INTRODUCTION

  Analysis of John Prescott's statement suggests that his Department has too narrow a view of both the problem and the solution to the housing crisis:

—  The problem is seen as not enough houses affordable to lower wage earners (never mind the unwaged). This is certainly true in most of the South East, where an average income will not buy the average house in an increasing number of places. It is also true in a more limited range of housing pressure areas in nearly all other regions (eg popular `rural' commuter and retirement villages). However, there are large swathes of housing suffering from the opposite problem of low demand, particularly widespread in the North West, North East and Yorkshire & Humber, but also in inner urban areas, outer estates and former mining communities all over the country. The public debate is unbalanced because it is dominated by the South East perspective, and although John Prescott's statement refers to low demand it fails to make the broader link to the supply of affordable housing.

—  The solution is seen exclusively in terms of increasing the supply of new housing: local authorities `delivering' the targets in RPG; growth areas at Milton Keynes, Thames Gateway, Ashford and in the M11 corridor; and increasing densities and using more brown field land. But new housing is only a small part of the supply: there are about 20 million existing dwellings in England and around 2 million of these change hands each year. Over the last 10 years new building has run at around 150,000 a year—less than a tenth of this number. While new building is around 120,000 at present, it is unlikely that this reduction in supply (about 1.5% of the total market) can account for the general rise in house prices. For the same reason, increasing new building is a very ineffective way of reducing prices.

  A credible strategy for resolving the housing supply problem needs to take a broader and (dare one say?) more joined-up approach, starting with a more balanced appreciation of the underlying problem.

THE HOUSING SUPPLY CRISIS

  The major reason for the supply crisis (and it is one) is not the lack of new housing but the collapse in the attractiveness of so much of our existing housing. Two key factors are (a) the widening economic gap between different parts of the country and (b) the flight of the better-off from some older urban areas and former mining towns to suburbs and so-called "countryside". The result is an increasing concentration in less attractive areas of people lacking the resources to maintain and improve their housing (or the social fabric that would support them in doing so). This in turn gives a further twist to the vicious cycle of decline. Where both factors are strong—in parts of the North East, North West and Yorkshire—"low demand areas" are now a major phenomenon. They are also emerging on a smaller scale even in parts of London and the South East. These houses are being removed from the effective supply (houses that people actually want to live in), raising prices for the rest. And these price rises are further fuelled by the housing finance system and the lack of an attractive social housing alternative.

HOUSING LAND SUPPLY

  Demanding that local authorities meet RPG housebuilding targets is pointless. They do not (any longer) build houses: the private sector builds 80% and housing associations most of the rest. The only lever local authorities have is the release of more housing land. But according to CPRE[19] there is already more than a 5-year supply of land at RPG rates, even in the South East. If house-building is to be accellerated by this means the extra would need to be in the places where housebuilders prefer to build: in attractive areas and on greenfield sites. Without addressing the urban and regional causes of the problem, this would simply reinforce the vicious cycle that is polarising neighbourhoods, removing housing from the pool of attractive stock, increasing commuting distances and car-dependency—and raising prices. Releasing enough land to increase the total amount of housing on the market (new and existing) by enough to impact on prices would require truly heroic quantities (and the abandonment of all other aspects of urban and regional policy).

PLANNING GAIN, GROWTH AREAS AND BROWNFIELD LAND

  But if land supply is not the answer to the current crisis, what is? As indicated earlier housing finance, for both social housing and owner-occupation, are likely to be important areas. But as far as the RTPI and the planning system is concerned, I believe that there are two significant issues:

—  The attempt to finance affordable housing through planning gain is simply leading housebuilders to hold their land off the market: it is difficult to see how else to explain how record high house prices can co-exist with record low rates of building and an adequate supply of identified land. Planning gain has failed to deliver anything remotely approaching the numbers of affordable housing units needed, and is simply distorting the planning system and land markets. There is in any case no reason why the surplus value that could be captured in any particular area should relate to the local need for affordable housing even if the system worked. Meeting the housing needs of people who cannot meet them in the housing market should be borne as a collective social responsibility, not a tax of almost accidental incidence.

—  The South East growth areas will not deliver much additional land or housing for many years. When they do, they may or may not become sustainable communities: unless something serious is done about managing transport demand (eg road tolls and area pricing) they could simply add to the South East's problems of social polarisation, congestion and overheating. Prescott's statement recognises that brownfield[20] land is crucial to a sustainable increase in housing land supply. If this is going to happen though it needs to be central to the efforts of Government, RDAs and local authorities, and seen as an integral part of the urban renaissance mission—not in a separate policy silo marked "housing". Using brownfield land and achieving higher urban densities whilst still delivering a quality of housing that people can both afford and want is not going to be cheap. And it requires attention to the whole public domain—not just the environment but also services like health and education. To justify this will require a much broader process of policy evaluation. We must transcend the present narrow, short-term and programme specific approaches to appraisal that have got us into much of the mess we are in.

REGIONAL POLICY

  Behind the immediate crisis is the much bigger question of inter-regional balance. This will take much longer to address, and to start delivering results—but that is a reason for starting now. This appeared to be recognised in the first flush of new Labour in Government: one of its first White Papers was that introducing the legislation for RDAs, and this contained a very clear statement of the need to address regional imbalances pro-actively "Wide variations in levels of economic activity- reflected in wage pressures, levels of unemployment and movements in house prices—make the task of providing a stable macroeconomic climate more difficult. In particular, setting a national interest rate which suits each region is more difficult when the regions themselves are widely divergent. The risk is lower overall growth and employment rates for the country as a whole"[21]. Quite so.

  I am not suggesting (nor was the White Paper) that we should return to the kind of dirigiste regional policy tried in the 1960s and 70s, but that we should set ourselves much higher aspirations for (and devote greater resources to) developing and exploiting the distinctive economic potential of the English regions. One measure of success would be the ability of every region to attract and retain people, reducing the pressures on the South East which are now endangering its economic success. If anything the case for a stronger regional policy has increased: the gap in regional GDP per head has widened dramatically since 1997 (and is widening fastest for those already the worst off) see table below:

  Source: Regional Trends

  This table demonstrates strikingly how interegional differentials have widened over the last 10 years. Moreover, there is a clear correlation between position in this league table and the rate of change in GDP per head: the best-placed regions are accellerating away from the worst-placed. It is also notable that (apart from Scotland) position in the table is strongly correlated with peripherality relative to the South East core.

  The quotation above from the RDA White Paper eloquently stated the problems caused by uneven regional development for a single currency (the £) even within the UK. The uneveness is getting worse and we are poised to join a much larger currency area. There are big national economic issues at stake.

  Urban and regional problems have been with us since WW2, but were made far worse by the social housing and land policies of Thatcher and Heseltine (respectively). Is it too much to hope that the present Government will avoid more of the same and act with greater breadth of vision and wisdom this time?

20   I was particularly pleased to see that in spite of all the efforts of his civil servants to abolish it Prescott is now using this handy term that I coined back in 1975! Back

21   DETR (1997), `Building Partnerships for Prosperity', page 11, para 2.3, HMSO, Cm 3814. Back