Big pictures are made up of lots of little observations. That’s pretty much what’s happening with the credit crunch at the moment. No one really seems to have a complete understanding of why the markets are so gripped with panic, but gripped with panic they are. We are not about to go to war, there isn’t an asteroid about to impact, we aren’t all dying of plague, and Spurs have started the season with their customary flourish and lie bottom of the table. In fact, in many ways, it’s quite a normal autumn. So why are banks in Europe and America going down like ninepins? And why has the housing market come to a complete standstill?
Here’s my fourpence worth. We have a big problem with land values. We’ve enjoyed (or some of us have) a 50 year bull market in building land which has caused a huge disparity between the value of ordinary land (i.e. designated as agricultural) and building land. Like, building land being around 250 times more expensive than fields. This is all because of planning restrictions, or what the Americans would call zoning. The value of building land has inflated slowly and steadily during this period, accelerating in the past fifteen years only.
The point about this bubble is that it’s been so slow to inflate that people haven’t recognised it as a bubble. On the contrary, it’s been seen as being “as safe as houses”. And people have got very wealthy by buying building land (and the houses that sit on it) and just sitting there and watching the bubble inflate. And banks have lent bucket loads of money, secured against these inflated house prices. The more the land goes up in value, the more mortgages get repaid, the more money the banks had to lend to the next generation wanting to ride this gravy train.
And the government in this country has stoked the fire by claiming that there is a housing shortage and that we have to build millions more houses in order to make them more affordable. There isn’t a housing shortage, any more than there is a road shortage, but if people say it loud enough and often enough, everyone gets drawn into the illusion.
Everything has conspired to make this particular bubble seem very real and very permanent.
And yet, and yet. Eventually something has to give. Eventually people started saying “enough is enough, I have better things to do with my life than pay 50% of everything I earn to service a mortgage for a crap house.” The worm started turning about four years ago. Just a few people, a trickle no more. It greatly affected the quieter districts of the country — it took me a year to sell a house in Norfolk back then. But then it spread. More and more people stopped believing in the inexorable rise of house prices and sometime last summer it tipped the balance and prices started falling across the board.
The image that keeps coming to mind is the tide. All these deals which made sense when the tide was coming in no longer make sense now the tide is going out. They are left exposed on the beach, the loans that supported them looking naked and ashamed. That is why it’s the banks that are copping it, because a huge chunk of banking over the past 50 years has been based on property values. At the moment, it’s the banks that took on the riskier loans which look exposed, but if the tide keeps going out and prices keep falling, then the so-called safe loans, made at 70% of value, start to become exposed too. As long as property prices keep falling, then more and more bank loans will loose their security. This is why the banking system is now in crisis. The more conservative banks are best placed to ride through the storm, but ultimately all banks could be at risk if the storm doesn’t pass.
So what we really need to bring back stability to the system is for house prices to stop falling. It doesn’t matter so much whether they fall by 15%, 30% or 43%, just so long as they stop falling.
We can already see a pattern emerging. The governments around the world are moving in to bail out the distressed loans. As a result, they may well end up owning lots of houses that these loans have defaulted on. Private houses will become council houses, and mortgage defaulters may find themselves council house tenants. Afterall, it makes no sense to throw all these people out of their homes: you’d end up with a million homeless families and a million empty homes, so they might just as well stay put.
There is a better solution to this crisis than buying up distressed debt. Instead of bailing out the banks that made these loans, the government could instead bail out the people who took on the loans and can no longer afford to service them. In effect, the government could and should become house buyers of last resort, so that if someone wants to sell a house and they can’t find any buyers, the government would have to take it off their hands at a reasonable price and then make it part of their council housing stock. The price paid for the house would have to reflect the rent achievable so that the government borrowing would be supportable. And the purchase could include a right-to-buy scheme so that in future the tenants could once again become property owners, should they wish.
In effect, government intervention could set a floor on how far house prices will fall. Once we have a floor, then stability can return to the markets, the banking system will pick up again, builders will be able to dust off their toolbags and financial meltdown will be avoided. We’ll still have a nasty recession because the housing bubble is over for a long time to come, and there are all manner of businesses (the banks being a prime example) that have built their business models on ever increasing land values.
But if we can at least stabilise house prices (and the government has the power to do this), then we can start to repair the damage that’s already been done. But it’s not going to happen until the government comes out of its state of denial about the nature of the housing crisis, and its fruitcake aim of building 3 million new homes by 2020. That is the sort of thinking that has caused this problem in the first place.
