The Small Sites Myth

Christine Whitehead has been peddling an old misconception that to counter the fall in the proportion of homes built by small builders the planning system should focus on many small sites rather than a few large ones.  The opposite is true.

  • Eras when small builders have been more important have been larger are eras when the total number of houses built has been larger
  • But the causation runs the other way eras with large housebuilding have been eras with more large sites like new towns and major council estates – try hitting 600 dpa per lpa without large sites
  • When large housebuilders concentrate on large sites there is less monopolistic competition by small builders for small sites
  • Large housebuilders have muscled in on small sites with their countyside homes divisions
  • When the state built large site there was less drip feeding of new housing
  • The Sedgefield method perversely disincentivises large sites and so reduced overall numbers
  • On the continent large sites are owned and subdivided by local authorities and then sold to many small builders – so the problem is not large sites but the oligopolistic structure of the housing industry.
  • Affordable housing thresholds produce grater profits for smaller sites and a flow of investment away from larger sites
  • The costs of infrastructure are hidden and borne by society for small sites again disincentivising investment in large sites

The Only Way out of the Romer Conundrum is to Dump Wicksells Rocking Horse

A great deal of discussion on the blogosphere about Paul Romers paper critical of neoclassical modelling.

Heres the diplomatic authorised version

Once macroeconomists concluded that it was reasonable to invoke an imaginary forcing variables, they added more. The resulting menagerie, together with my suggested names now includes:

A general type of phlogiston that increases the quantity of consumption goods produced by given inputs

– An “investment-specific” type of phlogiston that increases the quantity of capital goods produced by given inputs

-A troll who makes random changes to the wages paid to all workers

-A gremlin who makes random changes to the price of output

-Aether, which increases the risk preference of investors

-Caloric, which makes people want less leisure.

I think much of the discussion has reverted to catalogs of why people don’t like DGSE models rather than the implicit criticism of modelling startegies based on ímaginary forcing variables’creating ”shocks”.  The kind of models now dominant in ALL modelling approaches derived from real business cycle models including New Keynsian.

All of these models are based on a parable of equilibrium based on Wicksell’s Rocking Horse model.  We now know this to be mathematically false, so why don’t we just replace it?

His famous quote from 1918

“If you hit a rocking horse with a stick, the movement of the horse will be very different from the stick. The hits are the cause of the movement, but the system’s own equilibrium laws condition the form of movement”

Wicksells model was one of damped equilibrium.  In nature equilibrium is a state of rest, so a pendulum for example will eventually stopped swinging.  So the only way to make the rocking horse rock is to hit it with a stick.

So equilibrium models based on this framework cannot explain business cycles.  This was a real problem for early theorists who tried to explain business cycles endogenously.

Take for example Marx, whose verbal model in Capital IIexplained cycles as a combination of ‘lags’in replacement of fixed capital and wages caused by changes to profits.  He tried to explain it mathematically but gave up (letter to Engels 1872) as it was beyond his mathematical abilities.

Kalecki took up the investment part in his celebrated business cycle model, in Essay on the Business Cycle Theory 1933.   Clearly influenced by Marx but expressed in clear form as difference equations.

This was criticized by Ragnar Frisch

“The Characteristic Solutions of a Mixed Difference and Differential Equation Occurring in Economic Dynamics”, with H. Holme, 1935, Econometrica

Essentially this is Wicksell’s rocking horse rendered mathematically.  To keep the horse rocking there had to be periodic ‘shocks’- the cycle could not be endogenous.

But we now know this to be false.  Slutsky (1927) showed how periodic cycles could be explained by small variations in endogenous variables.  He had provided the maths that was beyond Marx.  We now of course have a much richer mathematical toolkit of teh regions of stability that generate limit cycles, those that create damped occilations and those that lead to shifts in attractors and chaos.  This has barely penetrated post grad economics which still uses a discredited 8- year old set of equations.

