“Remember that we sometimes demand explanations for the sake not of their content, but of their form. Our requirement is an architectural one; the explanation a kind of sham corbel that supports nothing.”
From Homes for Heroes to Exponential Zeroes.
Neglected actors in the “Housing Crisis” Narrative
Absorption Rate, Last Time Buyers, Cash Buyers, Fiscal Policy ( MIRAS and Stamp Duty ) and Mortgage Lending by the Banking Sector. Demography of Immigration and Ageing.
From Homes for Heroes to Exponential Abstract Zeroes.
Neglected actors in the “Housing Crisis” Narrative
#AbsorptionRate, #LastTimeBuyers,#Cash Buyers, #FiscalPolicy ( #MIRAS and #StampDuty ) and #MortgageLending by the #BankingSector. #Demography of #Immigration and#Ageing.
A road map for the Policy contexts of Housing supply. Demand Side and Supply side are broadly considered but a large lacunae in the literature is the relative influence of the segmentation in the Housing stock across tenures and relative to finance for Land and construction across tenures and Mortgages for the Owner occupation market. The Relative size of the New housing supply is considered and how influential are the different players in the Housing Market.
A week ago I decided to write a jaunty article on the “ Housing Market “ looking particularly at the Question of affordable homes. I came across a House of Lords debate from November 17, after deciding to see what recent articles on the “Housing Market” Came up in the BBC website search bar. The debate as is usual on this subject was somewhat polarised , with both sides for the most part not even tangentially seeking a context for the arguments about Supply problems , or Demand Problems In relation to Housing Stock or the Value of that stock in relation to the flow of funds to purchase new stock or existing stock.
Lord Best in his contribution to the debate mentioned the Letwin Review , and the introductory analysis to the Full report from Sir Oliver, as the Charity Shelter’s Blog HeadLine put it. “Letwin Identifies the Problem but misses the Solution.” Shelter though
Fail to mention the most important insight that Sir Oliver makes in both documents.
“The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house builder to be able to be sold successfully into) the local market without materially disturbing the market price.”
In the Same debate Lord Lilley gave a good summary of the polarised arguments and added in some helpful dimensions to The demand question.
“Until recently, the main driver of demand for housing was that households were becoming smaller”. “That used to mean we had to add 0.5% to the housing stock every year to cope with smaller households. That has come to an end.
Young people are now unable to leave home and are leaving later.
In 1999, 2.4 million adults aged between 20 and 34 lived at home with their parents.
By 2019, 3.5 million people in that age group lived at home with their parents.
So what is the reason?
“Over the last decade, the official figures show a net increase to our population of 2 million from those coming to settle here from abroad. That is equivalent to our having to build cities the size of Nottingham, Derby, Leicester, Middlesbrough, Carlisle, Oxford, Exeter, Portsmouth and Southampton, every decade, just to keep up with the net inflow from abroad.
If we allow a continued net inflow of 200,000 or 300,000 into this country, we have to build extra houses on top of the demand of the domestic population that is already here”
The Polarisation of the discourse into two broad groupings is explained in an interesting paper
Framing The Housing Crisis by Chris Foye of Henley Business school , University of reading.
“To conclude though, I want to focus on two trends these think-tanks’ framings shared in common. First, all three think-tanks agreed that a shortage of supply was the main ‘cause’ of housing unaffordability. Inversely, there was almost no reference to the role of demand-side factors, such as interest rates, mortgage market liberalisation, the income elasticity of demand or income/wealth in- equalities, all of which are recognised by neoclassical economists to have comparably large effects on house prices and affordability”
“The end result is that the debate becomes “bedevilled by rival simplifications” as Edwards (2015) recently described the English housing crisis discourse.”
The Following is a brief summary of where my contextual endeavors for putting dimensions on the “Housing Market”, as ever as I developed my own thoughts and clarified my own thinking
I found that the more I pared down my questions I found more nuanced answers but more answers on the supply side school of thought. I ended here with a partial route map
For some of the roads I have traveled.
Another Book now to read.
“there was almost no reference to the role of demand-side factors, such as interest rates, mortgage market liberalisation, the income elasticity of demand or income/wealth in- equalities”
“ I wanted to write that my work consists of two parts: of the one which is here, and of everything which I have not written. And precisely this second part is the important one.”
- On his Tractatus Logico-Philosophicus, in a letter to Ludwig von Ficker (1919), published in Wittgenstein : Sources and Perspectives (1979) by C. Grant Luckhard
Has the tide turned for Europe’s banks? –
Has the tide turned for Europe’s banks? Despite rising rates in 2022, only two of the 20 largest European lenders trade above book value
Happy new year, 2023 .
This FT article sets the tone for the Magic money tree narrative renaissance. It was more and more noticeable as 2022 progressed. Will we see
A European Sovereign debt crisis? It’s an obvious route to get Stirling back in the EURO fold with a hair shirt to boot.
The prospects for looting remain teed up , and with Bailey still at the BOE, I think Dash for cash 2 is upon us.
I have been researching an article on the Affordable Housing question?
I am keen to make progress on the HBF deposit unlock scheme with Home@ix group this year, and think a Rentenmark style bond aimed at bank of mum and Dad, last movers is an insight my Christmas period research has revealed.
A mortgage a day helps you live rent and pay
PAY RENT AND LIVE
Two prices ( Mulheirn )
#96: The Housing Supply Myth â Cameron Murray & Ian Mulheirn
The Housing Supply Myth – Cameron Murray & Ian Mulheirn
“The 5th thing is the misunderstanding that there are two markets here.
You have two markets, Two prices
The Market for housing services is the Rental Market
The Market for housing assets is the House Price
Just Like Cameron’s example of the I Phone price versus the Apple Share Price.
These are different markets with different prices and people just don’t get
6. Legitimate government spending generally provides infrastructure, services and welfare payments to resident people and businesses. To benefit from this government spending, a person must own or rent a home or operate a business in the area. The monthly amount people pay to occupy their homes is set in the marketplace, based upon location and the value of natural, commercial and government amenities provided. Landlords charge monthly for these location amenities while home sellers charge a lump sum.
Functions of Money fungible etc store of value
The following points highlight the top six functions of money.
- Function # 1. A Medium of Exchange: …
- Function # 2. A Measure of Value: …
- Function # 3. A Store of Value (Purchasing Power): …
- Function # 4. The Basis of Credit: …
- Function # 5. A Unit of Account: …
- Function # 6. A Standard of Postponed Payment:
Property as a security/surety/collateral
The Historic Periods.
1.1 .Post World War 1.
Demand for houses had built up since, and as a consequence of low levels of building during the war; the number of families increased;(2) migration occurred from the more depressed areas to the South and Midlands; and local authorities took a larger share of house completions during the twenties. From 1932, RPDI grew sharply, after stagnating since 1928 (Chart 13).
Although there are some similarities between financial innovation in the thirties and today it seems unlikely that a revival in housebuilding on the scale that took place then will recur. Several of the features of the thirties are lacking today. Interest rates have fallen in nominal terms, but remain high in real terms by the standards of the seventies. Real incomes are not rising strongly, and building land is in rather inelastic supply. The housing stock is high in comparison to the population over nineteen( years of age)(l) by recent standards, after some years of rapid growth in the sixties; and migration of population within the United Kingdom is not occurring on the scale of the thirties. Recent demographic trends which imply more rapid growth of the adult population in the next decade, and the slowdown in building, may presage a degree of pent-up demand in future years, but do not seem to be influential as yet.
1.2 Post World War 2.
This analysis has placed little emphasis on the demand for
loans, since rationing was in force for much of the period.
Clearly, however there were periods when queues were
short: but these were generally at times when interest rates
and other factors combined to produce weak demand. Thus
in 1973 and 1974 high rates were coupled with flat or falling
real incomes, and this pattern was repeated in 1977. In
periods of high and increasing demand, rationing by
building societies became important.
Other institutions did not generally fill the vacuum created
by rationing. Local authorities and insurance companies
have made a comparatively minor contribution, as have
banks until rather recently. This is in contrast to experience
elsewhere; for example, in the United States, banks account
for 17% of outstanding housing loans, and 45% in France,
compared with about 7% in the United Kingdom in 1981.