29 Sept 2008
Try Before You Buy
I don’t know why no one has thought of this before, but it’s taken an innovative Hereford-based green oak builder, TJ Crump Oakwrights, to pioneer the concept in the UK. Not only have they constructed a showhouse, but they offer it for weekend lets to prospective customers as well. Now you can get to live the dream, even if it’s only for a couple of nights.Ever wondered what Lutron Homeworks is like to use? Or whether you can get to grips with MVHR? Or underfloor heating? Or a body shower? Or how a boiling water tap works? Or a whole house audio system? What are these big glazed gables like at night time when the stars are out? Or in the morning when the sun shines through? Or just what it’s like to pad about barefoot in a huge hallway, with cathedral ceilings? Seeing this stuff on tele and in magazines is one thing. Staying in a top of the range show house puts a whole new perspective on it.
OK, I admit it, I was a guest. It was a favour in return for a speaking engagement at their open day. But I learned a lot and really enjoyed the weekend. Not surprisingly, the house is booked up months in advance. And also I am not surprised to find that here is a housebuilding business with a full order book.
23 Sept 2008
Craig Jones, the IceMan, Cometh
Spent the morning sitting in on a conference at Bath University on carbon footprinting. God, is it complicated! Not only is the available data very patchy, but there seem to be countless ways of accounting for it. By way of example:
• You have a choice of whether to count embodied energy, or carbon dioxide or all greenhouse gases (known as CO2e for CO2 equivalent). Each gives a slightly different result
• You can measure direct emissions (Scope 1), adjust for different emissions from electricity production (Scope 2), or count all the different emissions from pre-production work or imports (Scope 3)
• Products can be assessed cradle-to-factory gate, or cradle-to-site or cradle-to-grave (which includes their ultimate disposal)
• You can choose to include or exclude a) feedstock energy, which is the energy embedded in plastics which might otherwise have been burned as oil and/or b) sequestered energy, which is energy locked into timber or plant matter which might have rotted or burnt if it hadn’t been used in a building.
And this just covers the built environment. Leave that behind, and you move into the realm of ecological footprinting where everyone starts to talk in units of global hectares, which leads to the One Planet Living concepts. I came away with the impression that there an awful lot of academics out there beavering away at ever more complex algorithms, and that the rest of the world knows very little about any of it.
The star of the show for me was Craig Jones, who works at Bath’s Sustainable Energy Research Unit. He is the man behind the Inventory of Carbon & Energy or ICE database, which is the only place I know of where you can look up embodied energy data on building materials, without having to pay for it. Craig is involved in analysing published data from a variety of sources around the world and trying to make sense of it for the UK market, and he and his boss Professor Geoff Hammond have decided to make the fruits of their research available online as a public resource. Consequently, it gets very widely referred to by sustainability consultants and used as the basis for a lot of buying decisions. In fact, one delegate told us that every single water company in the land now refers to ICE when specifying their future investment programmes.
Craig gave a twenty-minute presentation, which included a summary of his methodology. Which, if my notes serve me correctly, is:
• CO2, not CO2e (it’s not usually that different)
• Cradle to Gate. He ignores transport costs, but reckons they rarely amount to more than 5% to 8% extra
• Feedstock energy gets included
• Sequestered energy in timber gets excluded
His logic for excluding sequestered CO2 wasn’t entirely convincing. What he said was that whilst it was true that using timber in buildings did effectively lock away carbon dioxide for the duration of the building’s life, he felt that there were still many unresolved issues with what happens to the large amounts of timber waste which doesn’t get used on site. He was happy to accept that it’s a contentious area. He did however admit that much of the timber data is sketchy and he relied on work done in North America, which puts the embodied energy of timber at a surprisingly high figure, mostly to do with the energy involved in kiln drying. I’ve read some of this stuff and have to say it gets bogged down on whether the kiln drying process uses fossil fuels or waste wood chips at the sawmill. Some sawmills do one thing, others do something else. You can see how this stuff ends up going around in circles.
Despite all the problems, Craig (the IceMan) is now becoming identified as the UK’s repository of information on embodied energy, and all because he’s gone open source. A lesson here for others. He’s obviously put a huge amount of work into compiling the database and should be congratulated for creating so valuable a resource. What needs to be done now is some comparative studies of different construction methods using the ICE data as a reference.