Where the economics profession – following Lucas – got it wrong was to take Slutskys proof that random variations can generate cycles – which became the ‘stochastic’part of DGSE from his wider demonstration that ANY endogenous change can generate cycles – which takes us to endogenous theories of the business cycle – the path of Marx, Hawtry, Kalecki and Kaldor.   You can ‘fit’a series of waves to explain a graph of past data, but that is the same technique a DX9 synthesizer uses Fourier synthesis to generate waves that simulate instruments.  A DX9 programmed to simulate the noise of a flute is not a flute.  Slutsky himself used the example of rainfall falling over many days influencing crop yields and criticised ‘spurious’statistical correlations.

Over time emphasis in business cycle theory has shifted between ímpulse’ and ‘propigation'(socks – the hitting of the rocking horse) – but the underlying assumption that shocks are necessary to ensure propagation.

To get away from models where change is generated by philosogen and chaloric we have to abandon the  assumption that what drives cycles is outside the model.  To get a rocking horse to rick requires energy, and how much it swings depends on its centre of mass.  The economy is much more like a powered rocking horse where its centre of gravity is subject to rare but violent shifts to new equilibria.

 

Protecting Nightime Economy Requires a change in Noise Law

Evening Standard

A historic West End cinema is facing closure in a row over soundproofing for flats being built above.

Noise from films played at Curzon in Mayfair can be heard on the two floors above, according to the developers of the properties, which are likely to fetch more than £2 million each.

Developers 38 Curzon Ltd are converting office space into four flats above the cinema’s home since 1934 on Curzon Street, where star-studded film premieres are regularly held.

But they want the cinema to foot the £500,000 bill for soundproofing work, which the Curzon cannot afford and would “never obtain approval for as the auditorium and surrounding walls are listed”, according to its director of cinema development Rob Kenny.

The deadlock has resulted in a legal “action for forfeiture”, meaning the cinema faces surrendering its lease and vacating the building.

Exactly the kind of case Sadiq Khan is trying to tighten Policy on

Khan proposes to protect bars and clubs from being closed down over noise complaints by introducing the “agent of change” principle, which would place the cost of soundproofing on housing developers rather than venues. “This is a simple measure but will have a massive effect on smaller, independent bars and clubs who often aren’t able to afford the costs involved,” he said.

But that isn’t enough for two reasons.  Firstly change of uses to offices could be PD, secondly the resident could complain of a statutory noise nuisance.

The change requires a change to the Environmental Protection Act 1990 to place the burden of remedying a statutory nuisance on the agent of change, i.e. the residential developer,

Oxfordshire Districts Close to Agreeing Housing Numbers

Oxfordshire CC  essentially a copy of the Cambridgeshire process

A proposed solution for the delivery of Oxford’s unmet housing need involving an apportionment to each district is to be discussed by the Oxfordshire Growth Board on September 26th.

The results of the Oxfordshire Strategic Housing Market Assessment (SHMA) published in 2014 established the overall housing need for each district planning area. The councils in Oxfordshire generally agree that Oxford City is not able to fully accommodate its need within its boundaries. Government requires neighbouring areas to cooperate in such circumstances and an agreement was reached that assistance would be needed from other districts in Oxfordshire to meet Oxford’s unmet need. Senior officers for all of Oxfordshire’s councils set up a programme of work to address this issue.

The Oxfordshire Growth Board will meet to agree a proposed apportionment of 15,000 homes but will not make decisions on where in each district housing growth will go. Each Local Planning Authority has the responsibility of doing this in their Local Plans. The Growth Board will consider a body of jointly produced work with a view to reaching a cooperative agreement on how Oxford’s unmet housing need should be distributed across the county. This work has involved consideration of the level of unmet housing need, the sustainability of broad growth options, a study of the Green Belt, transport and infrastructure issues.

The report to be presented on Sept 26 recommends that the Growth Board:

  • approve the apportionment of the agreed working figure for the unmet housing need for Oxford
  • approve a Memorandum of Co-operation setting out the apportionment and timetable for delivery of the unmet housing need for Oxford
  • formally recommend the approved apportionment to each of the Oxfordshire Local Planning Authorities for consideration in the preparation of their Local Plans, in the interest of meeting the objectively assessed housing needs for Oxfordshire.

Cllr Ian Hudspeth, Leader of Oxfordshire County Council and Chair of the Oxfordshire Growth Board, said:

“It is a well-known fact that housing is a major issue in Oxfordshire, with no easy answers, so it’s important that we all work together to consider the housing needs of the county in the context of economic growth.