In 1912, Raymond Unwin published a pamphlet Nothing gained by Overcrowding. He worked on the influential Tudor Walters Report of 1918, which recommended housing in short terraces, spaced 70 feet (21 m) apart at a density of 12 per acre (30/ha). The First World War indirectly provided a new impetus, when the poor physical health and condition of many urban recruits to the army was noted with alarm. This led to a campaign under the slogan “Homes fit for heroes”. In 1919, the Government first required councils to provide housing, built to the Tudor Walters standards, under the Housing, Town Planning, &c. Act 1919 (Addison Act), helping them to do so through the provision of subsidies. London County Council embraced these freedoms and planned eight ‘cottage estates’ in the peripheries of London: Becontree, St Helier, Downham for example; seven further followed including Bellingham. Houses were built on green field land on the peripheries of the urban area. The war had caused house building costs to rise enormously: Sir Ernest Simon reported to the Manchester Housing Committee in 1910 that “houses that had cost £250 to build pre war were then costing £1,250, so the economic rent was 30/- a week but had to be let at 12/6d”.
The provision of local authority housing varied throughout the UK; in the period 1919–39 67% of the houses built in Scotland were in the public sector, compared to 26% in England.
Mortgage lending and the housing market Bank of England Quarterly Bulletin: August 1995
This article, which has been prepared mainly by E P Davis and I D Saville of the Bank’s Economics Division, argues that:
• Now the banks have entered the housing market in a major way, the market for mortgages is more likely to be cleared mainly by interest rate movements rather than by rationing.
• The recent sharp rise in mortgage lending reflects the removal of restrictions, allowing persons to increase their capital gearing, and probably does not reflect a significant rise in the demand for housing.
• A substantial part of mortgage lending does not ultimately finance new or improved housing, but is available for the acquisition of other assets or other spending.
• House prices are somewhat low in real terms, and may recover in the course of the next few years.
1.3 The 1970’s Boom and Bust
Fluctuations in house prices are relevant to a broader economic assessment,(1) because of the information they can contain both about household expectations and about demand and price pressures in the economy.
Developments in the housing market over the past few years ( Published in 1995)—including arrears and possessions, and negative equity—have increased the perceived risks of borrowing for house purchase.
In addition, lower general inflation is likely to mean that the demand for housing as a hedge will be reduced. A climate of price stability may also lead to smaller fluctuations in real house prices, as uncertainty about the rate of return from housing is reduced; in the past, changing expectations have been an important source of volatility in real house prices. Moreover, both lenders and borrowers may shift towards lower desired loan-to-value ratios to take account of the likelihood that with lower general inflation house price falls may occur from time to time.
1.4 The 1980’s Boom and Bust
The film focuses on the long term effects of the Right to Buy policy implemented by the United Kingdom Government in the 1980s. It is argued that the selling of publicly owned housing to its tenants, and the subsequent policy of renewal, has led to gentrification and a form of social cleansing. This has resulted in the disintegration of communities, and local authorities being unable to provide adequate housing for those in need.
The film includes interviews with social geographer Danny Dorling and working class academic Lisa Mckenzie. There are also interviews with journalists Peter Hitchens, Dawn Foster and Deborah Orr; as well as prominent politicians Nicola Sturgeon; Caroline Lucas and other Members of Parliament with an interest in the issue.
Areas featured include Gorbals and Govanhill in Glasgow where the council has transferred its stock to a housing association; as well as two estates in London being faced with demolition: Cressingham Gardens and the Aylesbury Estate.
1.5 The 1990’s Boom and Bust
1.6 The Naughties Boom and Bust
1.7 The Teens to the Pandemic
Fluctuations in Tenure ratios.
1.8 The Pandemic Urban Flight
The Supply Side.
2.1 Land and Planning Central and Local Government
The financialisation of housing production: exploring capital flows and value extraction among major housebuilders in the UK.
The changing shape of the UK housebuilding sector The recent fnancial and operational performance of large UK house building firms should be set within the context of long-term structural changes in the sector. The development of large housebuilders in the form of public limited companies (PLCs)—giving them greater access to development finance and enabling them to exert more power in land markets—has been crucial to this process. In 1980, there were over 10,000 small and medium enterprise (SME) housebuilders active in Great Britain, building 57% of all new housing; by 2014, this had dropped to 3000 SME builders delivering just 27% of all new dwellings (Lyons 2014).
2.4 The Contracting Business, From Egan review to The Farmer Review.
1999. Towards an Urban Renaissance. Urban Task Force.
2000. Building a Better Quality of Life: A strategy for more sustainable construction, Department of the Environment, Transport and the Regions.
2001. Modernising construction, National Audit Office. .
2002. Rethinking Construction 2002: Achievements, Next Steps, Getting Involved, Rethinking Construction Group Ltd.
2002: Accelerating change: A report by the Strategic Forum for Construction, chaired by Sir John Egan.
2002 Fairclough Report, Rethinking Construction Innovation and Research: A Review of Government Policies and Practices. DTI and DTLR.
2005. The Urban Renaissance six years on. Urban Task Force.
2007. Callcutt Review of Housebuilding Delivery, John Callcutt
2007. Place-shaping: a shared ambition for the future of local government, Lyons Inquiry into Local Government, Sir Michael Lyons.
2009. Never waste a good crisis. Andrew Wolstenholme, Constructing Excellence.
2011. Laying the foundations: a housing strategy for England, HM Government.
2012. Government Construction Task Group, Government Construction Strategy: Final Report of the Procurement/Lean Client Task Group. July 2012.
2014. Our future in place, The Farrell Review of Architecture + the Built Environment (FAR). Sir Terry Farrell.
2014. Property in politics. Royal Institution of Chartered Surveyors (RICS).
2014. Lyons Housing Review ‘Mobilising across the nation to build the homes our children need’. 16 October 2014.
2014. Going for growth, Reviewing the Effectiveness of Government Growth Initiatives. All Party Urban Development Group. 17 November 2014.
2015. Fixing the foundations: creating a more prosperous nation. 10 July 2015
2015. A brighter future for our towns and cities, A report from the Commission for Underperforming Towns and Cities. The Institute of Economic Development (IED).
2016. Building Better Places. The Committee on National Policy for the Built Environment, 19 February 2016.
2016. Government Construction Strategy 2016 2020. Infrastructure and Projects Authority, 23 March 2016.
2017. Housing White Paper: Fixing our broken housing market. 7 February 2017.
2.4 Banking for Land and Construction procurement.
There are a dozen urgent measures that could and should provide temporary relief, but we also need to address the underlying cause of this national failure. What would make the biggest difference to getting more homes built—as the noble Lord, Lord Lilley, suggests we need to do—and galvanising the process of reducing the disastrous housing shortages? Top of my wish list for fundamental change is the adoption of the mechanisms for land value capture advocated by Sir Oliver Letwin in his 2018 review. Sir Oliver got to the heart of why we have been failing, year after year, to build what we need. Yes, we should resource our local planning departments to speed up the planning process, but that is not why we get such a slow build-out of new developments and build so few new homes affordable to the half of the population on average incomes or less, or why we have developments that continuously fail us on so many counts. We also see SME builders being excluded, despite those firms often being more in tune with local needs, the local vernacular and the local labour market. The housebuilders’ business model requires them to fight, with their lawyers and consultants, for the minimum number of affordable homes—the maximum number of properties they can squeeze on to a site, with the least green infrastructure and the fewest amenities, and to build at a speed that ensures the continuing scarcity that drives up prices. Our system rewards the very actions by housebuilders most at odds with the public interest. Instead, the Letwin review tells us we should take back control. Letwin puts the scale at 1,500 homes but his formula is just as applicable for 150: for every major development, land should be acquired at a price that relates to its current use—for example, for agricultural land, Letwin suggests paying no more than 10 times the agricultural value— with a master plan that determines what is built and parcels out sites to different builders and providers, for a range of uses and tenures. Having bought the land at a reasonable price, using compulsory purchase powers if necessary, a development becomes viable that actually and promptly delivers the social benefits missing today. To achieve this upending of the current, highly unsatisfactory process, Letwin proposes local authorities establish arm’s-length development corporations, as is quite possible under existing law. These would borrow the finance to buy the site and capture the land value uplift. The development corporation’s master plan can then incorporate all the features of healthy place-making.
Transfer of Local Authority Housing to Housing Associations
Housing Associations growth
Revenue from Right to buy and investment in new stock.
Local Authority ability to Borrow to build.
3.The Demand Side.
