The State 43 – Communities 0

A government that declares new rights for its citizens, without providing them with the resources to enact those rights, is engaged in a defunct form of libertarianism. This is a world where the only job of government is enforcement, playing no role in the distribution of the things that people need.

I argued in a previous blog that some of the UK government’s localism policies, particularly around ‘community rights’, fit this mold. I suggested that in order for these rights to be effective, community groups need ‘greater powers to force the disposal of assets’ and vastly ‘more support and financial resources’. As I dig more and more into this subject I find not only rights without resources, but largely unenforceable rights without resources. This is a kind of plastic libertarianism.

My earlier blog did not attract unanimous support. Friends and colleagues bemoaned it as ‘self-destruction’. They suggested I turn my critical eye to ‘welfare reform’ or ‘public sector cuts’, rather than those policies that actually support community ownership. After all, what is preferable, ineffective rights or no rights at all? I was starting to see their point until I looked into the Right to Reclaim Land. This right enables community groups to force public agencies to sell their disused land ‘to the public at a fair price, for housing or other development’. I asked someone at CLG how many Right to Reclaim Land applications had been made, and how many had been successful. The answer I received provides some vindication for my previous blog.

As of March 2014 the government had received 43 disposal orders under the Right to Reclaim Land. It is telling that all 43 have been rejected by the Secretary of State. When we look at the detail of how this ‘right’ works in practice, it’s easy to why. The right is only enforced if the public landowner, for which the request has been made, has ‘no suitable, consulted upon and publicly tested plans in place or likely to be put in place in an acceptable period’. There is not a public agency in the land that can’t find a piece of paper that says it has a plan.

This ‘right’ is just a PR exercise. It is libertarian rhetoric without the commitment. If the government wants to live up to its grandiose claims about community rights, it has to show it is willing to enforce them, and get ready to back community groups with adequate resources when they are.

Empty Homes: three things we’ve learned this week

Persistence pays. And so it is that the government revealed this week the progress made in tackling empty homes. Eric Pickles announced on Wednesday that the number of empty homes in England is now at a 10 year low. Significant progress appears to have been made on long-term empties, which are down by around a third since 2009. This is quite remarkable given the period this data covers, i.e. post-recession austerity.

Certain factors seem to be relevant in terms of this improvement. Firstly, government’s own package of incentives has been important, from dedicated funding for social landlords and community organisations, to enhanced new homes bonuses. Added to this, the recurrent discourse from Ministers about the importance of empty housing has been an important factor. This has given local practitioners and property owners (across the public, private and voluntary sectors) the confidence to take this issue on. It has been interesting to watch local initiatives spring up, such as this one in Leeds and this knowledge transfer partnership in Manchester. It is hard to see how these initiatives would’ve developed without a wider discourse about the importance of this issue.

However, beyond the good news story there lurks important questions about where these improvements have taken place and why. With this in mind, I want to share three lessons that have emerge from deeper scrutiny of the data;

1. Northern urban areas are doing well in terms of net reductions

Of the ten local authorities with the biggest reduction in empty homes since 2010, six are in the north of England*. This includes the big cities of Manchester, Liverpool, Leeds and Sheffield. The picture for long term empties (those empty for more than six months) is very similar. Of course, some of these cities had the biggest numbers of empty properties to start with, but that does not negate the fact that progress has been made.

2. Despite net reductions, the pace of change in northern areas is slow in comparison

Given the above, it comes as a surprise that those authorities making the biggest change in percentage terms are not in the north. Of the ten local authorities seeing the biggest percentage drop in empty homes, only two are north of Peterborough (Manchester and Salford). In fact, five are London Boroughs. What this means is that the pace of change is not as quick in northern cities as it is in the South East.

3. The tenure of empty housing is an important factor

Thinking about the areas where the biggest progress has been made, it would be easy to make certain assumptions, i.e. in the north progress is being fuelled by repair and re-letting of social housing, and in the south by private properties coming back into use. Surprisingly, in Manchester, social housing accounts for only 12% of the reduction in empty homes, and in Salford there has been a net increase in empty social housing. This means that even in northern cities this change is fuelled largely by the reuse of private properties. In London however, social housing has played a more prominent role. In Lambeth 46% of the reduction in empty housing has come from the repair and re-letting of social housing.

All of this leads me to think that, in the aftermath of the recession, a huge opportunity was missed. Local authorities, social landlords and community organisations had the chance to vastly increase our stock of social/affordable housing, by acquiring privately owned empty housing. Private investors have been able to make these properties financially viable and are now reaping the rewards. Local authorities and other providers should have been acquiring some these when their value was at its lowest. What a return on investment we would now be seeing, not just financially but socially. This was perhaps a golden opportunity to address the chronic shortage of affordable housing in this country. It has, sadly, been missed.