“The Oxfordshire Growth Board enables local government and representatives from education, transport and local business to focus on resolving county-wide issues such as housing in a co-ordinated and sustainable way.

“It is welcome news that the Oxfordshire Growth Board now has a comprehensive, county-wide evidence base which is needed to consider a fair and sustainable way to share Oxford’s housing needs beyond the Oxford boundary.”

Notes to editors

Item 15 of ‘Oxfordshire Growth Board Post SHMA Strategic Work Programme’ report

The recommended apportionment is as follows:

 

Shortlisted ‘green’ areas of search

Cherwell

4400

Oxford

550

South

4950

Vale

2200

West

2750

Totals

14850

The Oxfordshire Growth Board is a joint committee of the six councils of Oxfordshire, set up to facilitate and enable joint working on economic development, strategic planning and growth. It does this by:

  • advising on matters of collective interest, to seek agreement on local priorities and influence relevant local, regional and national bodies
  • overseeing the delivery of projects that the councils of Oxfordshire are seeking to deliver collaboratively in the fields of economic development and strategic planning and those agreed in the City Deal and Local Growth Deals that fall to the councils, working collaboratively, to deliver and has an overall responsibility to manage these programmes of work alongside the Oxfordshire Local Enterprise Partnership (OxLEP).

The meetings are administered and hosted on a rota basis and currently Oxfordshire County Council is the hosting authority.

The Oxfordshire Strategic Housing Market Assessment (SHMA) was commissioned jointly by all the Oxfordshire district councils supported by Oxfordshire County Council and published in 2014. It was a technical study intended to help the Oxfordshire local planning authorities understand how many homes will be needed in the period 2011 – 2031. It also considers the housing needs of specific groups such as older people, minority groups and people with disabilities and what housing growth will be needed to support the economy.

A Note to @HomeBuuildersFed read the Statistics Notes

Total nonsense from the HBF today

The Government’s most publicised measure of house building excludes around a fifth of all new build completions every year, a report released today reveals. The HBF’s Ghost towns report  shows how flawed methodology and poor returns from Local Authorities mean around 30,000 new builds are not counted in the official numbers.

why dont they read the governments own statistical note

As the government statistical notes states

The new build component of the Net supply of housing statistics is generally larger than the corresponding annual total from the House building series, despite the fact that they are measuring the same thing. The longer collecting period and range of sources used in compiling the Net supply of housing statistics means that the new build component of net supply captures some elements of new build which are missed in the building control based data. It is also possible that Net supply of housing will pick up the small minority of dwellings in which people are living but for which no completion certificate has been issued. In such cases a completion may be missed in the building control data even if the dwelling meets the ‘completion’ definition.

This issue has long been known and it does nothing to absolve the HBF for poor delivery.

How Dover could have Avoided JR

The recent case of  R (CPRE Kent) v Dover District Council & China Gateway International Limited (Court of Appeal, 14 September 2016)

Has highlighted the need to give sufficient reasons, especially as here for an approval of a major development in AONB contrary to officers advice.  See  Simon Ricketts blog.

It may have been the case that politically Dover members did not want to be seen to refuse a major housing scheme, after all they were the only LPA to raise voluntarily housing numbers above household growth in their local plan.

In which case the best course may have been for them to be pragmatic and issue a split decision under their powers granted by Kent County Council v Secretary of State for the Environment 1976.

They could have approved the part of the scheme that would not harm significantly AONB, and the layout of the western edge of Dover makes this possible, as recommended by officers, and then refused the residual.  Of course they then could have appealed or reapplied on the residual concentrating members minds on the most harmful part.

Of course it is right that this part is refused, but members could have avoided JR by stating that the exceptional housing needs of teh town justified granting an approval significantly harming AONB.

Javid Says Neighbourhood Plans Should be Upheld Even when out of date

Arun Recovered Appeal It will be successfully JRd as in conflict with the recent Woodcock Holdings case

The Secretary of State considers that neighbourhood plans, once made part of the development plan, should be upheld as an effective means to shape and direct development in the neighbourhood planning area in question. Consequently, in view of Framework paragraphs 198 and 185, and his guidance on neighbourhood planning that this is the case even in the absence of a 5 year housing land supply, the Secretary of State places very substantial negative weight on the conflict between the proposal and policy BB1.