3.1 The Owner Occupation and Rental Market
3.2. Social , Local Authority Housing and Housing Associations
3.3 Buy to Let ( BTR) (PRS) FOr Profit Social Rent.
3.4. Mortgage Provision
Interest Component of Capital Expenditures
THE MONEY SYNDROME is therefore unique among books on economic
topics. There are three titles that it could be compared with:
•Margrit Kennedy, Interest and Inflation Free Money. This book which
was largely inspired by Helmut Creutz’ work, can be seen as a more
popular summary of THE MONEY SYNDROME. The fact that this book
has been translated into eighteen languages up to now may indicate
a growing worldwide interest in the topic.
•Gero Jenner, Das Ende des Kapitalismus. Triumph oder Kollaps eines
Wirtschaftssystems?, Frankfurt/M. 1999, Fischer Taschenbuch Verlag
(Link in German only: The End of Capitalism. Triumph or Collapse of
an Economic System?) While relying on data from Helmut Creutz’
book as a standard work of reference, the author lays emphasis on
international scale industrial and sociological effects.
•Bernard Lietaer, The Future of Money, 2001, Random House.
Impressed by a rapid worldwide increase of alternative models of
economy, such as local exchange trading and barter systems, he
probes deeply into the psychological and sociological implications of
money. As a former manager of the Belgian National Bank Lietaer
also promotes an innovative global reference currency similar to
Keynes’ proposal of “Bancor”.
4.The Housing Crisis Debate.
In sum, all three think-tanks occupied very different positions in relation to the fields of science, media, and politics (and less significantly, business), and this can help us explain why their framings of the housing crisis diverged. To conclude though, I want to focus on two trends these think-tanks’ framings shared in common. First, all three think-tanks agreed that a shortage of supply was the main ‘cause’ of housing unaffordability. Inversely, there was almost no reference to the role of demand-side factors, such as interest rates, mortgage market liberalisation, the income elasticity of demand or income/wealth inequalities, all of which are recognised by neoclassical economists to have comparably large effects on house prices and affordability (Meen and Whitehead, 2020). This ‘supply shortage’ framing has not gone without contest. In the last decade, there have been several attempts to challenge the idea that housing unaffordability is due to a shortage of supply, most recently from Mulheirn (2019). Yet, these challenges have had little traction, much to the consternation of some economists.18
These demand-side framings are unpopular among New Urban Economists, and challenge the efficacy of free-markets, so it is unsurprising that both Centre for Cities and Policy Exchange have eschewed them. But why did Shelter – or other left-leaning think-tanks – not advance these demand-side framings? The answer becomes clear once we recall Shelter’s anchoring in the field of politics. As discussed, one consequence of the framing strategies pursued by think-tanks is that causal narratives become increasingly politically contingent, evaluated not only on the basis of their explanatory power but also on the perceived short-term feasibility of the policy solutions that flow from them. Put simply, demand-side explanations were eschewed by Shelter (and other organisations seeking to influence policy) because they were perceived to imply policies, such as wealth redistribution, which are judged politically unfeasible (at least in the short-term). As Toby Lloyd described Mulheirn’s demand-side framing “it’s just not useful as it doesn’t lead to any meaningful solutions”.19 This likely explains why supply-side framings of the housing crisis continue to dominate in the English policy discourse more generally.
The other trend that the three think-tanks have in common is that
they have all become more disciplined in their framings since 2017.
Whether it was Shelter’s campaign for land reform, C4C’s campaign for
planning reform; or PX’s Building Beautiful Agenda – all three of these
only became prominent after the 2016 EU referendum. Before then, the
Framing strategies of all three think-tanks were much more disparate.
Again, one explanation for this trend relates to changes in the field of
politics on which all three think-tanks are dependent, albeit to varying
degrees. When the Cameron administration won an overall majority in
2015, they came back into power with an ambitious programme for
housing and planning policy reform (e.g. Planning Bill 2015–16). This
pushed the think-tanks (especially Shelter and Centre for Cities) onto the
back-foot, forcing them to react to the government’s agenda. However,
after the EU referendum and the supplanting of David Cameron by
Theresa May, there was a vacuum in policymaking, which likely allowed
think-tanks to be much more proactive in pushing their own agendas.
More specifically, what think-tanks do is to frame the science. The defining feature of any successful political narrative lies in providing a simple and flexible story that succinctly links together a series of ‘symptoms’ with a cause while attributing blame (Hay, 2001: 204; Stanley, 2014). This is what framing seeks to achieve. Defined by Entman and Rojecki (1993: 52) as “the process of selecting and emphasising aspects of complex issues according to an overriding evaluative or analytical criterion”, framing involves two acts: first it presents a highly selective, but not factually inaccurate, picture of the scientific evidence; second, it entwines the evidence with a particular policy recommendation so that the positive and normative become indistinguishable.
By entwining the evidence with their preferred policy-agenda – e.g. “house price inflation is caused by planning constraints” – framing strategies allow think-tanks to advance preferred policy agendas under the auspices of pure scientific enquiry (Daviter, 2011). Moreover, it allows them to do so in a tightly condensed format that is better equipped to survive in the fields of politics and media where the competition for capturing attention is intense (Dayan and Katz, 1992, Baert, 2012). The corollary of these framing strategies though – and of the structural logics to which they conform – is that causal narratives become increasingly politically contingent. The decision of which cause to emphasise is made not only on the basis of that cause’s explanatory power but also on the perceived short-term feasibility of the policy solutions that flow from it.
Framing strategies also lead the debate to become increasingly reductive. Rather than engaging with opposing causal explanations and policy proposals in good faith, there is a tendency instead to just crowd them out of the fields of media and politics, through relentlessly repeating the same frame, thus capturing the scarce attention of the public and policymakers (Dayan and Katz, 1992, Baert, 2012). The end result is that the debate becomes “bedevilled by rival simplifications” as Edwards (2015) recently described the English housing crisis discourse.
Liam Haligan 2019. Home Truths: The UK’s Chronic Housing Shortage – How it Happened, Why it Matters and How to Solve It. Biteback
The odds on ending our housing emergency improved this weekend after the Daily Telegraph revealed that Tony Pidgley, founder and chairman of Berkeley Group, has joined the ranks of the country’s growing coalition for land reform. Speaking to journalist Liam Halligan for the new book Home Truths: The UK’s chronic housing shortage, Pidgley describes a housebuilding system ‘in dire need of reform’, and calls for landowners and developers to be forced to share profits of new housing developments with communities, saying: ‘The whole of society should capture that value – it’s about decency.’
The Property Lobby
The Hidden Reality behind the Housing Crisis
By Bob Colenutt
4.2 Wages and employment
4.3 Mortgage Market.
4.4 Cash Buyers
4.5 Bank of Mum and Dad
4.6. The Housing Ladder
4.7 Generation Rent and Student Debt.
In 2020, the BBC reported the UK’s housing gap was in excess of one million homes, and previously (in 2019) that “An estimated 8.4 million people in England are living in an unaffordable, insecure or unsuitable home, according to the National Housing Federation”. Unaffordable housing is defined by the Affordable Housing Commission as to where housing costs are above 30% of household income. In a government briefing paper, ‘Tackling the under-supply of housing in England’, Barton and Wilson describe England’s housing need as being illustrated by issues “such as increased levels of overcrowding, acute affordability issues, more young people living with their parents for longer periods, impaired labour mobility resulting in businesses finding it difficult to recruit and retain staff, and increased levels of homelessness”.
Despite an added 244,000 homes to England’s housing stock in 2019/20, the notion that an increased supply of housing will improve affordability has been challenged: the UK Housing Review (September 2017) states, “Indeed as the evidence to the Redfern Review from Oxford Economics reminds us, it is unlikely to bring house prices down except in the very long term and with sustained high output of new homes relative to household growth. Even boosting (UK) housing supply to 310,000 homes per annum in their model only brings a five per cent fall in the baseline forecast of house prices”. Therefore, the National Housing Federation (NHF) and Crisis from Heriot-Watt University argue that alongside the needed 340,000 new homes each year (until 2031), 145,000 of those “must be affordable homes”.
Amberfield Land RICS.
On 15 September 2014, the Royal Institution of Chartered Surveyors (RICS) published ‘Property in Politics‘, a report which it claimed set out a bold new vision for the property market. The report followed the largest ever consultation carried out by the RICS.
One of the key recommendations of the report was that a new land classification should be created, ‘amberfield land’, which would identify ‘ready to go land’. It suggested that creating a pipeline of ready-to-go amberfield land would increase the supply of housing and create new development opportunities.
