Cost is not the only barrier to housing

Writing for CityLab, Feargus O’Sullivan expresses some puzzlement over a new EU report that reports what share of people agree it is easy to find good housing at a reasonable price in various European cities. Here’s a map:
Map showing  what share of  people agree it is easy to find good housing at a reasonable price in various European cities

Feargus writes:

Predictably, it is in wealthy northern European cities where people feel that finding good value housing is toughest. Less than 19 percent of respondents in London, Paris, Berlin, Hamburg, Vienna, Munich, Stockholm, and Oslo thought affordable housing was easy to find.

But when it comes to the realities of housing affordability, how much credence can we give to this one measure, based on public opinion? In terms of perception, for example, Vienna and London appear to be on roughly the same level, even though the latter surely has far higher housing costs when compared to average income. Indeed, if you look at another map, which shows how many people are satisfied with their household’s financial situation, a rather different picture emerges.

Even though residents of Vienna and Munich expressed doubts about whether they can find affordable housing with ease, they are also among the happiest with their incomes in all of Europe, with over 83 percent of citizens in those cities responding that they were satisfied with the financial situations of their households.

To explain these results, I think we need to refer back to the actual question that was put to people, and consider that there are other barriers to ‘finding’ good housing than just the price. Rent controls and tenant-friendly regulation in places like Stockholm, Vienna and many German cities help keep the rent down below the market level, but they also make it more difficult to actually access housing at that price, because there is less turnover and landlords are more picky about who they rent to. As Kath Scanlon says here (p28) of the German rental system, “Because tenancies are indefinite, landlords are extremely selective about who they rent to: the search process can take months” – and if you don’t believe her there are some (very) detailed first-hand accounts here and here.

In London the barrier is more straightforwardly financial. Rents (and deposits) are very high, even when compared to London’s relatively high earnings. But if you’ve got the money, the process of finding a rental is relatively straightforward, and landlords are not (to my knowledge after years renting here) as picky as in German cities. Or at least, they were – things may be changing now due to the government’s misguided decision to make landlords check people’s residency status, which is likely to make access to housing more difficult for migrants or anyone who looks like one.

But this just proves the importance of non-price barriers when comparing housing systems from different countries. Unfortunately these barriers are very hard to measure, which makes questions like that in the EU survey all the more valuable.

Tracking England’s shifting centre of gravity over time

The new projections of future population growth in England released in May by the Office for National Statistics reinforced the impression of a country whose social and economic centre of gravity is moving remorselessly southward. But just how far has England ‘tilted‘ in recent decades, is the southward move picking up pace, and is it led or lagged by the movement of jobs and the supply of housing?

These are all big questions, but it turns out there is a relatively simple way to answer them (at least partially). By finding the geographic centre of each local authority district and then calculating an average ‘Easting’ and ‘Northing’ (as the X and Y values of Britain’s ‘National Grid’ coordinate system are called) using the population of each district as a weight, we can pinpoint England’s “population centre of gravity”. What’s more, we can track it over time (using re-districted population data from the Vision of Britain website), from the first Census in 1801 to the last one in 2011 and, using ONS population estimates and the new population projections, predict its location all the way out to 2039. Ideally you would do this with more data at a finer spatial scale than that of local authorities, but that’s not available for as long a time-scale as the Vision of Britain data (though in 1995 Danny Dorling and David Atkins estimated the path of the population centre of Britain between 1901 and 1991 using ward data).

Using this method, we can pinpoint England’s population centre of gravity as of 2014 to Easting 455822, Northing 274644, about 200m west of the A5 in a field that once accommodated the now-defunct Rugby Radio Station. But how far has it travelled in the last couple of centuries? Well, not very far, but it’s been an interesting journey.  In 1801 the centre was about ten kilometres almost due west in a field between Rugby and Coventry, and for the next two decades that’s more or less where it stayed. Then in the 1820s it started heading north-west, picking up speed in the following decades as the industrial revolution gathered strength and both domestic and international migrants flocked to the growing cities of the North. Around the middle of the century the centre began to move north-east, and kept going in that direction, but at a slowing pace, for the next several decades.

In 1911 England reached ‘peak North’ as its population centre of gravity rested at Stoney Stanton, after which began the great movement south-east that has continued to this day. For the last couple of decades England’s population centre has travelled at a rapid pace on a route pleasingly parallel to Watling Street, the Roman road that connected Wroxeter with London and the coastal ports beyond.

