Cities in the UK, and particularly London, may have a housing affordability crisis, but it is not a unique problem. Derek Wilson looks at what we can learn from Sydney and Vancouver.
As protesters demonstrate on UK streets on a seemingly monthly basis, it would appear that the Government’s housing strategies are undergoing a crisis of confidence. Its Housing and Planning Bill is attracting criticism not only from community activists, but also its own political allies1. Housing affordability is a major source of discontent for many, and as of yet, there does not seem to be an adequate or appropriate response.
This is not a situation unique to London or any one of the UK’s increasingly expensive residential markets; cities around the world are facing similar challenges and calls for action, with the majority of their governments unable to implement meaningful reform. However, concerted responses in a number of global cities have shown how progress can be achieved. Two such cities – both of which are facing affordability challenges even more extreme than London – are leading that charge. If we are to address the affordability crisis in the United Kingdom, we should look to these examples, appreciate their successes, understand their shortcomings, and relate them to our own challenges back at home.
Sydney: Building a New Legacy
For two and a half decades, home ownership has become increasingly unaffordable for Sydney residents. It has historically been an expensive city in comparison to most markets, but is even more so today; as of 2016, only Hong Kong outranks Sydney in terms of income-adjusted cost of housing2. While this can partly be attributed to the desirability of the city itself, and partly to sustained economic growth, governance issues have exacerbated the problem and rendered housing a trophy asset.
Many of these issues stem from market-oriented approaches to planning, under which the private sector was relied upon to provide infrastructure in the absence of government support. In the early and mid-2000s, infrastructure expenses were offloaded to such an extent that the cost of servicing a single residential lot could exceed A$100,000. This had the predictable effect of directing private developers towards higher-end (and higher-margin) residential products, with the supply of more affordable housing being slowly choked off. Combined with a limited land base restricted by urban growth boundaries, housing prices skyrocketed against income, increasing more than 50 per cent between 2001 and 20103.
This outcome can be partly chalked up to laissez-faire models of governance3. Without the necessary resources and regulatory mechanisms to maintain affordability, a widespread market failure was created, and the median home price in Sydney is now more than twelve times the median household income1. Anna Chubb, senior advisor to the minister of planning for New South Wales, notes that: “historically, we haven’t had strong leadership in strategic planning, and as a consequence we haven’t created a framework for affordable housing to be discussed in a reasonable way.”
However, the current government has taken a significant step to rectify this situation with the establishment of the Greater Sydney Commission, a body dedicated to the refinement and implementation of Sydney’s metropolitan plan. It will co-operate with multiple levels of government to introduce new legislation promoting housing affordability across the region. Adopting a ‘portfolio approach’, the GSC plans to focus on increasing the housing supply, improving the range of price points within it, and diversifying the housing stock beyond apartments and single-family dwellings. Though many of these strategies have been considered before, there has been no single body responsible for implementing them. Chubb believes that with this structure, “[Sydney] now has the leadership in place to actually make it happen for the first time.”
In addition to their portfolio approach, the GSC also plans to adopt a range of more targeted measures, each of which is intended to address particular market segments. Comprised of nine interconnected policy groupings, this integrated approach aims to create connections between government, the private sector, and non-profit organisations at a variety of scales, tackling everything from taxation and financing of particular developments to the planning of the entire metropolitan region.
Chubb urges that governments should “look at [housing] as a supply chain, and not just as one solution, but a whole range of them. The best strategy is a multi-pronged approach – not just about inclusionary zones, not just about supply, but about all of those things, and more.” This multi-pronged approach is how Sydney has chosen to move forward, and based on recent government plans, it appears as though its residents at all levels of the economic ladder will soon see some very tangible government interventions aimed squarely at improving their access to affordable housing.
The example set by Sydney is particularly relevant to the UK, where approaches to housing affordability have been trending towards the neoliberal strategy of simply building more. The 2015/2016 Housing and Planning Bill is a case in point – it attempts to address the affordability issue by promoting the construction of ‘Starter Homes’ for first-time buyers4. This policy is potentially problematic for two reasons: first, it does not attempt to address affordability issues for those outside this very specific target market, and second, it may not be particularly effective for those it does focus on.
The UK charity Shelter projects that for more than half of the administrative areas around the country, the starter homes proposed by the government will still be out of reach for the average wage-earner by 20205. Based on these assessments, the government’s proposed policy looks to improve affordability for some first-time homebuyers, while neglecting to address the rest of the market. The Sydney case would suggest that a more comprehensive approach is required – namely, one that addresses both renters and homebuyers at all price points through a range of housing types and affordability strategies. The strategy of building more starter homes may work for some, but it seems unlikely to achieve the type of systematic change that Sydney is aggressively pursuing – or that UK citizens are demanding.
Vancouver: Maintaining a Balance
Up until 1986, Vancouver was little more than a blip on the global radar. But Expo 86 changed that. Vancouver was thrust onto the international stage, and before long was growing at an unprecedented rate. Investment poured in and property markets boomed. More than 200,000 wealthy immigrant investors from these areas have moved to a city with a population of 2.4 million, and they now comprise 9% of metro Vancouver’s entire population6.
This has coincided with a staggering rise in the cost of housing, which geographer Professor David Ley views as the “collateral damage” of Vancouver’s economic growth strategies. Vancouver now ranks immediately behind Sydney as the third most expensive housing market in the world, five places above London1.
