Housing markets and independence in old age: expanding the opportunities

This report highlights the benefits of specialised private retirement accommodation and recommends a number of simple policy changes at no cost to the public purse to help increase its supply and address the challenges of housing an ageing population.

Do preference reversals generalise? Results on ambiguity and loss aversion

Preference reversals are frequently observed in the lab, but almost all designs use completely transparent prospects, which are rarely features of decision making elsewhere. This raises questions of external validity. We test the robustness of the phenomenon to gambles that incorporate realistic ambiguity in both payoffs and probabilities. In addition, we test a recent explanation of preference reversals by loss aversion, which would also restrict the incidence of reversals outside the lab. According to this account, reversals occur largely because the valuation task endows subject with a gamble, activating loss aversion. This contrasts with the choice task, where the reference point is pre-experiment wealth. We test this explanation by holding the reference point constant. Our evidence suggests that reversals are only slightly diminished with ambiguity. We find no evidence supporting their explanation by loss aversion.

Household attributes and the future demand for retirement housing

Ageing populations provoke the question of how much bespoke housing should be provided for the elderly. Older people are generally reluctant to move but as they age health circumstances may encourage moves into specialised accommodation. This paper reports an exercise in estimating the future demand for specialised independent living housing and the extent to which that demand will be for owner occupied accommodation or renting, using data for England. The approach is based on a behavioral model related to health and housing issues. The forecasts indicate a substantial increase in demand, growing at a faster rate than the population as a whole. If supply does not rise to meet these demands, serious problems arise in the quality of life of, and cost of caring for, older people; with implications for health care and social services.

The impact on housing supply in England of planning delay and uncertainty

The time taken to consider development proposals within the English planning system continues to provoke great policy concern despite a decade of inquiry and policy change. The results of an extensive site-based survey and hedonic modelling exercise across 45 local authorities are reported here. The analysis reveals a slow, uncertain system. It identifies planning delay as a serious problem for housing supply and its ability to respond to increases in demand. Only a relatively limited set of factors seem relevant in explaining differences in times and the results suggest that 80% of councils’ performances are statistically indistinguishable from each other. These findings question the policy emphasis put on rankings of local authorities, though some influence from local politics is apparent. Development control is consistently a lengthy and uncertain process due to its complexity. Therefore, success in lowering planning delay is only likely through radical simplification.

Does regional infrastructure investment stimulate extra housing and commercial building supply? Long-run evidence across the English regions

This paper uses long-term regional construction data to investigate whether increases infrastructure investment in the English regions leads to subsequent rises in housebuilding and new commercial property, using time series modeling. Both physical (roads and harbours) and social infrastructure (education and health) impacts are investigated across nine regions in England. Significant effects for physical infrastructure are found across most regions and, also, some evidence of a social infrastructure effect. The results are not consistent across regions, which may be due to geographical differences and to network and diversionary effects. However, the results do suggest that infrastructure does have some impact but follows differential lag structures. These results provide a test of the hypothesis of the economic benefits of infrastructure investment in an approach that has not been used before.

Change, rigidity & delay in the UK system of land-use development control

The British system of development control is time-consuming and uncertain in outcome. Moreover, it is becoming increasingly overloaded as it has gradually switched away from being centred on a traditional ‘is it an appropriate land-use?’ type approach to one based on multi-faceted inspections of projects and negotiations over the distribution of the potential financial gains arising from them. Recent policy developments have centred on improving the operation of development control. This paper argues that more fundamental issues may be a stake as well. Important market changes have increased workloads. Furthermore, the UK planning system's institutional framework encourages change to move in specific directions, which is not always helpful. If expectations of increased long-term housing supply are to be met more substantial changes to development control may be essential but hard to achieve.

UK planning controls and the market responsiveness of housing supply

There is growing international interest in the impact of regulatory controls on the supply of housing The UK has a particularly restrictive planning regime and a detailed and uncertain process of development control linked to it. This paper presents the findings of empirical research on the time taken to gain planning permission for selected recent major housing projects from a sample of local authorities in southern England. The scale of delay found was far greater than is indicated by average official data measuring the extent to which local authorities meet planning delay targets. Hedonic analysis indicated that there is considerable variation in time it takes local authorities to process planning applications, with the worst being four times slower than the best. Smaller builders and housing association developments are processed more quickly than those of large developers and small sites appear to be particularly time intensive. These results suggest that delays in development control may be a significant contributory factor to the low responsiveness of UK housing supply to upturns in market activity.