Amberfield land would be an addition to the existing classifications of:
- Greenbelt or ‘greenfield land’ – which establishes a buffer zone between urban and rural land, and
- ‘Brownfield land’ – defined in Planning Policy Statement 3 (PPS3) in 2010 as ‘previously-developed land…which is or was occupied by a permanent structure.
6.Money Supply and Mortgages
6.2 Council for Mortgage Lenders.( CML)
6.3 CML response to Calcutt review,
24 April 2007
1. The Council of Mortgage Lenders (CML) is pleased to respond very briefly to the
Callcutt review of housebuilding delivery.
2. The CML is the representative trade body for the residential mortgage lending
industry. Its 161 members currently hold over 98% of the assets of the UK mortgage market.
3. The CML and its members naturally focus directly on the UK mortgage market and
their interest in the house building market derives from that focus. Nevertheless, lenders are
the key funders of home purchase and thus indirectly support new house building. It should
not be forgotten that mortgage lenders provide funds both for home ownership and the private
rented sector. In addition, the CML members have also lent c. £40 billion UK-wide for newbuild, repair and improvement in the social rented sector.
4. Because of the key role played by lenders in the house building process, it is
important that they are fully involved in policy discussions aimed at influencing the house
building market. Failure to consult properly carries the risk that markets may be distorted
because property may be intrinsically unmortgageable or because supply or demand factors
may render categories of property unattractive as security for loans
5. This brief response will focus on two areas where government has influenced the
house building market in unintended ways and where better consultation with the mortgage
industry might have created a happier result.
Modern methods of construction (MMC) and mortgageability
6. Because of the key funding role of lenders it is important that those involved in house
building are aware of the features of properties that allow lenders to use them as security for a
mortgage loan of up to 35 years term. Briefly these features are:
• A life span of at least 60 years;
• Whole life costs comparable to traditional construction;
• Repair costs comparable to traditional construction and the ability to repair a property
using normal (local) trades;
• The potential for the property to be adapted over its lifetime without excessive cost or
difficulty, eg, to add a porch or conservatory; and
• Buildings insurance to be available on normal terms.
7. Past generations of non-traditional construction have failed to meet prudent lending
criteria on one or more of the counts set out above. Lenders (along with owners) are the
longest term stakeholders in a property and are rightly cautious about the value of their
security over the mortgage term.
8. Government has properly been concerned about overall housing supply. As part of its
drive to create a step change in supply ministers have supported increased use of MMC
through exhortation and directly via through the distribution of grant for new build by
housing associations and others. This has led to an increased use of MMC designs
particularly by housing associations building for rent or sale for low-cost home ownership.
9. Unfortunately, by no means all MMC designs meet the criteria set out above, and this
has led to some confusion as to which properties are mortgageable. In some cases, properties
have been built by housing associations with the intention of moving to open market sale
without prior discussions about mortgageability. Pressure by government to adopt modern
methods rather than simply to build efficiently has played a part in creating uncertainty. In
addition their failure to consult has meant that recognised standards in the area of MMC were
not in place at an early stage and this has undermined confidence of both lenders and
10. For its part the CML has engaged with the Building Research Establishment to
develop a certification standard for MMC properties that will recognise and meet the needs of
both lenders and buildings insurers. The new standard − known as LPS 2020 is still under
development but should make a valuable contribution to improving new build quality in
11. Government has the ability to influence (and distort) markets through modifications to
the planning system. Two examples will suffice.
12. As part of its package of measures to boost housing supply, the government has,
through changes to the planning guidance, created a situation where the proportion of newbuild flats has increased dramatically. As a result, there are anecdotal reports of localised
over-supply of new-build flats in urban areas, manifested in problems in selling such
properties and in difficulties for owners in selling properties at their original valuation. In
some cases, rental values have also been less than expected. Some lenders have reacted by
tightening their lending criteria in relation to new-build flats. This is a situation that could
have been avoided by better consultation with stakeholders including lenders. Indeed, the
CML wrote to the Minister Yvette Cooper MP some two years ago on this subject.
S. 106 agreements
13. A neglected aspect of housing supply is the difficulties lenders have been facing with
restrictive covenants imposed by some local planning authorities through planning
obligations (ie, s. 106 agreements) for affordable housing. Despite recent guidance from
DCLG local planning authorities (LPAs) are still adopting different approaches to affordable
housing in s. 106 agreements and lenders find it very difficult to deal with the variety of
restrictions being imposed. Lenders are finally are beginning to see the adoption of ‘cascade’
mechanisms to deal with restrictions on rural exception sites under PPG3. This means that
instead of lenders never being allowed to sell the property on the open market, the number of
eligible people is gradually increased until a buyer is found. The cascade has to take placed
within a limited time period. However, these mechanisms are not being adopted universally
and there is a danger that lenders will withdraw support for these schemes if this does not
happen. This example highlights the need for local as well as central government to be
sensitive to the needs of key stakeholders and for central government to enforce its guidance
14. The key message of this brief response is that lenders are an important stakeholder in
the house building process, though they are sometimes forgotten. It is vital that government
and other players in this market engage lender representatives fully in planning measures that
can have a significant impact upon the market.
15. This response has been produced by the CML in consultation with its members.
Comments and queries should be addressed in the first instance to Andrew Heywood, Deputy
Head of Policy:
Telephone 020 7438 8933
7.Mind Map of the Policy review minefield.
This article presents a list of key reports about the UK construction industry. Detailed articles are available about some of these reports, which can be accessed by clicking on the links, and more will be added.
1934. Building to the skies. Alfred Bossom.
He wrote, ‘The process of construction, instead of being an orderly and consecutive advance down the line, is all too apt to become a scramble and a muddle.’
He also saw that this inefficiency impacted on the wider economy, writing, ‘All rents and costs of production throughout Great Britain are higher than they should be because houses and factories cost too much and take too long to build… Bad layouts add at least 15% to the production of the cotton industry. Of how many of our steel plants and woollen mills, and even our relatively up-to-date motor works, might not the same be said? The battle of trade may easily be lost before it has fairly been opened – in the architect’s design room.’
Similar criticisms have followed Building to the Skies, most notably; the Latham Report, Constructing the Team in 1994; The Egan Report, Rethinking Construction in 1998; the Government Construction Strategy in 2011 and Construction 2025, published in 2013.
Sir Michael Latham described the UK construction industry as ‘ineffective’, ‘adversarial’, ‘fragmented’ and ‘incapable of delivering for its customers’, largely the same points as those set out by Bossom.
1940. Barlow Report. Royal Commission on the Distribution of the Industrial Population (Barlow Commission)
The Barlow Report, Royal Commission on the Distribution of the Industrial Population (referred to as the Barlow Commission) was commissioned by Royal Warrant on 8 July 1937 to investigate the distribution of industry and to propose remedies to the perceived disadvantages of a concentrated population. It was chaired by Sir Montague Barlow.
The Barlow Commission followed the Third Report of the Commissioner for ‘Special Areas’ published in 1936, relating to the imbalance in the distribution of industry and industrial populations due to the decline of some heavy industrial areas and the concentration of light industry and distributive trades around London.
The war prevented its immediate implementation but the report had a significant influence on post-war reconstruction and set the foundations for a formal new towns programme, culminating in the New Towns Act 1946 and triggering a major shift towards the building of new towns.
2007. Callcutt Review of Housebuilding Delivery, John Callcutt
JOHN CALLCUTT WAS COMMISSIONED BY THE GOVERNMENT TO LOOK INTO “HOW THE SUPPLY OF NEW HOMES IS INFLUENCED BY THE NATURE AND STRUCTURE OF THE HOUSE BUILDING INDUSTRY, ITS BUSINESS MODELS AND ITS SUPPLY CHAINS”.
As a former head of English Partnerships and chief executive of Crest Nicolson, John Callcutt has the experience needed to answer the questions set by the review, such as: “Does the prevailing business model of the house building industry constrain how it responds to demands?”
John Callcutt said: “This review will make recommendations on how we can improve the delivery of new homes to reach the government’s targets while also achieving high standards of energy efficiency and sustainability.”
CML response to Calcutt review,
24 April 2007
2014 Lyons_Housing_Review 2014.
Rebekah Paczek from snapdragon consulting assesses the 180-page Lyons Housing Review ‘Mobilising across the nation to build the homes our children need’, which was published on 16 October 2014.https://www.yourbritain.org.uk/uploads/editor/files/The_Lyons_Housing_Review_2.pdf
- Labour do not want to ‘help to buy’ but instead ‘help to build’, underwriting loans for small house builders.
