“The rise in income and wealth inequality that began from the 1970s onwards has become a housing problem in the end”

Posted on April 25, 2014 by dnmufc

What is the housing crisis in the UK?

The housing crisis is a crisis of affordability. The biggest part of the cost of living crisis isn’t gas bills or food bills, it’s your rent or your mortgage. Rents have increased, and prices have increased in the South-East. Elsewhere prices have fallen and people are in negative equity. It’s issues with housing that are probably going to keep people awake at night in worry more than anything else. Beyond the cost, it is also the unpredictability, the fear and lack of any certainty about what’s going to happen to you depending on how you’re housed. Many people are not particularly well housed. Many don’t have much of an idea of how they’re going to be housed in three or four or five years time.

What are the roots of the problem?

Housing was the one of the big three issues – the others being education and health – that the UK didn’t sort out in terms of having a decent state support; a control on the quality of what happened and a control on people profiteering. For instance we don’t allow people to make massive profits, or largely we haven’t, out of education. Private schools are non-profit making. Housing, on the other hand, is a massive source of profit-making.

The rise in income and wealth inequality that began from the 1970s onwards has become a housing problem in the end. If you have one part of society becoming wealthier and wealthier, and everybody else sees their average income drop and their wealth levels fall to a lower proportion of national, it gets expressed in housing.

The immediate crisis is what’s happened since 2008. And that’s quite an incredible one. We’ve seen a tremendous shift to private landlords. Huge profits; £245 billion in the last five years net gains for private landlords in Britain. Rent going up, homelessness going up and people becoming more precarious – all very rapidly. One in 4 children in Britain are now living in a house with a private landlord.

Can you elaborate on the connection between housing and economic inequality?

It becomes harder and harder to house a population when you got incomes going up at the top and incomes staying stagnant in the middle and going down at the bottom. The bottom half of the population simply cannot afford to be housed. They have no spare money or power to do much about housing. People at the very top of society, the richest 1%, have so much money now that they have a problem of where to put it. Which is why people end up buying houses in Kensington and leaving them empty. It’s hard to find any society on earth that manages to house itself well when it does this to its income structure. It’s an expression of widening income inequality, which is partly why the issue is quite hard to solve and why we have a massive housing benefit bill.

How have the Help to Buy policy, Quantitative Easing and low interest rates contributed to the housing crisis?

Help to Buy is all about holding house prices up. It’s getting banks to lend to people they would not otherwise lend to. The buyer guarantees the first 5% and the taxpayer then collectively guarantees the next 20%. So we’ve taken out a £130 billion liability on the housing market. The bulk of spending in the last budget was all about holding the housing market up to 2015. So it’s quite clever of Osborne to pretend he’s going to carry this thing on [to 2020].

Low interest rates are interesting, in a way they’ve helped landlords because landlords can now borrow easier than they could before. Landlords of course can claim tax relief on borrowing unlike buyers, so they’ve made it easier for landlords to get hold of money. So now if you’ve found yourself at the bottom end of the first-time buyer’s market in London you’re actually competing not just with other first-time buyers, but with landlords trying to buy exactly the same flat because they want to make money renting it to you rather than you slowly buying it.

QE is the elephant in the room when it comes to wealth polarisation. The Bank of England itself has shown how the benefits of QE have gone largely to the top 10% of the population.

Is housing an issue only in London or is it a nation-wide crisis?

It exists everywhere in one form or another. One problem with London being so expensive is that it makes what are actually really expensive prices elsewhere not look expensive. But people still cannot afford something that’s 5 times their income just because in London it’s 12 times. London makes it worse everywhere by stopping people realising it’s bad. You’ve also got areas where prices have fallen a long way from what they were in 2007; for instance, the whole of Wales. So you have people trapped in their homes with little sympathy for them because elsewhere prices are rising.

Is increasing the housing supply the solution? Should we simply build more?

