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

OUTLINE I.Key Problems in Housing II.Roots III.Solutions ? IV.Enlightenment for Shanghai 2

[I][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][Ii] Roots of Problem

10 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 [II] Roots of Problem Tenure: Ownership is dominant

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

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

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

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

16 2. Austerity Policy So far the coalition has cut spending on public services by 8%; by the target is a cut of 20% [II] Roots of Problem

17 Reform of Social Housing: Turning Point Council Housing Social Housing Affordable Housing Social RentAffordable Rent 1Rents at 50% of market rent Rents at up to 80% of market rent 2Life time tenanciesFixed term tenancies at least 2 years 3Existing TenantsNew Tenants ‘The final nails in the coffin were driven into the great visionary project of council housing’ 2. Austerity Policy [II] Roots of Problem

18 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 [II] Roots of Problem

19 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 [II] Roots of Problem

20 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 % of council houses were sold through this scheme. Housing tenure structure and social Classes were changed dramatically [II] Roots of Problem

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

22 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 [II] Roots of Problem

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

24 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 [II] Roots of Problem

25 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 [II] Roots of Problem

[ I Ii ] Solutions ?

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

28 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

29 Affordable Houses:17.5% Low-cost Houses: 12 % Total: 29.5% Bannerbrook Park near City of Coventry 1. Bridging the Gap between Demand and Supply On Supply Side [III] Solutions A) Investing Affordable homes

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

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

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

33 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][Iv] Enlightenment for Shanghai

36 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 37 [IV] Enlightenment for Shanghai

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

39 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) [IV] Enlightenment for Shanghai 1. Holistic Policy Design Housing Market The regulatory policies like property tax, income tax and purchasing restriction should be enhanced to prevent bubble

40 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 [IV] Enlightenment for Shanghai

41 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 [IV] Enlightenment for Shanghai 3. Fair Allocation of Social Housing Coventry ‘Homefinder’ system Tackling tenancy fraud

42 Thanks!