9.23 The government will deliver its commitment to get 200,000 Starter Homes built by 2020,
at a 20% discount for young first time buyers. The government is bringing forward proposals to
help deliver this commitment, which include:
requiring local authorities to plan proactively for the delivery of Starter Homes
extending the current exception site policy, and strengthening the presumption in
favour of Starter Home developments, starting with unviable or underused
brownfield land for retail, leisure and institutional uses
enabling communities to allocate land for Starter Home developments, including
through neighbourhood plans
bringing forward proposals to ensure every reasonably sized housing site includes a
proportion of Starter Homes
implementing regulations to exempt these developments from the Community
Infrastructure Levy, and re-affirming through planning policy that section 106
contributions for other affordable housing, and tariff-style general infrastructure
funds, will not be sought for them
putting in place new arrangements to monitor their delivery
9.24 The government is committed to extending the Right to Buy to housing association
tenants. Since the Right to Buy for council tenants was reinvigorated in the last Parliament, the
number of sales has increased by nearly 320%.15 The government will extend the same
opportunity to buy to the tenants of housing associations through the Housing Bill, to be
introduced in this session of Parliament.
9.25 In the Spending Review, the government will take further steps to re-focus Department for
Communities and Local Government (DCLG) budgets, focussing on supporting low cost home
ownership for first time buyers.
Buy to Let
9.26 The current tax system supports landlords over and above ordinary homeowners. Landlords
can deduct costs they incur when calculating the tax they pay on their rental income. A large
portion of those costs are interest payments on the mortgage. Mortgage Interest Relief was
withdrawn from homeowners 15 years ago. However, landlords still get the relief. The ability to
deduct these costs puts investing in a rental property at an advantage. Tax relief is particularly
beneficial for wealthier landlords with larger incomes, as every £1 of finance cost they incur
allows them to pay 40p and 45p less tax respectively. The Bank of England has also noted in its
recent Financial Stability Report that the rapid growth of buy to let mortgages could pose a risk
to the UK’s financial stability.
9.27 The government will restrict the relief on finance costs that landlords of residential property
can get to the basic rate of tax. The restriction will be phased in over 4 years, starting from April
2017. This will reduce the distorting effect the tax treatment of property has on investment and
mean landlords are not treated differently based on the rate of income tax that they pay. It will
also start to shift the balance between landlords and homeowners.
2016 Redfern Review 16 November 2016
The Review highlights the fact that whilst 80% of people see home ownership as the preferred form of tenure, there has actually been a significant fall in home ownership in England, from 70.9% in 2003 to 63.6% in 2014/15. This has been as a result of the higher cost of mortgage lending for first time buyers and the rapid increase in house prices, exacerbated by the decline in the incomes of younger people, aged 28-40, relative those aged 40-65. The decline in home ownership amongst young people has been more than 20% in 12 years.
However, rather surprisingly, the Review suggests that high property prices are a result of rising household incomes, high employment and falling interest rates rather than a lack of housing supply, which it argues has been broadly in balance with new household formation over the last 20 years. It suggests that if conditions remain broadly the same, the rate of decline in homeownership will actually stabilise in the near term.
June 2017 Missing Movers
2017. Housing White Paper: Fixing our broken housing market. 7 February 2017.
Independent Review of Build Out Rates Draft Analysis 4.2 In my letter to the Chancellor and the Secretary of State of 9 March, I set out in the following terms what then appeared to me to be the fundamental explanation for the phenomenon: The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house builder to be able to be sold successfully into) the local market without materially disturbing the market price. The absorption rate of homes sold on the site appears, in turn, to be largely determined at present by the type of home being constructed (when ‘type’ includes size, design, context and tenure) and the pricing of the new homes built. The principal reason why house builders are in a position to exercise control over these key drivers of sales rates appears to be that there are limited opportunities for rivals to enter large sites and compete for customers by offering different types of homes at different price-points and with different tenures.
Sir Oliver Letwin’s final report on how to close the significant gap between housing completions and the amount of land allocated or permissioned.Build out rates on large sites
1.4 The quantitative results of my investigation are set out in Chapter 3 of the Draft Analysis, and full data are provided in Annex A of the Draft Analysis.
1.5 I found that the median build out period on the large sites I investigated was 15.5 years. To put this another way, the median percentage of the site built out each year on average through the build out period on these 15 large sites was 6.5%. By cross-checking against a Molior data-set for other large sites in London kindly provided by the Mayor, I confirmed that the sites in my sample were not atypical and that, if anything, they were being built out at a faster rate than other large sites. The median percentage annual build out rate for London sites of over 1,000 homes in the Molior data-set was 3.2%.
1.6 It is worth restating this point: very large sites will almost always deliver a higher absolute number of homes per year than sites with only a few hundred homes in total; but the proportion of the site built out each year is likely to be small. Fundamental explanations
1.7 I concluded in the Draft Analysis that the homogeneity of the types and tenures of the homes on offer on these sites, and the limits on the rate at which the market will absorb such homogenous products, are the fundamental drivers of the slow rate of build out.
c. if either the major house builders themselves, or others, were to offer much more housing of varying types, designs and tenures including a high proportion of affordable housing, and if more distinctive settings, landscapes and streetscapes were provided on the large sites, and if the resulting variety matched appropriately the differing desires and financial capacities of the people wanting to live in each particular area of high housing demand, then the overall absorption rates – and hence the overall build out rates – could be substantially accelerated.
April 2019 Last Time Buyers
6.4 What implications might there be if the changes
being seen to continue?
1. The primary challenge is that the base of mortgaged homeowners is 13 per cent
lower than a decade ago and is still shrinking. We have seen most of the upside
effect on mortgage volumes from low-interest rates and the recovery in house
prices since 2013. Short-term prospects for the wider economy look challenging, with
global growth prospects fading on rising trade tensions and Brexit upheavals closer
to home. If the strong increase in FTB numbers over recent years comes to an end,
then the future growth of the mortgage market will largely depend upon providing new mortgages to existing homeowners and especially later-life households. Older
households have significant housing equity, so we will see further growth in equity
2. In the absence of continued growth in mortgage debt, competition between
mortgage lenders will intensify and the perceived attractiveness of higher-risk
and niche business areas will increase.
3. Technology and the availability of data and information will support the ability of
lenders to do more business directly with consumers which may impact/call into
question the dominance of mortgage intermediaries over mortgage distribution.
4. Housing transactions have plateaued and turnover, relative to the size of private
housing stock is close to historical lows. This makes for a relatively illiquid and
inefficient housing market, and one where it is difficult for households to find suitable
properties to buy. FTBs, for example, are thinking longer term and waiting to buy
larger homes than they may have done in the past. Longer mortgage terms and lower
inflation mean households need to stay for longer to pay down debt to a level where
they are able to trade up or move to a better area. Compressed property prices limit
the ability to release equity from trading down, opening up the opportunity in the
later life lending market.
5. Housing and mortgage markets have become dependent on government
interventions. This is most obvious in the case of the HTBEL scheme, the proposed
phasing out of which from 2021 onwards threatens to be disruptive unless alternative
replacement solutions that can deliver a similar impact are found. London HTB
fulfils a clear purpose in this context, and this suggests that its closure is likely to be
problematic as the market adjusts to the ending of HTBEL in 2023.
6.5. How might regulators and policymakers use this
1. The housing and mortgage markets are closely inter-linked and there is a growing
complexity to policy changes which requires improved long-term coordination
of housing policy and mortgage regulation at both national and devolved
2. Government should recognise that large-scale housing market interventions have
become embedded into current market conditions and that policy needs to evolve
rather than change abruptly if it wishes to avoid market disruption. This is most
obvious in the case of HTBEL, where policymakers have a role in promoting market
3. Government interventions need to be more aligned and considered against the
wider market impacts across markets and tenures. For example, policy changes that
reduce demand from private sector landlords and result in net dis-investment from
the market could reduce the availability of rental supply for those unable to buy while
pushing rental values higher. In a different vein, it would be helpful if government
provided a clear framework for its tax policies and the market impacts, especially with
regards to transaction taxes and the impact on market liquidity.
