27 Oct 2012

Bonfire of the Building Regs?

Building regs front page news. Here. That's twice in one year, after the Conservatory Tax fiasco back in April. What's going on?

It's hard not to conclude that it's the work of the headline-grabbing tea party tendency which seems to have taken over the Treasury, the rip-up red tape at any cost brigade.

In principle, there is nothing wrong with turning the building regs into a political football. In fact, I welcome it as it's actually a fascinating area. The regs are constantly under review in any event, and that doesn't always mean they get stricter and more expensive. I have sat in on a dozen or so government-sponsored meetings in the past five years which were seeking input from the selfbuild/DIY sectors, with a view to simplifying the building regs. What struck me after all this is how slowly the wheels turn and how good intentions very quickly get watered down. If there really is to be a bonfire, it will probably take an age to catch fire and we won't see its effects for about five years. Long after the next general election.

On the other hand, there's no doubt that the heavy hand of state intervention is writ large across our building activities and, thanks to this, we now have building standards that are far in advance of what we were required to meet even in my building lifetime (which began in 1980). Sometimes the regs are intrusive and seem petty, but mostly everyone is happy to accept them as they do make for better, safer homes. And if everybody has to comply, then there is no feeling of being cheated.

But in practice, any change in the building regs causes problems and upheavals. They are not easy to implement and they take years to bed in. If the government chooses to turn back the clock and make our building standards less exacting — and cheaper — that's its prerogative. But the way to do it is to bring it in as a fait accompli, not to announce to the world at large that it's undertaking a review. That's just political posturing which is likely to cause a good deal of confusion. The one thing it won't do is to "Get Britain Building" or some such silly nostrum. If anything, it's likely to make people pull projects they might otherwise have been considering on the grounds that they might just save a few quid.

24 Oct 2012

Do we really need any new homes?

There is a an unspoken problem at the centre of our housing debate. Are we short of new homes? Almost every commentator states that we are and that we therefore have a housing crisis on our hands. But the evidence for it is thin on the ground and what there is is almost always constructed from data which is only partially relevant.

Like the length of council house waiting lists, which is long and growing longer, but this only tells us the demand for council/social housing. Which, in turn, tells us that either private housing is too expensive or social housing is too cheap, but it doesn't really inform us as to whether there is a shortage of housing overall.

Or rents. Rents are going up in the South-East, having been pretty stable for many years. The reason seems to be that the population is increasing, private housing is too expensive to buy, mortgage finance is difficult to come by and so private renting is the only option for many. The squeeze is on, for sure, but this still doesn't lead to the conclusion that we are short of houses.

For to be short of houses, we have to have some notion of how many houses there should be. We don't. The nearest we come to it is something called the rate of household formation, popularly believed to be around 250,000/annum in the UK as a whole. This is used as a yardstick against which to measure our pitiful attempts to match it.

In the 20 years I have been writing about housing, we have never got close to this target. It's only ever been an aspiration. In the Blair boom years, we achieved about 180,000 new homes a year: now it's down to around 100,000. In the past five years, we have fallen short of this notional target by an accumulative 750,000 homes, so you'd think house prices would have rocketed as a result. Which, of course, they haven't.

Which perhaps in turn tells us that the notion of a rate of household formation is bunkum. Households form when they can afford to. When times are tough, they hang together. A household formation rate is a nebulous idea which may well be derived from historical data but it tells us nothing about the situation as it now stands.

To have a housing shortage, you have to have something more concrete to measure it against. Like what? Well, some sort of housing standard such as number of bedrooms per head of population. Or national housing floor area, or some such Domesday Book type data (which the national census doesn't seem to collect). If we had such data to hand, we could then set a standard — such as there must be 1.5 bedrooms for every man, woman and child living in the UK — and then we could judge whether or not we have a shortfall.

Without such an approach, there is really no way of knowing whether we have too many or too few homes, anymore than we might know whether there is a road shortage or a supermarket shortage. Relative to what?

The only hard data we actually have are house prices which are very efficient at allocating resources, so that supply and demand are kept in balance. For every buyer who thinks prices are too high, there is a seller who think they are too low. Do the sellers thus conclude there is a housing surplus? No. So why do buyers insist there is a shortage? Because they'd like to see lower house prices, naturally.

But the sellers — largely the elderly half of the population — want house prices to stay high to pay for their retirement. They certainly don't want them to crash. And, surprise, surprise, it's the oldsters who are mostly dead set against new building in their area. They are the classic NIMBYs. They are not stupid.

So in a nutshell, the young would like there to be more homes so that the prices might inch down a little, whilst the sellers are perfectly happy with what we've got, thank you. That's the essential tension between the young and the old which creates our housing market. It doesn't however follow from that that we have a housing shortage.

22 Oct 2012

What David Cameron should have said

Imagine going to fill up the family car at the garage and being confronted with a menu.

"Buy your first 10 litres for £2.00 and you can fill up the rest of the tank at just £1.15 per litre." Hmm, that sounds good. Or does it? Whilst you are trying to figure out if this is a good deal or not, you eyes alight on another option.

"Get your car serviced here and you can get 30p per litre off your petrol for six months." Excellent, you think. Except you now start wondering if its 30p off the first 10 litre price or the lower, follow-up price. Maybe it doesn't matter. Then there's another option.

"Pay by direct debit and we'll knock 5% off your annual bill." Gosh, this does sound good. A reward for loyalty. The more I spend, the more I save. You start to feel that you could spend your whole life cruising the motorways for free.

So you stand there on the forecourt not really knowing whether you are coming or going. You just wanted to fill up with petrol and you've ended up taking an IQ test and now you have a horrible feeling you've just failed.

I suspect you may know where this is going. Petrol and diesel on our forecourts may be horribly expensive but at least their purchase is a simple matter. You pay the price advertised on the sign.

Not so our domestic fuel bills. The menu of options described above is only the beginning for our gas and electric utilities. Most of them have 30 or 40 different tariffs, each with its own merits. When David Cameron made his off the cuff comment in the Commons last week about forcing energy companies to offer customers their lowest tariff, he stirred up a hornet's nest. Because the way fuel bills are constructed, it's almost impossible to tell what the best deal is. Price comparison websites can give you an indication of what would have been the best deal for you in the past, but have no way of knowing what the future deals will be, as the prices can and will change.

Of course, David Cameron has form on issues like this. So keen is he to appear to be a man of the people that he is given to making what he thinks are popular gestures which then turn out to be ill thought through. Or not thought through at all.

Had he called for energy bills to be simpler to understand, he might have been onto something. Had he demanded that the ludicrous two-tier tariffs, that all utility companies still base their billing on, be replaced with a petrol-pump style single price per kilowatt hour, he would have been making progress for all of us. At a glance we would be able to see who is offering what, and where we should place our money.