No the evidence doesn’t Yet support that Housebuilding is Higher in Neighbourhood Plan Areas

Last Year the former planning minister paraded statistics that outbuilding is 10% higher in areas with neighbourhood plans than areas with local plans alone.

Quite how this was worked out I dont know since house-building figures are not disaggregated to parish area.   I suspect it was simply measured by LPA for those areas with and without any neighbourhood plans.  A very crude approach.

This would have meant a sample of areas without local plans being biased to northern areas with less development activity because Respublica data shows neighbourhood plan coverage is weighted towards more prosperous areas.

So Neighborhood plan coverage may not be the causal variable, we may have a classic case of spatial autocorrleation where local priority is the causal variable and neighborhood plan coverage is correlated to that.  Indeed there may be a second autocorrelation as when a local plan is adopted housebuilding levels increase and then the neighborhood plan has to be consistent.

Turley in 2014 found half of neighbourhood plans were designed to resist development, so the real correlation may be negative in areas with out of date local plans and positive but non causal in areas with up to date local plans.

If people think that neighborhood plans are there to boost house-building then why isn’t Herefordshire with more than anywhere undergoing a development boom?  The main motive is rather to fill a vacuum and restrict development to levels the local community think appropriate.

 

@GavinBarwellMP Crack down on Landbanking would be Weak and Counterproductive

Property Week

Developers that fail to build on sites for which they have planning permission could find themselves penalised when they apply for their next scheme, Gavin Barwell has warned.

The housing minister told Property Week he wanted to crack down on developers that have a “habit of putting in planning applications, getting permission, getting uplift in their land value and then not doing anything”.

The government was “looking at” encouraging councils to take a developers’ past record on building out schemes into account when they assess new planning applications, he said.

This could come in the form of central government planning guidance.

“That should be a consideration that can be taken into account the next time they come back for planning permission,” said Barwell.

He suggested a ‘use it or lose it’ policy, whereby developers failing to build on land would be stripped of it or face heavy fines, would be “too aggressive” and may discourage building.

“You’ve got to put pressure on developers to say ‘why aren’t we going quicker now?’ But you don’t want to do it in such a heavy-handed way that the effect is to get fewer homes built,” he said.

Barwell stressed the need to “balance” the changes with pro-development policies. In his speech, the minister also said the planning system was steadily improving but that more could be done.

He said charging higher fees and ringfencing the money for planning departments was an option being considered.

Marnix Elsenaar, partner and head of planning at law firm Addleshaw Goddard, said the “stupid idea” could be “legally questionable”.

“Speeding up development is a laudable ambition, and a developers’ track record is clearly a relevant factor in decision making. But fundamentally, planning permission is gained on a site-by-site basis, and the suggestion as it currently appears would be legally questionable.”

“Planning permissions are not usually personal to developers, developers might sell sites on. It’s not always the applicant for planning permission that is building a site out.”

“Developers don’t not develop because they can’t be bothered, they don’t develop because the viability doesn’t work, because of rising construction costs, a skills shortage, things they can’t control. There’s no point trying to punish developers when there’s a whole range of other things the government should focus on.”

The idea is stupid, legally questionable and would result in fewer houses being built.

Though there is a problem with some housebuilders who wont build in any indivudual market above a certain rate  the main problem is with speculative property company that are not builders who sell land one which is then banked.  It wouyld simply encourage more ‘non developers’ into the market

How could a past record on building be material for those that dont build?

How would planning authorities measure it they would need records of ownership and completions by housing market area in the whole country.  These records dont exist.

Fundamentally it breaches the ‘de novo’ principle of each application being based on its own merits and not that of the applicant.  It opens the door to local authoritative refusing applications because they dont like the look of the developer.

Then waht is to stop the site being sold on to anyone the moment it has permission.

Also the NPPF is supposed to be based on clear yes or no rules – where is the yes or no rule hear.

This is a weak and dubious proposal.  Site Land value taxation – as always – is the obvious answer.