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The housing market works, where we let it

A follow-up to Building enough homes has kept prices down in Leeds

Leaving the market to build enough homes can keep prices down. In this piece I'm going to show that by looking at a single ward in Central Leeds: City & Hunslet. My data comes from the land registry (sales of flats by postcode which I matched to wards) and Data Mill North (empty homes by ward and currently planned homes by ward).

The graph below shows what happened. It's a complete mess, but don't worry, I'll break it down and explain each bit.

And here's a list,

  1. Leeds city-centre was until recently almost completely depopulated.
  2. In the late 1990s people started to want to live in Leeds City Centre. Flat prices started to rise.
  3. In response, developers started building flats. Because planning and raising capital takes time the flats were completed and sold years later.
  4. Once lots of flats were being built, prices of flats started to stabilise. Prices peaked in 2004, well before the financial crisis.
  5. With prices falling, and then the financial crisis in 2008, fewer flats were built and sold.
  6. But over a thousand flats were still empty meaning that demand was easily satisfied and prices kept falling.
  7. Today few empty flats remain and prices are stabilising. Fortunately there are already plans to build many more central flats.

City & Hunslet ward was special; there were almost no local objections to building.

By the early 1990's City & Hunslet ward in Leeds was almost completely depopulated, with the households remaining largely extremely poor. As a result there wer ealmost no local objections to building. Urban regeneration was planned without significant popular opposition.

We can see this by looking at the Leeds Site Allocation Consultation responses. The many thousands of responses to proposals to develop in outer wards are overwhelmingly personal and opposed to building. By contrast the responses in City & Hunslet ward are either professional or positive. As importantly, there were only a tenth of the number of consultation responses in this ward as in other wards.

City & Hunslet boomed.

Without local opposition to development, City & Hunslet ward boomed. Over the past two decades almost half of all new flats in Leeds have been built there.

A mature housing market from nothing.

The vast majority of homes in City & Hunslet ward are flats. During the building boom the majority of flats being sold were new. More recently the market has matured. Resales are now the majority of an increasing number of transactions.

New-build sales rates remain much lower than at their peak but continue at a decent rate. Currently a new flat is sold every other day.

Build more and prices fall.

There are two important things to note about the price of flats in City & Hunslet ward.

First, they peaked in 2004. This means that they started falling before the financial crisis. Strong supply — not a credit-crunch related collapse in demand — seems the likely cause.

Second, the price of new-build flats has been the same as, or slightly lower, than the price of resold flats for nearly a decade. This is why I'm using the price of all flats in the rest of my graphs.

Empty homes peaked and have since declined.

In the 2000s more flats were built than were needed at that time. In 2006 nearly 1400 were empty.

Since 2010 these flats have been filling up quickly. The existence of these flats has been pushing down prices of city-centre flats for the last decade.

Flat prices respond to new-build and empty rates.

The market works. Prices rose, flats were built, prices fell, and flats were filled. In City & Hunslet — in stark comparison to most of the country — flat prices are about the same in real terms today as they were 15 years ago. As Ian Mulheirn has shown, this probably means that housing costs are lower than they were 15 year ago.

Future success is already planned

There are currently over 5000 flats planned in City & Hunslet ward. That's over half the total new flats currently planned in Leeds. As before this is in large part because there are few local oppositions to growth.

If nothing intervenes, Leeds' plans should keep prices of city-centre flats sensible for another decade.

For the rest of the city it will be a different story. The council recently buckled under huge pressure from local opposition and is likely to cut its housing target. Too few homes will be permitted, too few homes will be built, prices will rise, and living standards will fall.

So what?

I think that we should stop pretending that the market can't or won't build enough homes to keep prices down. It can and will.

Let's instead admit that through our local opposition to growth we are choosing high home prices and a lower quality of life for mostly young people in our society.

If we are doing it to protect communities, our culture, the environment, or something else, that may well be a price worth paying. What if we accept that opposing building pushes prices up and try to explain honestly why we should do it anyway?

Or what if we picked a few more places like City & Hunslet ward and let planners do their job?. I'm not asking for an end to sensible restrictions on development that we need. I'm suggesting giving more freedom to city planners to apply the rules that we have now without having to deal with as much public opposition.

Oh and last of all, because I know I'll get the messages, I know that London is different. I don't know enough to help there.

Londoners, I wish you all the best with your housing crisis. At the same time I hope that whatever solutions you find do not break what we have achieved or could achieve in the North. Lots of your interventions already do. Please think of us when you're proposing national solutions to a very regional problem.

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