The median house price is now equal to 10.8 years’ worth of median household salary, and like London, the city’s citizens are becoming increasingly aggravated by the lack of affordable housing. “You’ve got a global market, but you’ve got local people trying to compete in that global market, and you find that they are getting priced out. There’s no other alternative at the moment, which is why you see the frustration” says Mukhtar Latif, the chief housing officer for the City of Vancouver. “You need to have government intervention to create affordability.”
In a city with a median household income of C$69,700, and a median dwelling price of C$726,200, it is understandable why some Vancouverites might be resentful of the influence of foreign money.1 Simon Fraser University researcher Andy Yan found that in addition to these high costs, university-educated adults receive lower salaries in Vancouver than in any of Canada’s other 10 largest cities7. Vancouver is now starting to see an exodus of young professionals looking for higher salaries and lower living costs, which is prompting concerns that the city has become a victim of its own success6.
While Canada’s recently elected Liberal government is currently working to establish a funded national housing strategy, the City of Vancouver has up until now received little support from the federal or provincial governments on the issue of housing, despite it being a core part of their mandate.
In the absence of intervention by the responsible governments, Latif is now spearheading an aggressive affordability strategy with the city in order to bring down the cost of housing. Unlike the supply-oriented strategies being deployed in the UK, he is moving forward with policies that aim to secure the affordability of existing properties – and by affordability, he does not only mean home ownership.
Latif suggests that Generation Y is much more transient than previous generations, and that home ownership is much less of a priority. That change in perspective has been embodied in policy. “We’ve been pushing more on rental than on home ownership … rental is much more affordable in terms of access to housing”, Latif says.
The City of Vancouver has recently introduced various incentives to promote the development of rental housing by institutional investors, ranging from reductions in parking requirements to increased density allowances. These incentives are estimated to add 1,000 additional rental units to the market every year, and while this figure may seem insignificant, it can have a tangible impact in the small corner of the market that is off-limits to investors.
The city is also working to secure existing rental units and affordable housing stock; many of the units developed in the 1970s and 1980s are currently leased for as much as 40% below market value, due to long-term rent controls. By mandating the preservation (or replacement) of these units, the effects of global capital flows are prevented from corrupting the affordable housing inventory that already exists. Further actions to limit the impacts of global investment have also been suggested, with mayor Gregor Robertson calling on the provincial government for a tax on property speculation.
“There is a way of dampening the market, and I think it’s important that we look at those tools as much as we look at understanding what those investments do to the market,” Latif suggested. However, he says that these types of policy responses are rendered much less effective in the absence of detailed data. “One of the things we have been quite keen to explore here is the introduction of pilot programmes to test the market and understand what’s happening, and then adjust those [policies] if need be.”
These pilot programmes are invaluable when weighing the need for economic development with the need for affordability – a critical issue that Vancouver and London have in common. Previously run-down areas in both cities are rapidly gentrifying, with new economies emerging and housing costs increasing. As Latif puts it, “it’s a balance between the economic growth you are seeking to achieve, the vibrancy that brings, and the jobs and opportunities, as much as it is the investments that are coming from overseas and pricing people out of their homes.”
Despite Vancouver’s limited authority on housing policy, and the abdication of responsibility by more senior levels of government, it has nonetheless managed to test and implement innovative market interventions to help restore that balance.
Bringing it home
Sydney and Vancouver have much to teach London – and the UK more generally – about the challenge of housing affordability and how it can be met with strong governance and innovative policy. They demonstrate that there is a way forward, even when confronting the most systemic and seemingly intractable problems.
With a comprehensive and integrated strategy delivered at all levels of government, there may indeed be a way forward for cities in the UK as well.
Derek Wilson is a Young Urbanist and the principal of Regenesis Urban Strategies Limited, a Vancouver-based consultancy with international expertise in the economics of sustainable urban development. Derek is also currently reading for a MSc degree as a Kellogg College Scholar at the University of Oxford
1. “Planning bill needs changes to help councils tackle the housing crisis.“ The Guardian, 10 April 2016. http://www.theguardian.com/politics/2016/apr/10/planning-bill-needs-changes-to-help-councils-tackle-the-housing-crisis↩
2. 12th Annual Housing Affordability Survey: Rating Middle-Income Housing Affordability. Demographia International, 2016.↩
3. Beer, Andrew, Kearins, Bridget, and Pieters, Hans. “Housing affordability and planning in Australia: the challenge of policy under neo-liberalism.” Housing Studies 22.1 (2007): 11-24.↩
4. “Housing and Planning Bill 2015-16 – Key Points Summary”. ServiceMatters. Retrieved from: www.housingnet.co.uk/download_pdf/1317↩
5. Rachael, Emmett and Van Lohuizen, Adam. “Starter Homes – will they be affordable?”. August 2015. https://england.shelter.org.uk/__data/assets/pdf_file/0011/1183790/Starter_Homes_FINAL_w_Appendix_v2.pdf↩
6. Ley, David. “Global China and the making of Vancouver’s residential property market.” International Journal of Housing Policy (2015): 1-20.↩
7. St. Denis, Jen. “Vancouver’s huge income-to-home-price gap will continue to challenge city: planner”. Business in Vancouver. September 25, 2014.↩