Wednesday, 2 May 2018

A solution to our housing problems: capitalism

'Housing provocateur' Patrik Schumacher likes to... provoke:

Rebecca Nicholson

The architect suggests that busy young professionals can be accomodated in pods

Sun 29 Apr 2018

Patrik Schumacher, director at Zaha Hadid Architects, suggests young professionals have no greater housing need than a city studio space. Photograph: Andrew Innerarity/Reuters

‘Let’s discuss,” tweeted Patrik Schumacher, with a link to his new, exhaustive essay for the Adam Smith Institute called “Only Capitalism Can Solve the Housing Crisis”. Schumacher has form for controversial statements about housing. When he took over Zaha Hadid Architects in 2016, the architect gave a speech at the World Architecture festival in Berlin, in which he proposed privatising all public spaces and eliminating social housing, which turned him into a kind of bogeyman for activists who object to things like, say, multimillion-pound properties being bought by investors and remaining empty while the evidence of rising homelessness is plain for anyone walking the streets to see.

It seems as if he’s now embracing the role of provocateur. In the piece, Schumacher pokes at a few easy targets and pre-empts the response. He suggests that for busy young professionals, a city centre studio space, its size unregulated, is all that’s needed and then imagines a linguistically loaded backlash of complaints that young people are being “forced” to live in “rabbit hutches”. I have written before about the frustrations of feeling trapped in a private rental market where property is capital and not a home. I have no idea if Schumacher has ever lived in a studio, but it strikes me that few people who do or have done would really consider a living room, for example, to be an unnecessary luxury. The novelty of being able to microwave your dinner without getting out of bed soon wears thin.

But what strikes me as a point more worthy of discussion is the hellish vision of an economically thriving city centre full of young professionals emerging from their pods only to work all of the time. “For many young professionals who are out and about networking 24/7, a small, clean, private hotel-room-sized central patch serves their needs perfectly well,” he writes. Elsewhere: “In a free market, workers would compete for locations. More productive workers that contribute more to the total social product will be able to out-compete less productive workers.”

Perhaps it’s my “outmoded educated elites’ left-liberal consensus” talking – Schumacher is not averse to emotive language himself – but I wonder which jobs would count as economically viable. I’m sure the city-centre-bots are too busy in the boardroom to have children, so in this near future we won’t need teachers or carers, but if we need a nurse to patch us up when we slip on a spilled coffee while networking 24/7, will this “productivity” count towards being worthy of a home in the area, too?

Here's the first bit of the piece from Patrik Schumacher on the Adam Smith Inst's blog: 


Patrik Schumacher, 25 April 2018

The 'housing crisis' is basically a housing affordability crisis. It manifests itself in the form of extraordinary housing prices and rents after three decades of nearly uninterrupted price increases. A much larger part of our income is now being spent on housing than in past decades. Whereas 20 years ago the house price to earnings ratio in London was about 4:1, it has now reached 10:1, and the mean rent-to-income ratio has climbed from 1:5 to 1:3 in the last 15 years. This situation implies that resources keep flowing to land owners and homeowners. The population is divided into owners who keep receiving windfalls and aspiring owners whose attempt to board this train is made harder and harder as this distortion progresses. The political attempt to ameliorate all this via so called "affordable housing" has further exacerbated the problem.

What triggered these developments? The root cause lies in the socio-economic transformations of the new economy. This new tech-induced, internet-empowered era implies an increasingly dynamic economy centred around R&D, marketing, and finance. Together these are delivering faster innovation cycles in line with the new, digitally empowered technological paradigm of flexible specialisation. This communication intensive new economy thrives best in large, dense urban clusters. In contrast, most of the 20th century was marked by a steady move to living in suburbs, compatible with the mechanical mass manufacturing of that era. London was shrinking until 1980. Since then suburbanisation has reversed and we’re seeing a return to people wanting and needing to live in urban centres. London became a Growth Pole.