• You have a choice of whether to count embodied energy, or carbon dioxide or all greenhouse gases (known as CO2e for CO2 equivalent). Each gives a slightly different result
• You can measure direct emissions (Scope 1), adjust for different emissions from electricity production (Scope 2), or count all the different emissions from pre-production work or imports (Scope 3)
• Products can be assessed cradle-to-factory gate, or cradle-to-site or cradle-to-grave (which includes their ultimate disposal)
• You can choose to include or exclude a) feedstock energy, which is the energy embedded in plastics which might otherwise have been burned as oil and/or b) sequestered energy, which is energy locked into timber or plant matter which might have rotted or burnt if it hadn’t been used in a building.
And this just covers the built environment. Leave that behind, and you move into the realm of ecological footprinting where everyone starts to talk in units of global hectares, which leads to the One Planet Living concepts. I came away with the impression that there an awful lot of academics out there beavering away at ever more complex algorithms, and that the rest of the world knows very little about any of it.
The star of the show for me was Craig Jones, who works at Bath’s Sustainable Energy Research Unit. He is the man behind the Inventory of Carbon & Energy or ICE database, which is the only place I know of where you can look up embodied energy data on building materials, without having to pay for it. Craig is involved in analysing published data from a variety of sources around the world and trying to make sense of it for the UK market, and he and his boss Professor Geoff Hammond have decided to make the fruits of their research available online as a public resource. Consequently, it gets very widely referred to by sustainability consultants and used as the basis for a lot of buying decisions. In fact, one delegate told us that every single water company in the land now refers to ICE when specifying their future investment programmes.
Craig gave a twenty-minute presentation, which included a summary of his methodology. Which, if my notes serve me correctly, is:
• CO2, not CO2e (it’s not usually that different)
• Cradle to Gate. He ignores transport costs, but reckons they rarely amount to more than 5% to 8% extra
• Feedstock energy gets included
• Sequestered energy in timber gets excluded
His logic for excluding sequestered CO2 wasn’t entirely convincing. What he said was that whilst it was true that using timber in buildings did effectively lock away carbon dioxide for the duration of the building’s life, he felt that there were still many unresolved issues with what happens to the large amounts of timber waste which doesn’t get used on site. He was happy to accept that it’s a contentious area. He did however admit that much of the timber data is sketchy and he relied on work done in North America, which puts the embodied energy of timber at a surprisingly high figure, mostly to do with the energy involved in kiln drying. I’ve read some of this stuff and have to say it gets bogged down on whether the kiln drying process uses fossil fuels or waste wood chips at the sawmill. Some sawmills do one thing, others do something else. You can see how this stuff ends up going around in circles.
Despite all the problems, Craig (the IceMan) is now becoming identified as the UK’s repository of information on embodied energy, and all because he’s gone open source. A lesson here for others. He’s obviously put a huge amount of work into compiling the database and should be congratulated for creating so valuable a resource. What needs to be done now is some comparative studies of different construction methods using the ICE data as a reference.
22 Sept 2008
More on those pesky PD Rights
The London Homebuilding & Renovating show has been and gone. We could have chosen a better week. AIG failing, Lehman Bros failing, HBOS becoming a distress takeover for Lloyds TSB, stories of thousands of job cuts up and down the land: it doesn’t exactly inspire confidence in the housing market. It’s funny, but turmoil always seems to come in the second or third week in September.
Despite all this, there were still many brave souls who made it to ExCel and I spent just as much time talking as ever, hearing some interesting stories along the way.
One topic of conversation that kept coming up was the aforementioned changes to our Permitted Development Rights. Everyone at least seem to have heard about them, which I suppose shows that the government has at least got the message out that something is afoot. But in truth many of the show visitors thought that these PD Rights Thingies were being introduced for the first time as a major concession — i.e. they hadn’t realised that they have always existed and are simply being amended.
I had an interesting conversation with Hugo Tugman of Architect Your Home who finessed me on some of the changes. One thing I hadn’t quite groked before is that the PD Rights for extensions and loft conversions have been separated, which is good news for lots of people. Before, you got 70m3 of extension out the back or of 50m3 of additional roofspace. If you used up 50m3 building a small extension, any roof changes you might later plan would require planning permission. That’s no longer the case. There’s an allowance for the extension AND the loft.