If you just build on its own the houses will be bought by people who can afford to buy the houses, so it won’t solve the problem. We are becoming more and more unequally distributed in the housing stock we’ve got. If we simply added more quickly, more of it would just be bought by people from abroad and by people who need a second or third home. That’s the problem with just building. We do not need to build more for the people who are currently here. For the people who are currently here we need to make better use of what we already have.

However, London does need to be build. It’s ridiculously shaped for a world city; it needs to build upwards. But the main debate about supply we should be having is about immigration. There is one good reason to build in Britain: we should expect high rates of immigration for many years to come. At the moment everybody’s in favour of building while nobody’s in favour in immigration. We’ve managed to have this incredible debate where we don’t talk about the prime reason why you’d increase your housing supply, which is more people. It’s really quite incredible that we can talk about housing without talking about immigration. The main reason why I’m in favour of some building is I hope not to be living in an economic dustbin in future. You know you’re not in an economic dustbin when people keep on coming to live alongside you where you live. So I expect, I hope, net immigration to continue and we need to build for that. But which politicians is ever going to say we are partly needing to build new homes for the immigrants we are going to come if our economy is successful in future?

You mentioned that our housing stock is becoming more unequally distributed. How do we use our housing more efficiently?

We’ve made London housing the safest investment for people – often dodgy people with lots of money to hide. We need a decent property tax like so many other places in the world, including many states in the US, so that people in the most expensive properties are paying at least the same tax as other people. Ireland now as a property tax of 0.18% which rises to 0.25% of the value of your property a year if it worth over one million euros. To get towards that I would take the lid off council tax. You take the top band, and then for the people in the top-half of the top band, create another band. For people in the top half of that band, create another band, and so on. I get up to band N for the Sultan of Brunei (who has a large home in Kensington). In this way you’d raise a lot of money. If you still want to own a really expensive house you can – it’s not a Stalinist policy that I am advocating – but your property tax would at least be proportionate to the value of the property.

Barriers to policy? Why isn’t anything being done?

A lot of people, say in the top 20 or 25% of the wealth distribution in Britain think that housing is worth far more than it is. They haven’t worked out that there isn’t going to be anybody to buy at the values that they believe it’s headed. They think it’s their pension, they think it’s their children’s future inheritance. So nothing happens because of optimism at the top.

How is this going to play out?

We’ll get a crisis is the most likely thing. At some point property in Mayfair won’t go up. If you run it forward 10 years, we run out of super-rich people coming in. If you run it for 20 years you have to have aliens arrive in spaceships to buy at the super inflated prices carrying bars of platinum with them from their home planets! Just take the house prices and multiply them forward 10 or 20 years, and then say: ‘so who’s going to have that money?’ I don’t believe super-rich aliens from other planets will arrive to buy London homes at future vastly elevated prices so the most likely thing is the beginnings of a crisis turning into a disaster, sadly, because of our lack of organisation and because of our politics.

Note: This article gives the views of the interviewee, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

Danny Dorling is a British social geographer and is the Halford Mackinder Professor of Geography of the School of Geography and the Environment of the University of Oxford. He was previously a professor of Geography at the University of Sheffield. He has also worked in Newcastle, Bristol, Leeds and New Zealand, went to university in Newcastle upon Tyne, and to school in Oxford. Much of Danny’s work is available open access

An open letter to the Daily Mail…

Posted on April 23, 2014 by dnmufc

Very well put letter to the Mail on Sunday

squidgetsmum

The Daily Mail chose today to celebrate the resurrection of Jesus, champion of the oppressed, by publishing this article today. Here’s my response.

Dear Daily Mail,

I’ve got a little boy. His name is Isaac, and he’s nearly three. Like any little boy, he loves cars, balls, and running around. He’s barely ever still.

A few days ago though, he was. I took him to the supermarket to spend his pocket money, and we passed the donation basket for our local food bank. It was about half full – nothing spectacular, in fact, mostly prunes and pasta – and he asked what it was. As simply as possible, I tried to explain that it was for people to give food for other people who couldn’t afford it.