4. All parties need to recognise the growing polarisation of society along intergenerational lines and show appropriate degrees of flexibility and sensitivity
around this. Younger households face real dilemmas when it comes to housing
choices, especially in cases when they cannot expect significant family support, and
these may have repercussions for their well-being and life choices for decades to
The FPC policies give this aspect of the market no weight when setting macroprudential policy, and, if necessary, the Committee’s remit could be widened to
support government policy in this area. There is a need to reach a consensus view as
to what is a reasonable affordability hurdle for renters to satisfy, if we are to avoid
large-scale rental prisoners. It should be possible to nuance the FPC’s housing levers
to take on board FTB considerations or regional divergences in a way that is still
compatible with the broad thrust of its macro-prudential policy and avoiding overindebtedness.
5. There is a need for all parties to think about what else can be done to help later-life
households draw on housing equity or other sources of finance to support their
living costs in retirement, help family members and live independently in suitable
homes for as long as possible.
Christine Whitehead and Peter Williams London School of Economics 11 November 2020
2021 The Bacon Review
IAN MULHEIRN JAMES BROWNE CHRISTOS TSOUKALIS.
Conventional wisdom looks to housing supply to increase home ownership. But there is no compelling reason to think that raising the rate of supply will change the pattern of who owns property. Well-established empirical evidence shows that significantly higher supply will have only a modest impact on house prices over a generation. And, in any case, house prices themselves are not the most important factor in determining home ownership. Almost all first-time buyers (FTBs) rely on mortgage finance to buy, so what matters for raising levels of home ownership is who is able to borrow.
In the face of the ongoing cost-of-living squeeze and rising interest rates, we expect a softer market for house purchases.
– Housing and market forecasts for 2023 and 2024
Identifying the Key Players
Cash Buyers and Mortgaged Movers.
In terms of movers the most buoyant group since the recession has been cash buyers.
In 2016, accounting for 440,000 transactions – a 35% share and 20,000 more than in
2007 – cash buyers were the largest buyer group.
But unpicking the characteristics of this group is tricky. Cash buyers are most often
treated as a residual – total transactions less mortgaged transactions. This covers a
broad range – from overseas buyers of London new build to older downsizers in the
South West and investors in the North East.
Using a range of data sources for a two-year period covering 2014 and 2015, we have
attempted to sub-divide the broad grouping of cash buyers. This analysis showed that
the average number of cash transactions across the two years (439,000 p.a.) can be
divided into four separate groups. These were:
• 30,000 first-time buyers with no mortgage
• 210,000 movers with no mortgage
• 103,000 buy-to-let with no mortgage
• 96,000 other unclassified transactions which involve the buying and selling of whole
or part of a property but fall outside of the three definitions above.
Linda and John
John was born in 1956 and married Linda in 1979. They bought their first home a
year later for £15,200 with a deposit of £2,400. Mortgage rates were high (15%), but
borrowing just 1.7 times their income and Mortgage Interest Relief At Source (MIRAS)
meant repayments cost 20% of their gross income.
By 1988 their two children were aged 4 and 2 and it seemed a good time to move.
Their house had increased in cash terms by 121% which meant their equity had
increased by 838%. Due to high general inflation their household income had doubled
and their mortgage repayments had fallen by more than half. Lower mortgage rates (11%)
and the increase in their income meant they could borrow substantially more than when
they first bought.
The substantial equity and the increase in what they could borrow gave them a budget
of £55,300 to buy a home – 65% more than their existing home. It was more than
enough to get the extra bedroom and bigger garden they wanted.
April 2019 Last Time Buyers
Last-time buyers The challenges and opportunities for 55+ home-owners wanting to move home
Far from being a niche sector, “last-time buyers” – home-owners who are aged
55 or older and who move property – now total about 200,000 each year. Their
numbers have doubled within a decade. They account for one in three of all
moves into or within the owner-occupied sector.
The Government may not find it easy to support last-time buyers financially,
because of inter-generational sensitivities about helping those who are already
fortunate enough to be home-owners, and this makes it even more important
that the mortgage lending industry looks to what it can do.
• The financial innovation around lifetime mortgages, lending into retirement and,
more recently, retirement interest-only mortgages, allied with efforts to provide
advice within an increasingly holistic context, have all been positive
developments in this respect, but more can and will be achieved.
• A better flow of household finance will encourage house-builders to prioritise
last-time buyers in their planning. With collaboration across all stakeholders, this
part of the housing market has strong upward growth potential.
With older home-owners accounting for a growing share of overall home-
ownership and housing equity, and the lion’s share of those who own their
homes outright, it should come as little surprise that cash has become more
prevalent among this group over recent years.
Yet last-time buyers each year still only represent about 21⁄2% of the 8 million or
so older home-owners. Various surveys suggest that many more such
households are interested in the idea of moving, but face a number of
• The principal obstacle seems to be a lack of suitable properties to buy. Relatively
few older home-owners actually need to move for health or other personal
reasons (that is a hallmark of later years), and for the vast majority any move is
aspirational in nature and focused on the mainstream housing market.
• Most would-be last-time buyers are keen to find a home that is more
manageable, energy-efficient and low maintenance.
• This should be a golden opportunity for the new-build sector, but strangely,
house-builders appear to have been slow to develop and market homes for last-
time buyers. This may be a policy area where the Government, working closely
with the lending and house-building sectors, needs to kick-start activity, much as
it did for first-time buyers with its Help to Buy initiatives.
Banks and Building societies , market Shares and Lending breakdown vis Total Market Value?
The latest commentary and full statistical tables are available below. The commentary includes
technical information on the MLAR as well as analysis of the findings.
The outstanding value of all residential mortgage loans was
at the end of 2022 Q3, 4.1% higher than a year earlier.
The value of gross mortgage advances in 2022 Q3 was £85.9 billion, which was £8.0 billion
greater than the previous quarter, and 17.0% higher than in 2021 Q3.
The value of new mortgage commitments (lending agreed to be advanced in the coming months)
in 2022 Q3 was 4.5% greater than the previous quarter and the highest value recorded since
Since the beginning of 2007, around 340 regulated mortgage lenders and administrators have
been required to submit a Mortgage Lending and Administration Return (MLAR) each quarter,
providing data on their mortgage lending activities.
The FCA and the Prudential Regulatory Authority (PRA) both have responsibility for the regulation
of mortgage lenders and administrators so this data publication is joint. We publish this data
Mortgage industry of the United Kingdom
The mortgage industry of the United Kingdom has traditionally been dominated by building societies, the first of which opened in Birmingham in 1775. But since the 1970s, the share of new mortgage loans market held by building societies has declined substantially. Between 1977 and 1987, the share fell drastically from 96% to 66%, and that of banks and other institutions rose from 3% to 36%. The major lenders include building societies, banks, specialized mortgage corporations, insurance companies and pension funds. During the four years after the financial crisis of 2008, the UK mutual sector provided approximately 80% of net lending to the housing market. There are currently over 200 significant separate financial organizations supplying mortgage loans to house buyers in Britain, with Lloyds Bank and the Nationwide Building Society having the largest market share.
The average house in the UK is worth ten times what it was in 1980. Consumer prices are only three times higher. So house prices have more than trebled in real terms in just over a generation. In the 100 years leading up to 1980 they only doubled. Recent commentary on this blog and elsewhere argues that this unprecedented rise in house prices can be explained by one factor: lower interest rates. But this simple explanation might be too simple. In this blog post – which analyses the data available before Covid-19 hit the UK – we show that the interest rates story doesn’t seem to fit all of the facts. Other factors such as credit conditions or supply constraints could be important too.
So what might the framework be missing?
All economic models involve abstractions and simplifications – if they didn’t they would be useless. But given the importance of housing to economic growth and people’s wellbeing, and that changes in house prices could impact financial stability, we need a model that captures the key drivers.
There could be a role for changes in credit conditions. The framework assumes that people are not credit constrained, meaning they can exploit arbitrage opportunities by buying up rental properties. If there are frictions in practice, this could mean that credit conditions matter for house prices. Mortgage debt expanded rapidly as house prices rose in the UK before the crisis, so this could be an important channel for the UK.
The framework does not include an explicit role for supply elasticity. In practice, evidence suggests that housing supply responds very differently to prices in different countries and regions. The Barker review of UK housing supply pointed to low elasticity of supply in the UK. Where supply elasticity is low, as is the case in the UK, the same change in rates will have a larger impact on prices and rents. More work is likely required to document UK supply elasticities in detail and to explore what different elasticities have meant for growth in prices and rents over time and across places.
It’s hard to measure how expectations and risk premia vary over time and place but this could be important. Within the framework, an increase in rental growth expectations or a fall in risk premium would imply an increase in price. There is some evidence to suggest that returns on housing have been similar to other risky assets and relatively constant over the long term.