However, there are lots of little fiddly bits which have crept in as well which need to be deconstructed. The roof extension can no longer be built up directly off the back wall, you now have to step it back 200mm from the eaves. Solar panels are acceptable without planning permission, provided they don’t protrude beyond 150mm above the roofline (they shouldn’t). Even more good news for Good Lifers is that garden buildings can now include hen houses, pigstys and beehives. I’m sure the neighbours will appreciate that one.
Finally, there is something in here about off-street parking bays. You can still have them but if the area covered is greater than 5m2 (i.e. a very small car), then the materials have to be porous, or a soakaway has to be provided.
Despite all this, there were still many brave souls who made it to ExCel and I spent just as much time talking as ever, hearing some interesting stories along the way.
One topic of conversation that kept coming up was the aforementioned changes to our Permitted Development Rights. Everyone at least seem to have heard about them, which I suppose shows that the government has at least got the message out that something is afoot. But in truth many of the show visitors thought that these PD Rights Thingies were being introduced for the first time as a major concession — i.e. they hadn’t realised that they have always existed and are simply being amended.
I had an interesting conversation with Hugo Tugman of Architect Your Home who finessed me on some of the changes. One thing I hadn’t quite groked before is that the PD Rights for extensions and loft conversions have been separated, which is good news for lots of people. Before, you got 70m3 of extension out the back or of 50m3 of additional roofspace. If you used up 50m3 building a small extension, any roof changes you might later plan would require planning permission. That’s no longer the case. There’s an allowance for the extension AND the loft.
However, there are lots of little fiddly bits which have crept in as well which need to be deconstructed. The roof extension can no longer be built up directly off the back wall, you now have to step it back 200mm from the eaves. Solar panels are acceptable without planning permission, provided they don’t protrude beyond 150mm above the roofline (they shouldn’t). Even more good news for Good Lifers is that garden buildings can now include hen houses, pigstys and beehives. I’m sure the neighbours will appreciate that one.
Finally, there is something in here about off-street parking bays. You can still have them but if the area covered is greater than 5m2 (i.e. a very small car), then the materials have to be porous, or a soakaway has to be provided.
16 Sept 2008
PD Rights: Damp Squib
So the much talked about revision of Permitted Development Rights arrived in our laptops last week, amid much talk about slashing the need for planning permission and the like. But when you actually get to look at the small print, there is precious little that has changed from the old version.
It seems that the way of calculating how much extension you can build without applying from planning permission has switched from working it out in cubic metres to having maximum dimensions. And the net result is not really very different — it’s just a different way of working out the same thing.
So much for a bonfire of the regulations.
However, planning guru Ken Dijksman reckons he spotted an error. Outbuildings can cover 50% of the garden (no change there) but there is no longer a requirement for them to be situated more than 5m from the back of the house. He writes: “it means that if you have a large garden, (even in the greenbelt), as long as you do not cover over half the curtilage, you can build a huge amount of additional accommodation at single story right up to your house, as long as they are outbuildings.”
It seems that the way of calculating how much extension you can build without applying from planning permission has switched from working it out in cubic metres to having maximum dimensions. And the net result is not really very different — it’s just a different way of working out the same thing.
So much for a bonfire of the regulations.
However, planning guru Ken Dijksman reckons he spotted an error. Outbuildings can cover 50% of the garden (no change there) but there is no longer a requirement for them to be situated more than 5m from the back of the house. He writes: “it means that if you have a large garden, (even in the greenbelt), as long as you do not cover over half the curtilage, you can build a huge amount of additional accommodation at single story right up to your house, as long as they are outbuildings.”
1 Sept 2008
On the Eurostat Population Predictions
Last week, an august body known as Eurostat, made some rather bold predictions. Eurostat is the statistics office of the European Union and it took it upon itself to undertake some guesswork about what would happen to European populations over the next 50 years.
Their published results are remarkable. Not in terms of the overall population of the 27 states making up the EU, which is set to increase from a current 495 million to 520 million by 2035 and thereafter to start declining to around 505 million by 2060. The remarkability concerns the population totals for individual countries which are hugely variable. Most of the relatively poor accession states will experience dramatic population declines, of between 18% (Poland) and 28% (Bulgaria). More surprising, Germany will loose 12 million people, 14% of its current population and cease to be the largest state within the EU. That rather weighty burden will be passed to the UK, which, it is anticipated, will grow from around 61 million today to 77 million in 2060.