* By north of England I mean in the regions of Yorkshire and the Humber, the North East and the North West

Making rights-based localism viable

We get a warm feeling when we are given the right to do something.  Our instinctive reaction is a sense of gratitude that our freedoms have been extended.  But as this feeling slowly subsides, we start to ask questions such as ‘who is offering these rights’, ‘what really changes as a result’ and ‘do I have the resources to make use of these rights anyway’.  In this blog I want to explore these issues in reference the government’s rights-based approach to localism.  I want to pose the question whether conferring rights to community groups will ever be enough.

In the Localism Act 2011, the current government created a number of rights for ‘communities’ which give them the ‘opportunity to take the initiative when it comes to how local public services are run and planning decisions are made’.  Aside from the Right to Challenge, which enables groups to bid to take over Council services, the other rights are largely orientated toward land use and development.  Neighbourhood Planning and the Right to Build allow local communities to specify the type of development in their area, and shortcut the planning process.  The Right to Bid enables groups to register and have first refusal on assets of ‘community value’. And the Right to Reclaim Land enables groups to force the disposal of underused public buildings and land.

There has been a lot said about the intricacies of implementing these rights.  Whole websites are usefully dedicated to how groups apply them.   However, little has been said about whether a rights-based approach, in general, is either prudent or effective in making best use of our land and buildings. One criticism of such community rights, which has been leveled at rights-based approaches for decades, is that they are often silent on the key issue of resources.  Take the Right to Reclaim Land.  Once a group has gone through the rigors of applying to the Secretary of State for a disposal order, the land is then auctioned on the open market.  Are small community groups supposed to compete with Barratts or Persimmon in an open tender?  This is naive to the economic structures which differentiate the private and community sectors.

We need to get real here and be open. If we want to foster non-profit models (that reinvest ALL surplus value) then we need to create the infrastructure to support this.  Firstly, that means giving groups greater powers to both force disposal and to obtain that asset at below market value.  Secondly, we need to provide support and financial resources so groups can plan, develop and sustain these assets.  This is a message that has been made time and time again (e.g. Aitken, 2011, p.81).  And whilst the government has provided some initial funding (£52m across all initiatives), it is grossly inadequate.

Offering rights without resources starts to look like staunch libertarianism, which has at its heart a distaste for the State.  Community rights are not about cutting the State down to size, but finding opportunities to assetise local groups so they can create value and reinvest it.

When is enough enough?

In response to my last blog, The Reinvestment Imperative, I received an interesting comment via email.  The writer noted that housing associations have to run high levels of reserves to cover short-term liabilities and/or deal with unforeseen difficulties.  This, in essence, justifies the banking of large surpluses.

This blog explores that issue further, looking at the assets of big housing associations, particularly those assets that can be accessed quickly to meet short-term problems. This is not about elegant financial analysis.  It is about using some basic financial information to pose what are essentially moral and political questions.  To ask whether housing associations are striking the right balance between their financial health and their social purpose.

When we look at an organisation’s current assets (e.g. money in the bank, loans etc) against their current liabilities (repayments, tax liabilities etc), we get a picture of their ability to pay short term obligations.  Dividing the former figure by the latter, we get what is called the organisation’s ‘current ratio’.  This is an accepted measure of how efficiently that organisation is using its resources.  A ratio of between 1.0 and 2.0 is considered healthy. A low ratio suggests not being able to meet short-term liabilities, and a high ratio suggests the organisation is not using its resources efficiently.

The five largest housing associations in the UK have an average current ratio of about 1.7, with some variation between 0.7 and 3.5.  What this means is that most of them are able to meet pressing obligations, and could arguably use some of their current assets to develop more houses.  Of course, each organisation will have its individual circumstances and future concerns.  For instance, I’m sure all social landlords are concerned about how the welfare reforms will affect their revenue.  However, as surpluses and current assets increase year-on-year, and our lack of affordable housing becomes more and more acute, it is not unreasonable to suggest a more progressive approach to using these resources could be applied.

Perhaps, as I argued in the last blog, this is down to the corporatisation of big housing associations that focus too heavily on the balance sheet.  It would be interesting to consider the role of the regulator in this.  Perhaps the regulator’s focus, and the response of social landlords, is producing and reproducing processes which preference the hoarding of assets, rather than reinvestment of those assets for social good.