This explains the new demand on urban accommodation but cannot alone explain the explosion of land and accommodation prices. In fact, a more compact city has cost advantages over a more spread out city: the latter was in fact subsidised through government infrastructure provision. In theory, we should eventually see falling overall costs of accommodation, once transitional, market-led adjustments have been allowed to do their work.

The house price development we continue to witness constitutes a preventable distortion rather than an inevitable, rational adaptive process that could be explained by increasing urban concentration. The dramatic price increases must instead be attributed to the political interference in the urban development process. This prevents the appropriate supply response to meet large increases in demand due to the new societal dynamics of the knowledge economy.

The low urban density of London, in comparison with Paris for instance, implies that there is plenty of space for growth that could and would be developed if market forces were allowed to operate more freely.

The lack of development imposes a steadily increasing, politically engineered wealth inequality. Zoning restrictions redistribute wealth and income to homeowners–as documented by Brink Lindsey and Steven Teles in their book The Captured Economy. [1] This restriction of development also implies that overall society is getting relatively worse off. In this distorted market most London city dwellers consume less residential space, in less central (and less desirable) locations, than they would otherwise choose to consume, making these Londoners' lives poorer. Further, the synergetic, productivity-enhancing urban concentration process is slowed down. London, the global prosperity engine, is artificially held back as many potential workers are discouraged due to the extraordinary cost of living, instead choosing less productive jobs in more provincial locations. This spatial misallocation of labour is a cause of Britain's productivity slowdown and hurts UK GDP. [2]

The answer to all this is clear: The extraordinary price increases must stop. This much is obvious to all. That more houses must be built to achieve this is also clear to most people. What is never spelled out –as it would be immediately divisive and politically toxic– is that house prices should indeed be falling, and so slowly reversing the imbalances and windfalls. A rapid or even precipitous fall in house prices, however, would be dangerous to the financial system and would jeopardise many people's retirement plans.

This points us to another problem with the UK situation. The artificial house price development –and perhaps the inflation experience of the 1970s– has tempted too many into a one-sided, non-diversified reliance on home ownership as a savings and retirement vehicle. This is not only risky but has another disadvantage: it hampers locational adaptation and labour mobility. This unfortunate bias in the allocation of personal savings is further promoted by the fact that shares are burdened with Capital Gains Tax while homes are exempt. Saving and housing must be decoupled. They should follow their independent logics. The government should therefore stop intervening to promote home ownership.

It will be difficult to manage the transition out of these distortions into a more rational, safe and prosperous pattern. However, the general direction of travel can, in my view, be unambiguously stated: politically imposed distortions must be gradually reversed. In effect, government interference in the urban development process in general, as well as in housing in particular, must be pulled back at all levels of government.

The thesis put forward here argues that the so-called 'housing crisis' which plagues London (as well as other growing cities around the world) can only get worse the more politicians are trying to help via yet more state intervention. In contrast to the prevailing analyses and recipes, this essay argues that the current malaise cries out for free market solutions–it’s time for a capitalist revolution. Since urban development is currently operating under the impositions of a quasi-socialist regime, a decisive shift towards an unencumbered free market system would indeed be revolutionary. The solution to the housing crisis lies in the denationalisation and depoliticisation of development rights in general and in the radical liberalisation of housing in particular.

What is the root cause of the housing crisis? Why are we suffering a housing shortage while nobody has to worry about a banana shortage, a bicycle crisis, or an automobile shortage? By the way, in socialist countries all of the above are endemic. The explanation is that the housing market, in contrast to the bicycle market, is highly politicised (it suffers from massive state interference which prevents this market from functioning). Homes are much more vital and existential than bicycles, so it is all the more important that we fix the housing market. We need to break these fetters and set the housing market free. In fact, we need to set the whole real estate market free and allow all urban development decisions to be determined by economic rather than political criteria.

Market-responsive entrepreneurs have to replace the blind bureaucratic allocation of land resources and consumer choice has to replace the state-enforced rationing of housing resources. This is mandated both by considerations of justice and by considerations of efficiency that bear upon general prosperity...