England's population centre of gravity, 1801-2039

If the ONS population projections are any guide it will continue heading south-east, and in a couple of years should hit Daventry International Rail Freight Terminal, which on this evidence seems very smartly located. By 2039, the last year of the projections, it should be just off the A5/Watling Street and about to cross the Jurassic Way, which follows another ancient cross-country route. More symbolically still, it will be just a few miles from the Watford Gap, which on this evidence it should cross some time in the early 2040s.

What does this circumlocutory demographic journey tell us? First, that there have been no great migrations in in England comparable to the westward expansion of the United States, as seen in the movement of its population centre from 23 miles east of Baltimore, Maryland in 1790 to 3 miles outside Plato, Missouri in 2010. Movement of that scale and speed is presumably unique to the United States as a country that grew dramatically over less than 200 years, but England’s population distribution has probably also been relatively stable compared to other European countries, due to a happy absence of major wars, famines and epidemics since at least 1801.

All that means that the movement that we have seen has probably been largely in response to the rise and fall of economic prosperity in different parts of the country. And as it happens we can also track that too, by finding the centre of gravity of people in employment from historic Census data. The earliest year this is available is 1841, at which point the employment centre was a little outside Shilton, north-east of Coventry and about two miles north-west of the population centre (indicating that unemployment rates were lower in the north-west of England than in the south-east at that point). By 1881 both centres had moved north-east and much closer together, and they tracked each other very closely until the 1950s, at which point the employment centre began to pull away south-eastwards, highlighting the rise in unemployment in the North relative to the South. By 2001 it was about 5km further south-east than the centre of population.

Pop and jobs centres

Why didn’t the centre of population keep up with the centre of employment? Probably because the South didn’t build enough housing. We can only calculate comparable centres of gravity of people, jobs and homes from 2001 on, but at that point the housing centre was lagging around 800 metres north-west of the population centre, which in turn was around 5km north-by-north-west of the jobs centre. Over the next 14 years they all moved south-east, but the housing centre moved the slowest. Broadly speaking, this is why we have a housing crisis: people want to move to where the jobs are, but there’s not enough housing to accommodate them all at a reasonable cost, so you get a mixture of higher housing costs, more crowding and some people choosing not to move at all.

Pop, jobs and homes centres

It’s not that surprising that the growth (or decline) of the housing stock lags behind changes in the distribution of jobs and people, since homes can’t move or disappear very quickly. This lag can mean rapidly rising costs in growing cities, and then an over-supply when economic and population growth go into reverse (something demonstrated all too effectively in recent decades by the great industrial cities of the North). But local areas can still choose to build new homes more or less quickly, and right now many places that are seeing rapid growth in population and jobs are deliberately restricting the supply of new homes. And so we are where we are.

Acknowledgement for use of Vision of Britain data: This work is based in part on data provided through http://www.VisionofBritain.org.uk and uses statistical material which is copyright of the Great Britain Historical GIS Project, Humphrey Southall and the University of Portsmouth. Parts of the data are Crown copyright, adapted from data from the Office for National Statistics and licensed under the Open Government Licence v.1.0. Parts are based on historical material which has been re-districted by the Linking Censuses through Time system, created as part of ESRC Award H507255151 by Danny Dorling, David Martin and Richard Mitchell.

The disappearing new build premium in UK housing

As part of their long-running house price index Nationwide publish data on average prices for new, ‘modern’ and ‘older’ properties at UK level. According to this data the price premium on new/modern homes versus older ones has disappeared over time.

2016.02.07 Nationwide new build premium 1952-2015 UK HP Since 1952 Chart 6

Some of this is probably due to objective quality trends – i.e. the low-quality older homes being demolished and more investment being put into the remaining ones – but I think some is a symptom of our decades-long refusal / inability to build enough new housing.

In functioning housing markets new homes should be pricier due to better-than-average locations and build quality (remember that EPC statistics show new builds are on average slightly larger and much more energy efficient than the existing stock).

A consistent new build price premium would also be a sign of filtering at work, with higher income households buying new homes and older ones filtering down to lower incomes. This filtering process is a natural feature of well-supplied housing markets and is critically important for improvements in overall affordable and quality.

For comparison, in the US (where they build a lot more homes than we do) new builds command a premium of around a third.