The Reinvestment Imperative

In recent months Labour and the Conservatives have entered into a kind of lose-lose battle.  They take it in turns to show how ridiculously inadequate each other’s housebuilding performance has been.  The argument goes a little like this; ‘New Labour’s record was appalling, particularly on social housing’; ‘the Coalition has a worse record than any other administration since 1920’ etc etc.  This is akin, as one commentator has described it, to two bald men fighting over a comb.

Governments can only pull certain policy levers, and these have partial and unpredictable causal effects.  Nowhere is this more the case than in private housebuilding.  As Aneurin Bevan once said, ‘if we are to plan, we have to plan with plannable instruments, and the speculative builder, by his very nature, is not a plannable instrument’.

In the last blog I discussed some of these unplannable qualities and counter-intuitive trends in the housebuilding industry.  I showed how big developers consolidated their financial position during the recession, despite little discernable change in their output.  Of course, this kind of ‘efficient production’ by the market would be okay if we didn’t have an urgent need for more housing!!!

So, if our big housebuilders are becoming adept at increasing their earnings without markedly increasing their output, perhaps we can rely on housing associations to take up the slack?  Surely, as not-for-profit organisations, they are ploughing their surpluses back into housing development?  Unfortunately, however, they are not. Housebuilding by housing associations in England in 2012-13 was at its lowest level since 2006.  At the same time, they have been creating more and more surplus cash, up 60% to £1 billion for the year 2012/13.  We may legitimately ask, why were these surpluses not being used to fund new development?

Each housing association will have its own rationale for retaining these surpluses, for instance, in lieu of increasing debt payments.  However, in general terms, I think this boils down to the application of (private) business logics within a not-for-profit model.  There has become a disproportionate focus on the bottom line.  Not every housing association fits this generalisation, but increasingly their financial health has become the number one priority, not pressing local needs.  The suggestion of full-throttle reinvestment in housebuilding probably seems odd to most housing associations, ‘why spend when we can consolidate, employ more staff, improve the balance sheet’?  This may be prudent for the organisation, but neglectful of those in need of housing.

With these flaws in market-driven approaches, as well as in modern-day housing associations, we must turn again to the local, autonomous and collectively-owned.  We must turn to those organisations where reinvestment of surpluses is in their DNA.  In housing terms this means community land trusts, co-operatives, and small scale social businesses, where the members intuitively want, and press for, productive use of surplus resources.

A call for something bolder

I’ll wager there’s been a good deal of back slapping in the Treasury over the last few weeks.  The government’s Help to Buy scheme has received a deluge of applications, and with house prices on an upward curve, there are suggestions of a housing market ‘recovery’. In response, commentators have warned of exacerbating the problem of affordability and creating another housing bubble.

This debate is increasingly played out in the mainstream media, so I won’t regurgitate it here.  I am however interested in two elements of this discussion.  Firstly, the political response to the Coalition’s policies and fiscal programme for housing.  And secondly, the lack of focus on the house building industry’s performance, in particular their financial performance.

Let’s look at the political response first.  Writing recently in the Daily Telegraph, Hillary Benn provided a vehemently localist argument for devolved planning control, placing faith in residents to plan and approve local housebuilding.  As you will see the article is thin on details, but further interviews with shadow minsters provide some specifics. Faced with a new housing boom and the increasing exclusivity of owner occupation, what are Labour’s proposals??? Compulsory neighbourhood plans and a reworking of the community infrastructure levy.  I’m probably not the only one feeling a little underwhelmed.

These proposals are not bold enough because our house building sector is dysfunctional.  To address this requires more radical intervention.  As the chart below shows, in the last three years the revenues of the top five house builders in the UK has steadily increased, and yet the amount of houses being completed has pretty much flat lined, as has new affordable housing.  The red line tells the story adequately enough.

HouseBuildingLoNchart2

So it seems that the big housebuilders have, at certain points, been generating more revenue from building less houses.  This seems to defy one our most basic economic principles.  The revenues of the big house builders seem so out of kilter with completion rates that the notion of ‘economies of scale’ seems not to apply.

Perhaps the problem relates to who holds the responsibility for deciding whether to build or not.  Big house builders, using their land banks, can pick and choose when to build and how much, presumably based on what best maximises their profits. Our dependency on these decisions, for future housing supply, is quite frightening. In 2010 around 137,000 dwellings were completed in the UK, and around a third of these came from a handful of big developers.

There are some radical responses to this predicament.  Advocates of Land Value Tax (LVT) argue that by taxing land, irrespective of the development on it, we can incentivise house building.  Under LVT an undeveloped piece of land is subject to the same level of tax as a piece of developed land in the same location. This creates the incentive to build and maximise the income from a site.