Housing supply and planning delay in the South of England

There is growing international interest in the impact of regulatory controls on the supply of housing The UK has a particularly restrictive planning regime and a detailed and uncertain process of development control linked to it. This paper presents the findings of empirical research on the time taken to gain planning permission for selected recent major housing projects from a sample of local authorities in southern England. The scale of delay found was far greater than is indicated by average official data measuring the extent to which local authorities meet planning delay targets. If these results are representative of the country as a whole, they indicate that planning delay could be a major cause of the slow responsiveness of British housing supply.

Firm size and competition: a comparison of the housebuilding industries in Australia, the UK and the USA

Housebuilding is frequently viewed as an industry full of small firms. However, large firms exist in many countries. Here, a comparative analysis is made of the housebuilding industries in Australia, Britain and the USA. Housebuilding output is found to be much higher in Australia and the USA than in Britain when measured on a per capita basis. At the same time, the degree of market concentration in Australia and the USA is relatively low but in Britain it is far greater, with a few firms having quite substantial market shares. Investigation of the size distribution of the top 100 or so firms ranked by output also shows that the decline in firm size from the largest downwards is more rapid in Britain than elsewhere. The exceptionalism of the British case is put down to two principal reasons. First, the close proximity of Britain’s regions enables housebuilders to diversify successfully across different markets. The gains from such diversification are best achieved by large firms, because they can gain scale benefits in any particular market segment. Second, land shortages induced by a restrictive planning system encourage firms to takeover each other as a quick and beneficial means of acquiring land. The institutional rules of planning also make it difficult for new entrants to come in at the bottom end of the size hierarchy. In this way, concentration grows and a handful of large producers emerge. These conditions do not hold in the other two countries, so their industries are less concentrated. Given the degree of rivalry between firms over land purchases and takeovers, it is difficult to envisage them behaving in a long-term collusive manner, so that competition in British housebuilding is probably not unduly compromised by the exceptional degree of firm concentration. Reforms to lower the restrictions, improve the slow responsiveness and reduce the uncertainties associated with British planning systems’ role in housing supply are likely to greatly improve the ability of new firms to enter housebuilding and all firms’ abilities to increase output in response to rising housing demand. Such reforms would also probably lower overall housebuilding firm concentration over time.

The uncertainty of valuation

Valuation is often said to be “an art not a science” but this relates to the techniques employed to calculate value not to the underlying concept itself. Valuation is the process of estimating price in the market place. Yet, such an estimation will be affected by uncertainties. Uncertainty in the comparable information available; uncertainty in the current and future market conditions and uncertainty in the specific inputs for the subject property. These input uncertainties will translate into an uncertainty with the output figure, the valuation. The degree of the uncertainties will vary according to the level of market activity; the more active a market, the more credence will be given to the input information. In the UK at the moment the Royal Institution of Chartered Surveyors (RICS) is considering ways in which the uncertainty of the output figure, the valuation, can be conveyed to the use of the valuation, but as yet no definitive view has been taken. One of the major problems is that Valuation models (in the UK) are based upon comparable information and rely upon single inputs. They are not probability based, yet uncertainty is probability driven. In this paper, we discuss the issues underlying uncertainty in valuations and suggest a probability-based model (using Crystal Ball) to address the shortcomings of the current model.

Planning delay and the responsiveness of English housing supply

There is growing international interest in the impact of regulatory controls on the supply of housing. Most research focuses on the supply impacts of prescribed limits on land use but housing supply may also be affected by the process of planning monitoring and approval but this is hard to measure in detail. The UK has a particularly restrictive planning regime and a detailed and uncertain process of development control linked to it, but does offer the opportunity of detailed site-based investigation of planning delay. This paper presents the findings of empirical research on the time taken to gain planning permission for selected recent major housing projects in southern England. The scale of delay found was far greater than is indicated by average official data measuring the extent to which local authorities meet planning delay targets. Hedonic modelling indicated that there is considerable variation in the time it takes local authorities to process planning applications. Housing association developments are processed more quickly than those of large developers and small sites appear to be particularly time-intensive. These results suggest that delays in development control may be a significant contributory factor to the low responsiveness of UK housing supply to upturns in market activity.