This affected his two year old brain fairly deeply. After a lot of thought, he decided to spend a little bit of…

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People want to work: providing tailored support, rather than extra responsibilities, is key

Posted on April 23, 2014 by dnmufc

Qualitative research into the impact of welfare reforms have found that they led to an erosion of resilience and increased sense of powerlessness, often making people less able to get into work. Demanding more and more from people whose access to support has been drastically cut won’t help the government’s welfare reforms to succeed in their objectives, argues Liam Crosby.

DWP Ministers have been out in force recently, announcing a raft of further changes to the social security system. From fraudsters having to sell their homes to further restrictions on migrants’ benefits, it’s the sort of stuff that thrills large parts of the British population (though even the Telegraph couldn’t help pointing out the irony in a week where Minister Miller continues to dominate the headlines).

These are just the latest policies being proposed in the coalition’s wide-ranging, flagship welfare reform programme. Many people would agree with the stated aims of the reforms – ”simplifying the system and making work pay” – and many organisations providing benefits advice and employment support at the frontline have been calling for this for years.

But in order to ensure that the laudable objectives of a system that’s simple, fairer and supports people to work become reality, it’s essential to understand the impacts that ongoing changes mean for people. Some of the new changes – including that jobseekers will need to bring a CV, email address and Universal Jobsmatch account to their first meeting with an adviser – are sensible and achievable for most people but could appear as another unmanageable disruption for many others.

To understand the overall impacts of the changes to benefits on people in our community, at Community Links we have undertaken in-depth qualitative research into how people are affected – not just financially but also in terms of employment opportunities, family life, their health, wellbeing and resilience. We then published a research report of our main findings.

For a few of the people who we spoke to, the reforms had encouraged positive moves into work: take Shanti, who having lost £300 per week as a result of the benefit cap (she lives with five children in a three bedroom house) successfully made the move into work. She felt positive about this change: “I pushed myself to overcome all the bad stuff. Sometimes I wish I had done this ages ago”.

But for most people who we spoke to, the cumulative effect of several simultaneous changes has left them less, rather than more, able to cope. Many of the research participants were attempting to save money by missing meals and leaving homes unheated. The consequent degradation of physical and mental health was noticeable, with several people reporting depression and anxiety. People were fearful of rent arrears and eviction as securing housing became people’s top priority. Some turned towards crime including stealing food.

Altogether, these impacts led to an erosion of resilience and increased sense of powerlessness, which made people unable to make the important decisions which might get them into work. These findings were confirmed by focus groups with employment advisers at Community Links and other stakeholders, who highlighted how people having to deal with immediate and severe changes to their income and living situation became “shackled” and immobilised by the pressure, and unable to focus on their job search. Our analysis showed three clear reasons for these impacts and the consequent erosion of resilience:

A significant, and sometimes overwhelming, cumulative financial impact of the different reforms happening at the same time.
Poor communication, particularly of how the reforms fit together, resulting in a worrying lack of understanding
A lack of compassion and inadequate support to help navigate the reforms left people feeling unable to identify the best courses of action to make positive improvements.
Take Mr Okafor. He has worked much of his life in an Airport, and would have no problem writing a CV. As part of the welfare reforms, he was moved from Income Support to Jobseekers Allowance; he’s also been affected by changes to his housing benefit and council tax – and soon his Disability Living Allowance will also change. Together the reforms have decreased his income from £205 per fortnight to £140 per fortnight. This has had serious broader affects – he has cut back on food, struggled to pay his rent, he experiences stress and anxiety.

Mr Okafor is keen to work and was attempting to search for jobs, but his benefits were sanctioned when a jobcentre adviser decided he wasn’t looking “properly”. He says this is because he was not helped to know what to do by the jobcentre staff; in spite of the fact that he hasn’t used a computer much before, he was expected to get on with searching online (a situation that isn’t all that uncommon). Not surprisingly, he feels unsupported: “Jobcentre staff say it’s down to you to look for a job”. He doesn’t think that there has been adequate communication and feels confused by different things changing at the same time.