In fairness to Ed Milliband he has also tried to explore solutions to this thorny issue, proposing developer penalties if they bank land that has planning permission.  Developers ‘hoarding’ such land could be charged penalties or forced to sell it under compulsory purchase, an idea also being explored by Boris Johnson.

Taxation systems such as LVT, and punitive ‘use it or lose it’ measures have their merits. However, we need to do more to fundamentally change the pattern of responsibility and decision-making around development.  Alongside the above measures we need to increase the incentives for individuals and collectives to acquire land and get building.  Lessons can be learned from the development of co-ownership housing in the 1960 and 70s, which saw over 40,000 homes built by collectives in this short period (see Johnston Birchall’s ‘The Hidden History of Co-operative Housing in Britain’).  Despite its faults (and they were many) the co-ownership model of the 60′s and 70′s shows how we might start to shift the patterns of responsibility for house building at a larger scale, and loosen our dependency on the big developers and their land banks.  This represents a bolder politcal response than merely tinkering at the edges of planning policy, or adopting purely punitive measures.

Upwards and upwards!

Like me, you have probably winced at the price of your shopping recently.  We may have economic growth, but we’re certainly no richer for it, and in terms of food prices we’re in for tough times.  Last week a government adviser on food security forecast that over the coming years’ food prices in the UK will treble. Driven by an expanding middle class in Asia, global demand for food will explode creating shortages in the developed world.

A scary thought indeed.  Or is it? A couple of weeks ago I went to see some people from the Rochdale Rotary Club.  They have come up with a startlingly simple system for growing fruit and vegetables, and one that does not require prime agricultural land.  All you need is a few bits of wood to create a frame, some plastic bags, a handful of bamboo sticks, a few kilos of soil and some seeds.

UrbanFarm

This growing system has a number of important horticultural benefits.  The bags retain a lot of moisture so, if the plants are carefully tended, very little water is used.  Growing vertically on a number of tiers, as demonstrated above, can create high yields per square foot of land needed, and also protects against vermin, pests etc.  Furthermore, it is a portable a system that can be moved if needed.

Despite these clear benefits, what really interests me is the system’s inclusivity, and it’s potential to change our everyday economic practices.  Firstly, the cost and space requirements of setting this system up are so minor, that it opens up food growing to everyone. You don’t need a sprawling garden, you don’t need an allotment, you don’t need raised beds.  A patch of concrete nine feet by nine or any other level surface will suffice.  In practical terms, this opens up food growing to a whole new audience and social strata, i.e. those with space limitations and without access to growing land.

It also provides an opportunity to change our future predicament as food consumers.  Most of us are slaves to supermarket price-setting and passive victims of global economic shifts.    The widespread diffusion of this system could create a healthy degree of autonomy from market produced food, which is going to be subject to increasing pressure.  Adopting collective forms to develop and maintain these growing systems could bring some additional social benefits.

From the perspective of land use, this growing system has significant potential.  Over the last year I’ve worked with public bodies who own acres of cleared and redundant land.  Such sites are now liabilities, requiring on-going maintenance costs with no prospect of income generation.  Their re-development looks less and less likely, and soil contamination means they cannot be used for food growing without expensive remediation.  Landowners can stimulate local food production by supporting such growing systems on their land, and in so doing, start to subtly shift patterns of consumption and everyday practices.

Progressive practice in regeneration…

Last week brought some excellent news. We learnt that a number of community land trusts (CLTs), and other community-led housing organisations, received funding for empty homes projects.  This is in addition to funding for housing associations who are working with them on joint projects.

Such news gives us an opportunity to reflect on why this is important.  A number of the grant recipients are working in areas where regeneration programmes have failed to deliver substantive change for a number of decades. In Anfield (Liverpool) and Gresham (Middlesbrough) problems still persist.  Grand strategic visions come and go, bringing with them hope and promise.  And no doubt one day a large-scale solution will prove decisive.  Perhaps in Anfield this will be the one.

Yet the question has always been, will this regeneration make existing residents any better off?  Does it have an explicit plan for increasing the ownership and wealth of existing residents, so that they have the economic opportunities of everyone else?  It is because community-led organisations collectively own assets, that they prioritise the needs of existing residents, and prevent the seepage of profit into distant hands.  They have the potential to ensure that the total value of assets (such as land) are captured for existing residents.

So whilst regeneration programmes come and go, asset ownership persists.  The argument for these organisations is not just financial, but political also.  With long term asset ownership comes inalienable property rights, which in turn brings power and a seat at the decision-making table. So whilst the organisations receiving funding last week are just scratching the surface of huge socio-economic problems, they are doing it the right way, and will probably outlast many of the short-term government initiatives so susceptible to changes in the political cycle.