Only Capitalism Can Solve The Housing Crisis — Adam Smith Institute

And here's another response from Paul Finch, writing in the Architects' Journal blog today: 

Why Patrik Schumacher is wrong about housing

2 MAY, 2018 Paul Finch


We tried ditching standards and counting on private housebuilders before, and it became a race to the bottom, writes Paul Finch

I admire Patrik Schumacher as an architect and I applaud his bravery in sticking to his guns in respect of unpopular arguments he has espoused, for which he has been subjected (by some) to abuse rather than reasoned argument.

However, I have never found his propositions about housing provision very convincing, and reading his long essay for the Adam Smith Institute, ‘Only Capitalism Can Solve The Housing Crisis’, reminded me why.

Like all polemicists, he tries to convince us of the validity of his views by stating some truths, then throwing in an enormous falsehood or non sequitur which we are supposed to regard as just another fact. Thus, for example, his claim that the present shortage of homes in London is a result of ‘socialism’. Since when did London have a socialist housing policy, providing truly affordable (and decently designed) homes based on need, in appropriate quantity? Probably not for five decades.

The former housing minister, Nick Raynsford, has pointed out that the last time the UK produced a sufficiency of housing for anticipated need was in 1978. At that time, there were four chief sources of supply: housebuilders and housing associations (then as now), local authorities and new towns, this latter pair now generating almost non-existent numbers.

Patrik fails to mention, in the course of an essay of several thousand words, the historical role of the public sector in supplying housing for those not earning enough to hoist themselves onto the housing ladder. A thumping gap in his argument is why, when the public sector was actively engaged in building homes, we did not have the sort of crisis of supply he now rightly complains about.

Funnily enough, and here is the second thumping gap in the thesis, we had a very similar planning system, and for a respectable period had minimum sizes in the form of Parker Morris space standards, when supply and demand were in broad balance. Far from ‘socialist’ policies resulting in a shortage of housing, what they did was create a civilised context in which private housebuilders could not engage in a race to the bottom over design and construction quality: to an extent they had to match public standards. It was the world of 1978.

When that cut-price national treasure Michael Heseltine scrapped both local authority housing and Parker Morris standards, he created the conditions which according to Schumacher should have triggered a perfect market response to a new world in which the poor could not expect to be housed in the same way, or to the same extent. (Except where, via subsidised purchase, they reduced the available public stock.)

Heseltine’s policies prompted big housebuilders to cut sizes and standards, focus on land speculation rather than quality of construction, and consistently opposed measures designed to improve quality, including energy and fire regulations – an attitude which persists. They were honest enough not to claim that they could house poor people decently – but then, why should they have?

So the third thumping gap is the absence of suggestion as to why or how the private sector will provide for the relatively poor. There is scant mention in Patrik’s essay of the following: children, families, communities. He seems to think that the world consists entirely of ‘young professionals’, mentioned more than once, who spend most of their time away from their home, which can therefore be kennel-sized.

A final thumping gap in the Schumacher proposition concerns inward migration to London since the 1980s – not discussed. Reading this hymn to the joys of capitalism, with its silly and insulting suggestion that the poor should live in the housing equivalents of Subway, McDonald’s and EasyJet, you wonder why Patrik fails to analyse a huge reason for the housing crisis in London: the addition of more than two million people over the past 30 years, increasing the city’s population by a third to its current record levels, with plenty more predicted to come. And they are not simply those ‘young professionals’, for which read: ‘the sort of people my practice employs’.

Obviously the capitalist class likes the population increase, because additional folk represent cheap labour and a bigger economic market; hence the CBI’s role as cheerleader for tired old Remnants masquerading as supporters of the dignity of labour.

But you can’t successfully accommodate huge population increases without planning, whether in respect of housing, schools or the NHS. That is precisely what we haven’t had, and if you assume, like the Adam Smith Institute, that planning is a dirty word and a doomed philosophy, then you will end up with our current ‘crisis’ condition.

By planning – and here I agree with Patrik – I do not mean development control; I do mean ‘predict and provide’.

Why Patrik Schumacher is wrong about housing | Opinion | Architects Journal

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