There doesn’t appear to be much in the way of supporting evidence for all this. The population changes have little to do with birth/death rates which will remain broadly neutral and a lot to do with patterns of migration. I can’t help thinking that what they have done is simply to have taken current trends and projected them forward far into the future. But this is a bit like saying because it’s windy today, it will still be windy in three weeks time. In other words, it’s all just guesswork, based on extrapolation of the near past into the far future.
But then another thought occurs. In terms of planning and the built environment, population projection is fundamental. So maybe we should take it seriously.
And then another thought. Why should we take this lying down? Who says we have to house 16 million extra people by 2060. Or Germany has to lose 12 million, or Bulgaria 2 million? Would it not be more sensible to pursue policies which encourage population stability? Why are we acting as though population is stuff that just happens to us and our job is to passively react to it?
Then another subversive thought. An extra 16 million people in the UK equates to around 8 million new homes at current household formation rates. Divide that by 50 (for the number of years between now-ish and 2060) and you get 160,000 new houses a year, just about the amount we managed to build before the credit crunch had other ideas.
Or, put another way, 8 million new homes is around a thousand eco towns of 8,000 homes apiece. Assuming that nearly all of these 16 million extra people would want to live in the South East, a region which measures approx 32,000 square miles (that’s 200 x 160), that means there would be nowhere south of Derby where you’d ever be more than six miles from an eco-town. That’s a comforting thought.
But what worries me even more is what is going to happen to Germany in this Eurostat scenario, where there will be approximately six million empty homes. And thousands of kilometres of empty autobahns. And all those spiffingly fast trains with no one on them. Germany already has a built infrastructure capable of handling a population nearly double what it is now. For what purpose? As a manufacturing powerhouse, Germany in 2060 will be run by robots and Germans will be largely redundant. Has anyone asked them how they feel about this future? Has anyone asked us?
I know it’s uncool to talk about optimal population levels, but without a population strategy, what is the point of having a planning system? That’s the sixth question mark in this blog entry: that’s enough for one evening.
Their published results are remarkable. Not in terms of the overall population of the 27 states making up the EU, which is set to increase from a current 495 million to 520 million by 2035 and thereafter to start declining to around 505 million by 2060. The remarkability concerns the population totals for individual countries which are hugely variable. Most of the relatively poor accession states will experience dramatic population declines, of between 18% (Poland) and 28% (Bulgaria). More surprising, Germany will loose 12 million people, 14% of its current population and cease to be the largest state within the EU. That rather weighty burden will be passed to the UK, which, it is anticipated, will grow from around 61 million today to 77 million in 2060.
There doesn’t appear to be much in the way of supporting evidence for all this. The population changes have little to do with birth/death rates which will remain broadly neutral and a lot to do with patterns of migration. I can’t help thinking that what they have done is simply to have taken current trends and projected them forward far into the future. But this is a bit like saying because it’s windy today, it will still be windy in three weeks time. In other words, it’s all just guesswork, based on extrapolation of the near past into the far future.
But then another thought occurs. In terms of planning and the built environment, population projection is fundamental. So maybe we should take it seriously.
And then another thought. Why should we take this lying down? Who says we have to house 16 million extra people by 2060. Or Germany has to lose 12 million, or Bulgaria 2 million? Would it not be more sensible to pursue policies which encourage population stability? Why are we acting as though population is stuff that just happens to us and our job is to passively react to it?
Then another subversive thought. An extra 16 million people in the UK equates to around 8 million new homes at current household formation rates. Divide that by 50 (for the number of years between now-ish and 2060) and you get 160,000 new houses a year, just about the amount we managed to build before the credit crunch had other ideas.
Or, put another way, 8 million new homes is around a thousand eco towns of 8,000 homes apiece. Assuming that nearly all of these 16 million extra people would want to live in the South East, a region which measures approx 32,000 square miles (that’s 200 x 160), that means there would be nowhere south of Derby where you’d ever be more than six miles from an eco-town. That’s a comforting thought.
But what worries me even more is what is going to happen to Germany in this Eurostat scenario, where there will be approximately six million empty homes. And thousands of kilometres of empty autobahns. And all those spiffingly fast trains with no one on them. Germany already has a built infrastructure capable of handling a population nearly double what it is now. For what purpose? As a manufacturing powerhouse, Germany in 2060 will be run by robots and Germans will be largely redundant. Has anyone asked them how they feel about this future? Has anyone asked us?
I know it’s uncool to talk about optimal population levels, but without a population strategy, what is the point of having a planning system? That’s the sixth question mark in this blog entry: that’s enough for one evening.
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