What factors affect the success of community land trusts?

If you are starting a community land trust (CLT), or advocating for them, this is arguably the most important question you will face.  If you can understand these factors, so the argument goes, you can accentuate or mitigate them.

Whilst I agree that such knowledge is valuable, I want to argue that it just isn’t that simple.  Reflecting on my work with urban CLTs over the last few years, isolating the factors for success is tricky, in part because they are so enmeshed together.  I want to use the idea of two types of factors to show this.

The factors affecting CLTs can be classed as either structural factors (e.g. the rules, norms or resources that affect the CLT) or agency factors (e.g. the choices and actions of individuals inside and outside the CLT).  When we look at the factors affecting CLTs in this way, we see an important system at work.

An experienced CLT activist once suggested to me that the context for urban CLTs was just too complex, particularly in deprived neighbourhoods.  The ‘rules’ of regeneration were set by professional bodies who held the power, resources and finances to determine how regeneration should happen.  The nature of any regeneration that takes place is hence defined by the professional ‘rules’ that are most dominant.  In addition, it was argued that economic factors, which had created deprivation, low demand for housing and low land values, would hamper any CLT project.  Such structural factors have indisputably affected the groups I’ve supported.

Contrast this with the role of individual members in such CLTs.  I have witnessed one activist almost single-handledly drag a CLT to viability.  I’ve also seen how supportive Councillors, housing association officers and public officials have tipped the balance in terms of a CLT’s success.  More discouragingly, I have observed the draining effect of member apathy, along with individual self-interest which can fracture shared aims.  Furthermore, a lack of technical skills and experience among individual members can be a crucial factor for success. These individual actions or characteristics, in my opinion, are just as important as the structural ones. 

Now, the important lesson here is not that we can create the right factors for CLT success.  The important message relates to the interplay between structures and agency.  A dominant professionalised approach can feed the apathy and low-confidence of CLT members, which in turn reaffirms the professional dominance.   The resources, held by professional bodies, tend to be channelled to the most ‘compliant’ projects, which again reaffirms the professional norm. More positively, successful action by CLTs can give professionals confidence to back community-led initiatives, changing the dominant ‘rules’ of regeneration.  If we need an example of this, surely the Dudley Street Neighbourhood Initiative shows how the ‘rules’ can be changed.

If we are to create the right conditions for CLT success, we must address both structural and agential factors in integrated ways.  But there are limits as to how far we can change rules, norms and resource structures.  And there are limits as to the potential agency within these constraints.

Are you a confronter or a subverter?

Political consensus is a hard thing to come by.  But if we’re looking for an area where we get close, surely housing affordability is one.  That we have a shortage of affordable homes is something all the major political parties (and UKIP!) agree on.  A quick look at the government’s statistics shows why.  The price people have to pay for housing, compared to what they earn, has nearly doubled since 1996:

PtoIratio

The current government is just as keen on increasing affordable housing as the last one, particularly in the form of homeownership. No Conservative-led government in the last 80 years has left office with homeownership lower than when it came in.  And yet, this is a likely outcome for the current administration.  This in part explains ill-conceived programmes such as Help to Buy, which may improve access to ownership in the short term, but make for unsustainable ownership in the long run.

The problem stems from a dysfunctional house-building sector which, bizarrely, now makes more money from building fewer houses.  This is allied to the fact that land is a finite resource and subject to acute forms of speculation.  For anyone that still thinks free market economics is the best distributive system we have, then just look at land, and consider what a ruinous state we would be in if speculative processes were left unchecked.

Those that share these concerns, and wish to address the worst effects of this problem, can be said to fall into one of two categories.  These categories are based on differing views about ownership of land, in terms of rights, laws and norms.

Those in the first category, let’s call them ‘confronters’, wish to challenge the framework for land ownership in England which is entrenched by the Law of Property Act (1925), making ownership a distinctly individualised practice.  Confronters suggest that this model of ownership leads to the worst excesses of the modern age and posit radical positions.  They argue for such things as state ownership of land, or the treatment of land as a common pool resource and owned by no one.

Those in the second category, which we will call ‘subverters’, seek solutions that operate within the existing legal framework, but which aim to subvert the status quo to affect the distribution of land and who benefits from it.  In the subverter camp are those that argue cogently for Land Value Tax, community land trusts, and the redistribution of publicly owned assets.  Some of these would seem uneasy bedfellows, but they share a common feature; their starting point is to work within the existing legal framework for land ownership.

So what camp are you in?  You may be in both, you may see one as facilitating the other, or may seek some hybid of the two.   Of course, you may be in neither camp, in which case you’re probably reading the wrong blog!

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