Other relevant factors might include maintenance costs and taxes. Maintenance costs have risen in line with inflation in the UK. UK property taxes are small and have been relatively flat – but there is evidence that higher taxes would likely reduce house prices. All of these are subject to considerable uncertainty.
Local Authorities, Housing Associations , The Social Housing Stock
The Housing Acts of 1985 and 1988 facilitated the transfer of council housing to not-for-profit housing associations. The 1988 Act redefined housing associations as non-public bodies, permitting access to private finance, which was a strong motivation for transfer as public sector borrowing had been severely constrained. These housing associations were also the providers of most new public-sector housing. By 2003 36.5% of the social rented housing stock was held by housing associations. In some council areas referendums on changing ownership were won by opponents of government policy, preventing transfers to housing associations.
The Wakefield district council found itself unable to maintain its supply of council housing and transferred it all to a housing association in 2004; this represented the second largest stock transfer in British history. Housing rented from the council accounted for about 28% of the district and around 40% of the actual city of Wakefield.
Many districts of the country have less than 10% of housing rented from the council; the national average stood at 14%.
The Private Rental Stock, BTL mortgage Growth
First Time Buyers and Student Debt burden.
The impact of student housing on rental markets in the UKby Benedict Wiggins,
Does Student Loan Debt Structure Young People’s Housing Tenure? Evidence from England
We find that young graduates who did not borrow for higher education are more likely to own their home and less likely to rent or live with their parents than graduates who borrowed for their studies or young people who never attended higher education. These results suggest that higher education funding policies and student loan debt play important roles in structuring young people’s housing in England.
DE GAYARDON, A., CALLENDER, C., & DESJARDINS, S. (2022). Does Student Loan Debt Structure Young People’s Housing Tenure? Evidence from England. Journal of Social Policy, 51(2), 221-241. doi:10.1017/S004727942000077X
2 These policies aim to shift more HE costs from government to students. As study costs have risen, so has reliance on student loans. All English domiciled full-time undergraduates qualify for loans covering all their tuition fees and means-tested maintenance loans towards their living costs. In 2017-18, with tuition fees of £9,250 and no maintenance grants, 94 percent of full-time undergraduates took out a tuition fee loan and 89 percent a maintenance loan (Bolton, 2020). Students today can expect to graduate with average debts over £50,000. Since the abolition of maintenance grants in 2016, student loan debt has become unequally distributed. Students from the poorest 40 percent of families will graduate with average debts of about £57,000, compared with £43,000 for students from the richest 30 percent of families (Belfield et al., 2017a). Students start repaying their loans once they leave HE and their income reaches a threshold. 3 They then pay nine percent of their earnings above the threshold until their loans are paid off, with any outstanding debt forgiven after 30 years. The more graduates earn, the larger their repayments, making the repayment system progressive and protecting low-earning graduates from high repayments. An estimated 83 percent of graduates will not repay their loan in full within 30 years (Belfield et al., 2017b). Consequently, most students will be repaying their debts for most of their working lives. Significantly, monthly repayments deducted from graduates’ pay packet are dictated by graduates’ earnings and not the total amount borrowed, unlike time-based repayment schemes found, for instance, in the United States (US) where repayments are not linked to a graduates’ capacity to repay. In an income-contingent plan, large student loans increase the time it takes to pay them off, but not monthly loan repayments. These design features of income-contingent loans might protect graduates and render their student debt irrelevant to their housing options. Alternatively, the fact that most graduates will be saddled with loan repayments for most of their working lives might matter for their financial resources. Moreover, the psychological burden of carrying debt – which can shape students’ HE decisions (e.g. Callender and Mason, 2017) – might influence housing options too.
The Planning system, Land Reform, Land Ownership, Consented Plots
Volume House builders and the “Absorption Rate” Letwin.
The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house builder to be able to be sold successfully into) the local market without materially disturbing the market price. The absorption rate of homes sold on the site appears, in turn, to be largely determined at present by the type of home being constructed (when ‘type’ includes size, design, context and tenure) and the pricing of the new homes built. The principal reason why house builders are in a position to exercise control over these key drivers of sales rates appears to be that there are limited opportunities for rivals to enter large sites and compete for customers by offering different types of homes at different price-points and with different tenures.
4.15 The value-unaffecting rate of sale that avoids all of these effects is what the house builders, the land agents, the council planners – and indeed independent commentators such as the OFT – call the ‘absorption rate’ for homes on a large site by the local market. They do not actually mean the absolute absorption rate in the sense of the rate at which the market will absorb the homes at any price, or even the construction-cost-relative absorption rate at which the market will absorb the homes if they are sold at or near to the cost of construction (including the cost of capital). They mean, instead, the rate at which new homes can be absorbed without reducing the price of the homes below the price assumed for the purposes of the land valuation.
Demographic change, Aging population and Immigration.
Debates around the ‘housing crisis’ tend to centre on the experiences of younger people, but some of its most acute impacts are felt by older generations. While many older people will be able to live happily and independently with relatively little change, through continued health and adaptations to their existing homes, many would prefer to move to a home more suited to age-related health and care requirements. To support this there is a pressing need for more homes specifically aimed at older people with greater choice in their cost, design and tenure. Currently it is only wealthy homeowners who are catered for by the retirement housing market. The aim must be increasing housing choice in later life for people of all financial means. As the UK population continues to get older, with people living longer and more to a very old age, this report puts forward a policy programme for a retirement housing market more characterised by competition and choice. We make recommendations to Government, local authorities and developers. The report’s foreword is written by Lord Richard Best, CoChair, All Party Parliamentary Group on Housing and Care for Older People
“That this House takes note of the multiple problems affecting all tenures in the housing market in England; and the case for a coherent strategy to encompass the social, economic, and environmental aspects of housing and construction”
Lord Lilley (Con) given that the rate of births is below the rate of deaths. We are not creating more households domestically to create this demand for housing. Until recently, the main driver of demand for housing was that households were becoming smaller. As people left home earlier or lived longer after their children had left home, so that there were only two instead of four in the household, or after their partner had died, so that there was only one instead of two, average household size was coming down. This was also aggravated by the sad break-up of families through divorce or separation.
That used to mean we had to add 0.5% to the housing stock every year to cope with smaller households. That has come to an end.
Young people are now unable to leave home and are leaving later.
In 1999, 2.4 million adults aged between 20 and 34 lived at home with their parents.
By 2019, 3.5 million people in that age group lived at home with their parents.
So what is the reason?
The main reason, which I suspect no one else in this debate will mention, is not migration into the south of England or London from the rest of the United Kingdom. That is often the reason given, but in the last two or three decades there has been a net outflow from London and south-east England to the rest of the UK. The inflow is from abroad.
We have seen mass immigration into this country on a scale never before seen in our history. We know that the official figures from the last decade understate the numbers coming here. We found, when we asked European residents to register, that there were 2 million more of them than we knew about. Over the last decade, the official figures show a net increase to our population of 2 million from those coming to settle here from abroad. That is equivalent to our having to build cities the size of Nottingham, Derby, Leicester, Middlesbrough, Carlisle, Oxford, Exeter, Portsmouth and Southampton, every decade, just to keep up with the net inflow from abroad.
If we allow a continued net inflow of 200,000 or 300,000 into this country, we have to build extra houses on top of the demand of the domestic population that is already here. We can strive to reduce the inflow, but we will still have to build a lot of houses and there will still be a lot of objections to that housebuilding. I do not mind which side of the debate people take, as long as they are honest about it.
If they say, “We want to see mass immigration into this country and we are prepared to build all those extra properties every year—the equivalent of all those cities every decade”, that is fair enough, but they may oppose that.
The treasury and Bank of England.
. Housing Wealth.2021
Housing Wealth 2015.
1 . Main points
The National Balance Sheet is a measure of the wealth, or total net worth, of the UK. It shows the
estimated market value of financial assets, such as loans, and non-financial assets, such as dwellings.
Market value is an estimate of how much these assets would sell for, if sold on the market
The estimates in this release cover the period 1997 to 2014. All data referred to in this bulletin are annual
estimates at current prices
At the end of 2014, the total net worth of the UK was estimated at £8.1 trillion. This was equivalent to an
average of £125,000 per person or £302,000 per household
Dwellings remained the most valuable non-financial asset in the UK at £5.1 trillion, accounting for 63% of
the UK’s total net worth at the end of 2014. Dwellings increased in value by £408 billion (9%) over the
period 2013 to 2014
The households and non-profit institutions serving households (NPISH) sector provided the largest
increase in the total net worth of the UK in 2014. This sector increased in value by £1.03 trillion (12%) over
the period 2013 to 2014
Financial corporations placed the largest downward pressure on the total net worth of the UK between
2013 and 2014. This can be mainly attributed to a decrease of £175 billion (16%) in their estimated
financial net worth of “equity and investment fund shares/units”
Housing Wealth Geographically.