Iain Duncan Smith has recently said that the new measures are about “making sure that if someone fails to meet their responsibilities, they will face the consequences”. But this depiction of benefit claimants as irresponsible layabouts is wrong. People are keen to make change, they just face barriers – which the confused and complicated delivery of the recent reforms have often entrenched. Mr Okafor, for example, comes into Community Links almost every day to phone employers, DWP and Newham Council in order to try to sort out his situation. His problem isn’t that he’s irresponsible; it’s that he’s been hit by financially devastating changes, without being told how they fit together or supported to navigate them.

Demanding more and more from people whose access to support has been drastically cut won’t help the government’s welfare reforms to succeed in their objectives. We need to make sure that future changes to social security take proper account of people’s situations, and provide adequate financial and advisory support to enable those who can to make the changes that they are so keen to do.

Note: This article gives the views of the authors, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

About the Author

Liam Crosby is Policy and Public Affairs Officer at East London social action charity Community Links, where he focuses on welfare reforms and welfare-to-work. He tweets @liamjcrosby

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We need to ensure that young Londoners gain the skills and experience that will be of value to them in the labour market

Posted on April 16, 2014 by dnmufc

While there is evidence that suggests people with no or low qualifications should benefit from living in more successful urban labour markets, where employment rates and wages tend to be higher for low-skilled workers relative to low-skilled workers elsewhere, this isn’t the case in London. Ceri Hughes discusses research that shows that young people with low skills in London are at a particular disadvantage.

Each year, ambitious young people move to London to begin their careers, joining a relatively young and highly skilled resident population. There are advantages to working in London, particularly for young, mobile and highly ambitious people for whom the city can serve as an ‘escalator’ enabling them to progress further and faster than their peers elsewhere.

But not everyone benefits from living in London. Our new report finds that it is the lower skilled that particularly struggle to find work in London. Young people with lower skills have poorer employment prospects. This applies across the UK, but the distinctive characteristics of the London workforce – the ready supply of a large number of young highly skilled people – puts young people with low skills in London at a particular disadvantage.

In 2011, the unemployment rate amongst young people with a few GCSEs and even those with a few A-levels was much higher than the rates for young people with similar qualifications in the rest of England (see Figure 1). Young people with five or more GCSEs (A*-C) registered an unemployment rate of 28 per cent, compared to 19 per cent in the rest of England.

Figure 1: Youth unemployment rates (%) by qualification level

Source: Census 2011, young people aged 16-24 including full-time students; qualifications listed are examples and equivalent qualifications are also included in each band; data on the level of apprenticeship is not available; other qualifications include some vocational qualifications and foreign qualifications.

Yet, evidence suggests that people with no or low qualifications should benefit from living in more successful urban labour markets, where employment rates and wages tend to be higher for low-skilled workers relative to low-skilled workers elsewhere. Why isn’t this the case in London?

Why do young people with low-skills struggle to get into work?

In part, the high rates of youth unemployment amongst young people with low skills reflect wider challenges that young people across the UK must contend with, including limited access to careers advice and guidance, too few apprenticeship opportunities and variations in the quality and availability of local support services.

But there are also some distinctive factors that may explain the high levels of youth unemployment in London. Local concentrations of unemployment are related to the characteristics of the local population, as well as varying demand for labour. For example, there are high levels of poverty and deprivation in London and the location of the highest rates of youth unemployment broadly mirrors the distribution of deprivation across the city. This matters because many routes into skilled work require young people to undertake unpaid work placements or at least to survive on low wages.

A wider explanation then is that young people with low skills are struggling to compete with other highly skilled people. There are many jobs in London, but where the overall supply of workers exceeds demand then lower skilled, less experienced workers are likely to suffer.

“Bumping down” in the labour market?

