and historic preservation specialist, so rather than launch immediately into my opinion, let me tell you a true story.

    In the 1950s, business owners in downtowns across the country became agitated over the fact that their central business districts were facing a double challenge: increasing amounts of traffic congestion and increasing competition from new suburban shopping centers.  One of the towns feeling these challenges was Green Bay, Wisconsin, which had a very energetic and forward-thinking business leadership circle. 

    The good men of Green Bay did what most forward-thinking leaders do when faced with a fearful challenge on the horizon: they hired a consultant.  The consultant they chose was Victor Gruen, an architect who had recently gained fame designing the nation’s first enclosed shopping mall, in Edina, Minnesota.  In the couple of years that had lapsed since the Southland Mall plans hit the streets, Gruen had become a celebrity – the Andres Duany of his day. 

    In a 2006 article for the New Yorker, Malcolm Gladwell described Gruen as “short, stout, and unstoppable, with a wild head of hair and eyebrows like unpruned hedgerows.” Gladwell summed up Gruen’s impact pretty succinctly:

    Victor Gruen didn’t design a building; he designed an archetype. For a decade, he gave speeches about it and wrote books and met with one developer after another and waved his hands in the air excitedly, and over the past half century that archetype has been reproduced so faithfully on so many thousands of occasions that today virtually every suburban American goes shopping or wanders around or hangs out in a Southdale facsimile at least once or twice a month. Victor Gruen may well have been the most influential architect of the twentieth century. He invented the mall.

    Gruen asserted in Green Bay, as he did in dozens of other cities in the 1950s and 1960s, that the key to solving downtown’s competition challenge was to completely separate vehicular traffic from pedestrians.  By massively widening Main Street at the north end of the commercial district and completely enclosing the core of the existing commercial district, all of downtown’s problems would be solved.  All the plan required was money and a willingness to be unsentimental and practical.

    You don’t have to be Duany to understand what happened.  It took 20 years for Gruen’s vision to become some form of reality, and during that time the City’s business and political leadership –and its planning staff – stuck to Gruen’s plan as diligently as the real world constraints of financing and private development would allow.  

    By the time it opened in 1977, the new Port Plaza Mall and associated parking lots and garages had obliterated acres of downtown buildings, dislocated a hundred residents.  It sent dozens of businesses to liquidation or to the far edges of the newly-sprawling city where many of them are located today.  If Gruen considered the collateral damage of grand ideas at all, I wager he simply viewed them as the price of progress. 

    All of this might be tolerable from a strict economic standpoint if Gruen’s grand plan had worked.  It didn’t.  Port Plaza Mall was a money-loser from virtually day one.  By the early 1980s, Port Plaza was doing so poorly that the City took the advice of another consultant and bulldozed another full block of buildings to add the magic third anchor, which they were assured was the way to fix the mall’s ails.  By the early 2000s, that anchor was gone. 

    Green Bay, like many other cities that drank the downtown mall Kool-Aid, continues to struggle with a downtown that is dominated by a windowless, dispiriting, too-vacant hulk where its heart should be.  Meanwhile, the region’s former skid row, right across the Fox River within eyesight of the mall, has become the hottest urban neighborhood in the region, and the winner of a Great American Main Street Award. 

    This isn’t simply a story about the virtues of historic preservation.  Gruen’s idea didn’t fail because Green Bay wanted old buildings or because the people who lived and worked in those old downtown buildings did something to undermine the plan.  Like most people of that era, the majority of the City’s leadership and residents placed their faith in the expert and in the concept of progress.  Any gut misgivings they may have had were pushed aside.  The plan was made by a national expert, right?

    Gruen’s mall failed because he envisioned and sold an ideal solution without giving any attention to economic realities, and without consideration of the myriad of unforeseen factors and unintended consequences that could, and did, develop.  Gruen stood at the beginning of an era, and there was no way anyone could anticipate how the world would change in a few short decades.

    The greatest failure of Gruen’s plan was that he did not recognize or acknowledge that his Grand Vision could very well turn out all wrong.     

    We should have learned by now that our Grand Visionary Designers are not infallible. Our landscapes are littered with Grand Visionary Architecture that was supposed to fix something, or create Something Big. And so few of those grand visions ever came out the way they were promised, or managed not to create a new set of problems.  Never heard of Port Plaza?  That’s because there are Port Plazas of one flavor or another in virtually every city in the country.  Some are malls, some are stadiums, some are brutalistic, forsaken parks.  You can pick them out easily by their Grand Design ambitions and their total lack of life. 

    Our failure to learn this lesson is a blot on architecture and planning.

    This history is exactly why Duany is wrong about the importance of public participation.  Public participation is important not just to try to get people to go along with our vision, to give us a chance to yell loud enough to drown them out, or to allow us to demonstrate the superiority of our Grand Vision over their piddling little concerns.  When residents resist a new development  – even when they supposedly “don’t like change” – it doesn’t take many questions or much effort to develop a real understanding of their concerns and their point of view.   

    We fail consistently to realize that the locals are there every day and we are not. Local residents have a level of detail and a critical perspective that can make the difference between whether a proposed project supports the health of the community or creates a new burden.   Much of the time, the real concerns of the residents of an area have to do with nuts and bolts issues that can be fixed with relatively little effort or accommodation.  It’s possible that local resistors might have good reasons why the proposed change is a bad idea.  If we don’t enable and empower them to speak, we have made the same mistake as Gruen and we are likely to create a similar legacy.

    Understanding the real reasons why people oppose a project requires the willingness to do so, the humility to listen, and the internal fortitude and self-assurance to admit that possibly, oh just possibly, we don’t know everything that there is to know.   That is the real mark of wisdom.

    Duany and other marquee designer types have the privilege of maintaining a distance from the dirty work of making a project functional in real life. Don’t overlook the work of the nameless landscape architects and architects who are hired by the developers after the big name architects are paid, have gathered their glory, taken their big checks and left.  It is those highly competent, highly talented professionals who deal with the Grand Architect’s ignored steep slope under that proposed building or those planting beds that will block other drivers’ vision of the charming landscaped driveway emptying out onto a major intersection.  

    Ah, little stuff. Who cares?

    If the people who live around a proposed development oppose a development, chances are those people know something that is important to the health of their neighborhood and the larger community. If we think that we know more than to have to listen to them, then we are no better than little Napoleons in big capes, creating monuments to our hubris that our children and grandchildren will have to clean up. The lessons of the damage caused by our ignorance are all around us.