New housing strategy misses a trick

Government intervention has made it more likely that we are on course for another lost decade in Bri

The three main planks of the government's new Housing Strategy represent a bonanza for Britain's big builders. The "Build Now, Pay Later" scheme, releasing plots held by statutory bodies like the MoD and NHS, will give them public land. The £400m "Get Britain Building Fund", intended to un-stall shovel-ready sites, will give them public money. And the new mortgage indemnity scheme will underwrite the house-buying borrowing that they rely on, at the taxpayer's risk. What is missing is the quid pro quo -- the crucial piece of the jigsaw that requires the development industry, in return, to perform.

In the past, a disproportionate amount of the money from previously announced pump-priming schemes has gone to the largest house-builders, without a clearly articulated "ask" of them in return. So, the danger is that this could again lead to the major developers repairing their balance sheets while the sector maintains its long-term record of under-performance. If this is allowed to happen, we will not see the 250,000 new homes each year we need.

The fallout from the credit crunch has left a damaged building sector at low levels of output with unhealthy balance sheets. The historical experience of past recessions contrasts with the current optimism about a strong supply-side response from the building sector. The past two British house-building recessions, starting in 1972 and 1990, both resulted in lost decades for housing output. The shock we are now seeing -- with the lowest levels of house-building since World War Two -- comes alongside long-term trends of failure from the building sector. We have seen a failure to increase output or respond adequately to growing demand; a trend towards industry consolidation within the sector over output growth; and a growing cyclicality and vulnerability to external shocks. There is little reason to think this behaviour is likely to change without reform. The danger is that we are now on course for another lost decade in British house-building.

If anything, today's government intervention makes that eventuality more likely. Government intervention has stopped any "creative destruction" in the building sector. Its effect has been to prevent the realisation of losses and release of cheaper land that is critical for facilitating new market entrants and delivering cheaper housing. Rather than leveraging up government investment, the current approach deleverages down the impact of government subsidy by allowing it to cushion financial weakness among existing larger players at the cost of under-performance. Larger firms benefit from being seen as "too big to fail", but smaller firms and possible new market entrants have become increasingly frozen out of access to credit and government support packages.

Planning reform and public land schemes should drive building sector innovation to increase output and encourage new entrants, as there is a real danger that existing UK house-builders will merely use building on public land with public money to displace activity from less viable market sites -- leading to no net increase in output.

The Housing Strategy sets out ways to get land and money to developers, but there are serious question marks as to whether house-builders are willing or able to deliver on their side of the bargain. Just as the government's attempts to increase bank lending have broadly failed -- with a banking sector more concerned about recapitalisation and risk management -- so the attempt to encourage the major UK house-builders to increase supply is currently likely to fail due to their overriding focus on restoring their damaged balance sheets and entering into a long period of risk aversion and stagnation. The government needs to come up with a programme of radical change within the building sector itself if it is to succeed in spurring growth through house-building. Like the UK banking sector, the UK building sector is a "broken transmission mechanism" in need of reform. IPPR will publish a paper next month analysing the sector's problems and suggesting ways to shake it up, such as tying public land release to stricter criteria for lower profit margins and faster build-out rates, as well as the government acting as a clearing house for the landbanks of failing developers. Meanwhile, it is not too late for the Chancellor in his autumn statement next week to show that government is serious about getting developers to develop; building the sorts of homes we need, where we need them, soon.

Andy Hull is Senior Research Fellow at IPPR

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The Liverpool protest was about finding a place for local support in a global game

Fans of other clubs should learn from Anfield's collective action.

One of the oldest songs associated with Liverpool Football Club is Poor Scouser Tommy, a characteristically emotional tale about a Liverpool fan whose last words as he lies dying on a WWII battlefield are an exhalation of pride in his football team.

In November 2014, at the start of a game against Stoke City, Liverpool fans unfurled a banner across the front of the Kop stand, daubed with the first line of that song: “Let me tell you a story of a poor boy”. But the poor boy wasn’t Tommy this time; it was any one of the fans holding the banner – a reference to escalating ticket prices at Anfield. The average matchday ticket in 1990 cost £4. Now a general admission ticket can cost as much as £59.

Last Saturday’s protest was more forthright. Liverpool had announced a new pricing structure from next season, which was to raise the price of the most expensive ticket to £77. Furious Liverpool fans said this represented a tipping point. So, in the 77th minute of Saturday’s match with Sunderland, an estimated 15,000 of the 44,000 fans present walked out. As they walked out, they chanted at the club’s owners: “You greedy bastards, enough is enough”.

The protest was triggered by the proposed price increase for next season, but the context stretches back over 20 years. In 1992, the top 22 clubs from the 92-club Football League broke away, establishing commercial independence. This enabled English football’s elite clubs to sign their own lucrative deal licensing television rights to Rupert Murdoch’s struggling satellite broadcaster, Sky.

The original TV deal gave the Premier League £191 million over five years. Last year, Sky and BT agreed to pay a combined total of £5.14 billion for just three more years of domestic coverage. The league is also televised in 212 territories worldwide, with a total audience of 4.7 billion. English football, not so long ago a pariah sport in polite society, is now a globalised mega-industry. Fanbases are enormous: Liverpool may only crowd 45,000 fans into its stadium on matchday, but it boasts nearly 600 million fans across the globe.

The matchgoing football fan has benefited from much of this boom. Higher revenues have meant that English teams have played host to many of the best players from all over the world. But the transformation of local institutions with geographic support into global commercial powerhouses with dizzying arrays of sponsorship partners (Manchester United has an ‘Official Global Noodle Partner’) has encouraged clubs to hike up prices for stadium admission as revenues have increased.

Many hoped that the scale of the most recent television deal would offer propitious circumstances for clubs to reduce prices for general admission to the stadium while only sacrificing a negligible portion of their overall revenues. Over a 13-month consultation period on the new ticket prices, supporter representatives put this case to Liverpool’s executives. They were ignored.

Ignored until Saturday, that is. Liverpool’s owners, a Boston-based consortium who have generally been popular on Merseyside after they won a legal battle to prize the club from its previous American owners, backed down last night in supplicatory language: they apologised for the “distress” caused by the new pricing plan, and extolled the “unique and sacred relationship between Liverpool Football Club and its supporters”.

The conflict in Liverpool between fans and club administrators has ended, at least for now, but the wail of discontent at Anfield last week was not just about prices. It was another symptom of the broader struggle to find a place for the local fan base in a globalised mega-industry.The lazy canard that football has become a business is only half-true. For the oligarchs and financiers who buy and sell top clubs, football is clearly business. But an ordinary business has free and rational consumers. Football fans are anything but rational. Once the romantic bond between fan and team has been forged, it does not vanish. If the prices rise too high, a Liverpool fan does not decide to support Everton instead.

Yet the success of the protest shows that fans retain some power. Football’s metamorphosis from a game to be played into a product to be sold is irreversible, but the fans are part of that product. When English football enthusiasts wake in the small hours in Melbourne to watch a match, part of the package on their screen is a stadium full of raucous supporters. And anyone who has ever met someone on another continent who has never travelled to the UK but is a diehard supporter of their team knows that fans in other countries see themselves as an extension of the local support, not its replacement.

English football fans should harness what power they have remaining and unite to secure a better deal for match goers. When Liverpool fans walked out on Saturday, too many supporters of other teams took it as an opportunity for partisan mockery. In football, collective action works not just on the pitch but off it too. Liverpool fans have realised that. Football fandom as a whole should take a leaf out of their book.