BN-IA478_homepr_G_20150422120114

But because in the UK we block new supply in high-demand areas the price of old homes is pushed up while new builds are diverted to worse locations. This erodes the new build premium and cuts off the filtering mechanism. It’s a pretty clear signal that we’re doing housing policy wrong.

Analysis of London housing sales data

The Land Registry has recently started publishing data on individual residential property sales, and the two charts below use the data to compare housing markets in London and the rest of England and Wales.

The first chart shows the distribution of prices (up to £1m) in the capital and elsewhere in 2012, broken down by the tenure type (leasehold and freehold, roughly corresponding to flats and houses) and whether or not the property was newly built at the time of sale. Average prices are higher in London across all categories. You can also see the effects of stamp duty in the kinks of the price distribution curves just before the threshold values of £125,000, £250,000 and £500,000.

House price distributions, London and the rest of England and Wales, 2012

 

The second chart plots the total value of new build and non-new build residential property sales in 2012 by local authority area, with London boroughs in cyan and other local authorities in pink. In the vast majority of cases the value of new build sales is far lower than the value of older home sales. London boroughs account for the top four new build markets, Tower Hamlets (in the top left) leading the way with new build sales that account for around 30% of total sales value in 2012. Kensington and Chelsea (bottom right) is at the other end of the spectrum, with very few new build sales (because it doesn’t really build any new housing) but an incredibly valuable resale market. Westminster (top right) combines both a lot of resale and lot of new build sales.

Total value of new and old housing sales by local authority, 2012

 

The data was analysed in R and the charts produced using the ggplot2 package among others.

London Housing Market Report

I have converted the GLA’s London Housing Market Report from a quarterly document (last edition here) to a live resource on the London Datastore. It uses the Google Charts service via the googlevis R package, which allows you to create HTML straight from your own data rather than having to upload it to Google’s servers. While the use of Google Charts started out as a labour-saving device and hopefully will be over time, setting this up involved a lot of fiddling with Javascript to get the charts to display okay on the Datastore’s Drupal system. I’m grateful to Scott Day in the GLA’s GIS team for help with this aspect.

The great advantage of using Google Charts are that its layout and colour defaults are very good and where changes are required they are pretty easy to implement. I used to agonise excessively over the choice of colours in charts like this one but I think the Google version looks fine.

Quarterly change in average London house prices - comparison of indices

Most of the report consists of fairly standard presentations of market data. But one thing I would like to draw people’s attention to is the presentation of changes in average rents as published by the Valuation Office Agency. We show these changes at Inner London, Outer London and London-wide level to show that the London figure can be significantly distorted by shifts in the VOA dataset, notably the exclusion of a large number of Housing Benefit cases in Outer London over the last year which has skewed the balance of the dataset towards Inner London. So the average rent for a one bedroom property in London seems to have risen 13% even though the average in Inner London rose by 8% and the average in Outer London by ‘only’ 6%! I’m not sure these features of the VOA dataset are widely understood but lots of people are using their data to calculate changes anyway.

Change in median private rents in London, March 2012 to March 2013

Net housing supply by hexagon

This map, which didn’t quite make it into Housing in London 2012, shows total net conventional housing completions between 2007/08 and 2010/11 in London, aggregated using an artificial hexagonal grid in Quantum GIS. This type of grid can be useful for aggregating point data, though it still suffers from the usual problems of shaded maps in that variation within the classes is lost.

Net conventional housing supply in London, 2007/08 to 2010/11

The data comes from the London Development Database maintained by the GLA and comprising data provided by the London boroughs. My colleagues in the GLA GIS team have made an excellent interactive map for exploring LDD data, which you can find here.

Housing in London 2012

One of my main tasks each year at the Greater London Authority is to publish ‘Housing in London’, the evidence base document for the Mayor’s London Housing Strategy. It summarises key facts and trends across a range of housing-related topics, with an emphasis on visuals. The 2012 edition was published online just before Christmas and is available here (warning, it’s an 11mb PDF).

I plan to publish a few of the charts from Housing in London 2012 on this blog. Below is the very first chart in the document, taking a 110-year view of trends in population, households and average household size in London based on Census data.

London’s population grew rapidly in the last decade, reaching 8.2m in 2011 and fast approaching its previous peak recorded in the 1939 Census. The number of households also grew but not so quickly, with the result that average household size increased for the first time in at least a century. This is likely due in part to housing supply not keeping up with demand.

Trends in London's population, number of households and average household size, 1901 to 2011