The working-age population of London increased by more than 950,000 between 2001 and 2011, but the number of jobs increased by only 229,000 (see Table 1). In addition, the number of people of working-age with low skills in London decreased by almost 300,000 over the last decade, whilst the number of people with a degree-level qualification or higher increased by over 700,000. In all, this means that there are likely to be more higher skilled workers competing for fewer jobs. And this has implications for the lower-skilled.

Table 1: Shifts in labour supply and demand in London: 2001-2011

Summary statistics	2001	2011	Change	% change
Working age population¹	4,686,697	5,644,424	957,727	20
Of which foreign-born	1,518,697	2,475,942	957,245	63
Population aged 16-64	4,832,265	5,644,424	812,159	17
Of which educated to NVQ level 4 and above	1,576,113	2,287,248	711,135	45
Of which educated to NVQ level 3	500,794	650,230	149,436	30
Of which educated to NVQ level 2	863,996	711,075	-152,921	-18
Of which educated to NVQ 1 and below	1,642,169	1,350,438	-291,731	-18
Of which have other qualifications/level not known²	249,193	645,433	396,240	159
Workforce jobs³	4,664,000	4,893,000	229,000	5

Source: Census 2001 and 2011, ONS workforce estimates
Notes: ¹Data on the number of 16-64 year olds who were foreign born is not available in 2001. For this year and this variable a different definition of the working-age population is used, covering men up to the age of 64 and women up to the age of 59. As a result, the total number of people aged 16-64 in 2001 does not match the total for the working-age population in 2001. People born outside of the UK are defined as ‘foreign-born’.
²The ‘Apprenticeships’ category, added in 2011, is included under ‘Other’ as the level of apprenticeship was not specified
³Source: ONS estimates, rounded and average of four quarters

Many graduates will struggle to find work in London, perhaps finding that they have to take-up lower-skilled work instead. According to recent GLA analysis, around a quarter of London residents employed in low-skilled occupations had a degree or equivalent qualification in 2011, more than twice the rate for low-skilled workers in the rest of the UK. People that begin their careers in inappropriate jobs can struggle to progress. But they are at least able to enter work – competition for jobs at the lower end of the labour market means that the low-skilled will struggle to enter work.

What can be done?

We need to ensure that young people are being given the chance to gain the skills and experience that will be of value to them in the labour market, as employers will choose to employ the person they judge to be the best candidate. Whilst they are at school young people need to be supported to think through their career options, and be encouraged to consider an array of employment pathways. But recent assessments of careers advice and guidance have found that many schools are failing to secure adequate provision for their students. This must change, but despite the new guidance issued to schools this week this is unlikely to happen unless additional resources are earmarked for careers advice services for young people.

The Mayor has committed to work with business to create at least 250,000 apprenticeships in London by the end of 2016. But the majority of apprenticeship opportunities go to internal recruits and nearly half are taken up by people aged over 25. More investment is needed in initiatives that seek to increase ethnic, socioeconomic and gender diversity amongst young people entering apprenticeships and other routes into skilled work. This might include offering more taster days, and growing the number of traineeships in the capital. To achieve this, more employers need to be willing to offer young people an opportunity.

Financial and transport barriers also need to be tackled to ensure that young people can both access and sustain employment. For a start, Borough councils and Transport for London should extend access to concessionary fares for young people in their first month of employment to support those young people with limited resources to reach their first pay packet.

And finally, entry to employment should not be the only goal. Young people need to be supported to progress once they are in work. With large numbers of people working fewer hours, and working in jobs below their qualification levels, the GLA & DWP should work together to develop post-employment support services in the city, including advice and guidance for those in work, with some provision directed at supporting young people.

About the Author

Ceri Hughes is the author of a new report, London: A Tale of Two Cities, which looks at the characteristics of young people living in London, with high levels of poverty and deprivation in the city, particularly amongst some ethnic groups. Ceri works as a Research Assistant in the Socioeconomic Centre, and is currently contributing to the Missing Million consortium and examining the links between cities, growth and poverty.

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