1. Governance
July 8, 2016

By 2030, the Northern Powerhouse will have a shortage of 86,220 homes

By Edward Douglas

When people talk about the housing crisis, they are generally thinking about London and the South East – but northern cities are facing a significant housing shortage too.

Housebuilding rates dropping by 28 per cent over the last decade. While building slows, foreign investment into Northern Powerhouse cities into city centre property purchases is booming, creating concerns about a property bubble that may bring the problems of London to Manchester. And, across the north, regeneration efforts to make better use of existing housing stockhave stalled.

What’s more, the ratio of housing costs to income – the key measure of affordability – in the north is getting closer to that in the south. There’s now only a two percentage point gap between the North West and the South East. In other words, although there is still a big difference in absolute house prices between the North and South, the amount people are spending on housing as a proportion of their income is not that different.

The Northern Powerhouse must therefore accelerate housing delivery to meet local needs, make best use of inward investment opportunities, and make meaningful progress on regeneration. That’s why ResPublica has this week published a manifesto that sets out how the North’s housing challenges can be met.

Our inability to deal with the London housing crisis is holding back productivity and social mobility. People are unable to find suitable homes in the centre of the capital, diminishing the ability of young people to access high wage employment , and depriving high growth and strategically important sectors – such as tech, banking and construction – access to a greater pool of talent.

Fewer than one in fifteen (6 per cent) of new graduates who move to London come from the most disadvantaged fifth of UK local authorities. And this is an intractable problem: the housing shortage is so large that even accelerating housing delivery in London and its suburbs will make only a small difference in the short-term.

We must not let the same thing happen in Manchester or the north.

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So far, housing and planning have been considered matters for city devolution policies; they’ve not been considered as a part of the wider Northern Powerhouse agenda, which is led by central government. But city regions across the north face similar issues that can best be addressed through a whole region approach.

Indeed, estimates suggest Greater Manchester’s housing shortage is putting £4.6bn of investment at risk. If the Northern Powerhouse is to bring about sustainable and inclusive growth, it must include comprehensive strategic plans for housing that meet current and projected housing needs across all tenures. Now is the time to be thinking about this.

The northern way

The good news is that the housing shortage in the north is not insurmountable. But the shortfall will reach 86,220 homes in the major five city regions – Manchester, Liverpool, Newcastle, Sheffield and Leeds – by 2030.

The next step for devolution could be to call for local retention of stamp duty receipts to fund housebuilding to close the gap: our projections suggest this could help fund 53,175 homes in that timeframe. But with building rates falling by more than a quarter in recent years, we’ll need to look at more options to ensure housing needs are met.

If cities are to be able to deliver on their strategic economic growth plans, we need to think beyond city boundaries. The way to do this is to allow cities to enter planning partnerships with their neighbours to drive regeneration.

These bodies would pool devolved powers, holding control of financing and land. They’d be protected from schemes being called in by the secretary of state, and funded through capturing uplifts in land value. This would push regeneration across the north, by meeting affordable housing targets at the regional rather than local level; it would spread the benefits of devolution beyond urban hubs.

We also need to ensure the housebuilding drive crosses all tenure types. We need more homes that families want to buy, and more rental properties for young professionals and entrepreneurs.

There is a particular need for good quality, affordable private rented homes in the centres of the north’s major cities; these will help retain and attract the young professionals who will work in high growth sectors, such as tech in Manchester or financial services in Leeds. Handing retention of the new buy to let stamp duty levy to city regions would facilitate the creation of funds to attract long-term investment in private rented developments.

At the same time, northern cities need to look at what can be done to ensure the housing needs of young families are met. Instead of national affordable housing targets that have to be followed regardless of local conditions, we should consider how empty property can be brought back into use – for example, by replacing affordable housing targets with other aims such as renovation of underused housing stock. Such an approach offers a way to spread growth beyond city centres, to create more thriving communities across the north, whilst at the same time offering more desirable locations for young families to live.

This is an exciting time. If national and local policy-makers get housing and planning decisions right, we could see sustained growth in cities that are prepared for it in a way that London never has been. We must realise that now is the time to act.

Edward Douglas is a senior policy and projects officer at think tank Respublica.

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