Housing Wealth Demographically.
Fiscal policy and Housing Wealth.
Stamp Duty and MIRAS
Our taxation system confers generous tax advantages on housing wealth and serves
to discourage people from moving home.
Capital gains tax exemption and inheritance tax relief on main homes, together with
the failure of policy-makers to index Council Tax in line with house price inflation, all
encourage people to hold on to their residential property wealth.
While the government has sought to ensure that home-owners selling or downsizing
their homes are not put at a disadvantage with respect to inheritance tax (following the July 2015 Budget changes), public policy does very little at present to incentivize older people to move or downsize.
The transaction costs associated with buying and selling property can be large and
are, in many cases, dominated by stamp duty.
IMLA, like many organisations, believes that stamp duty is a poorly designed tax, which acts as a significant across-
the-board deterrent for those thinking about moving home. Such adverse effects may loom particularly large in the minds of older home-owners for whom such moves are in most cases highly discretionary.
A number of think tanks and others have proposed cuts in stamp duty or other
concessions to help last-time buyers address high transaction costs and affordability
As general relief from stamp duty for older households would risk triggering
concerns about inter-generational unfairness, most proposals in recent years have
been predicated on helping just those home-owners who need to move into
specialist housing, or households looking to move into smaller/cheaper properties(22)
While such proposals are well-intentioned, piecemeal reform risks adding further
complexity to the tax treatment of property and also perhaps unintended
consequences, such as seeing the benefit of any change being dissipated in higher
More importantly, it is simply not clear whether stamp duty relief would be
transformative. The recent changes in the tax treatment of first-time buyers are
salutary in this respect, with almost no change in first-time buyer numbers last year,
despite the fact that the vast majority of first-time buyers have enjoyed relief from
stamp duty land tax since late 2017.
(22) See for example Building for the Baby Boomers, Policy Exchange, December 2018
In Autumn Budget 2017, the Government announced the introduction of a permanent stamp duty land tax (SDLT) relief for first-time buyers. This box considered the effects of a previous temporary relief for first-time buyers and how the new permanent relief was expected to affect tax receipts and house prices.
The Government will introduce a new permanent relief for certain first-time buyers (FTBs) that will reduce stamp duty land tax (SDLT) to zero on properties up to £300,000. A rate of 5 per cent will be charged on the value between £300,001 and £500,000. But FTBs buying a property for £500,001 or more will not benefit from the relief at all, so a purchase at that price would be liable to £5,000 more in SDLT than one at £500,000. Eligibility criteria match those of the post-crisis ‘stamp duty holiday’, although then the relief stopped at £250,000. HMRC published an evaluation part way through that holiday. It concluded that the majority of the value of relief had fed through to higher house prices and that it “has not had a significant impact in terms of improving the affordability of residential property for FTBs. It is estimated that most of the buyers who benefitted from the relief would have purchased property in its absence anyway (i.e. are deadweight).” A Confirmation that the relief would end was announced alongside the evaluation.
From Wikipedia, the free encyclopedia
Mortgage interest relief at source, or MIRAS, was a scheme introduced in the United Kingdom from 1983 in a bid to encourage home ownership; it allowed borrowers tax relief for interest payments on their mortgage. Previously tax had to be reclaimed from HMRC 
In the 1983 Budget Geoffrey Howe raised the tax allowance from £25,000 to £30,000. Unmarried couples with joint mortgages could pool their allowances to £60,000, a provision known as Multiple Mortgage Tax Relief. This remained in place until the 1988 Budget, when Nigel Lawson ended the option to pool allowances from August 1988. Lawson later publicly expressed regret at not having implemented the change with effect from the time of the budget, as it is generally accepted that the rush to beat the deadline fuelled a sharp increase in house prices.
There is a similar scheme in the Republic of Ireland, although not available for mortgages drawn down after 2013.
Further Reading List.
Analysing Financial, Economic and Capitalist Crisis: Old and New Logics
Pages 23-50 | Published online: 27 Apr 2010
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The Repositioning of Territory in the Global Division of Functions
- Perhaps less known than the African case is the fact that privatized land in the territories of the former Soviet Union, especially in Russia and Ukraine, is also becoming the object of much foreign acquisition. In 2008 alone, these acquisitions included the following: a Swedish company, Alpcot Agro, bought 128,000 hectares in Russia; South Korea’s Hyundai Heavy Industries paid $6.5 million for a majority stake in Khorol Zerno, a company that owns 10,000 hectares in eastern Siberia; Morgan Stanley bought 40,000 hectares in Ukraine; Gulf investors are planning to acquire Pava, the first Russian grain processor to be floated on the financial markets to sell 40% of its landowning division, giving them access to 500,000 hectares. Also less noticed than the African case is that Pakistan is offering half a million hectares of land to Gulf investors with the promise of a security force of 100,000 to protect the land. These developments are part of a larger combination of trends. First, there is the immediate fact of how the global demand for food, partly fed by the half million strong new middle classes of Asia, has meant that there are profits to be had in food and land.15 We now have a global market for land and food controlled by large firms and some governments, and it has been a growth sector throughout the financial crisis. Under these conditions pricing is a controlled affair. Secondly, there is the ongoing demand for metals and minerals of all sorts and a whole new demand for metals and minerals hitherto not much exploited as their demand comes from the more recent developments in the electronics sector.
Sub-prime Mortgages: A New Global Frontier for Finance
- The 1980s opened a new financial phase that became yet another disciplining mechanism.22 Here it was not structural adjustment programs but financial adjustment crises. Since the 1980s there have been several financial crises, some famous, such as the 1987 New York stock market crisis and the 1997 Asian crisis. And some obscure, such as the individual country financial crises that happened in over 70 countries in the 1980s and 1990s as they deregulated their financial systems, mostly under pressure from global regulators aiming at facilitating the globalizing of financial markets.
- Conventional data show the post-1997 financial crisis period to be a fairly stable one, until the current crisis. One element in this picture is that after a country goes through an ‘adjustment’ crisis, ‘stability’ (and prosperity!) follow. This then produces a representation of considerable financial stability, except for a few major global crises, such as the dotcom crisis. A much mentioned fact regarding the current 2007 – 2008 crisis intended to show that the system is fine, is that in 2006 and 2007, 124 countries had a GDP growth rate of 4% a year or more, which is much higher than that of previous decades. The suggestion is then that the 2007 – 2008 crisis is precisely that—an acute momentary event, but that the system is fine. But behind this stability lies a savage sorting of winners and losers, and the fact that it is easier to track winners than to track the slow sinking into poverty of households, small firms, and government agencies (such as health and education) that are not part of the new glamour sectors (finance and trade). The miseries these adjustment crises brought to the middle sectors in each country and the destruction of often well-functioning economic sectors is largely an invisible history to the global eye.
- What stands out in this phase that begins in the 1980s is that global and adjustment crises had the effect of securing the conditions for globally linked financial markets and the ascendance of a financial logic organizing larger and larger sectors of the economy in the global North. In this process large components of the non-financial economy in these countries were ruined.24 Against this background, the current financial crisis is yet another step in this trajectory. One question is whether it spells the exhaustion of this trajectory, or rather the beginning of its decay. In what follows I argue that the specific way of using the sub-prime mortgage in the 2001 – 2007 period makes it a dangerous instrument that is likely to be used worldwide over the next decade. It is a mistake to see this instrument as having to do with providing modest income households with housing. It has rather to do with a structural condition of high finance marked by the combination of a growing demand for asset-backed securities given extremely high levels of speculative investments. This structural condition is at the heart of the actual event that momentarily brought the system to a (partial) standstill—the credit-default swap crisis of September 2008— which in turn suggests an even keener interest in asset-backed securities, and hence in the speculative use of sub-prime mortgages. I see this as one of the new global frontiers for finance, specifically, the 2 billion modest-income households worldwide. The effect could be yet another brutal sorting, with expulsions from more traditional economies, not unlike the consequences of the structural adjustment crises in the global South discussed in the first half of this paper.
- I begin with a quick comparison of the major global crises since the current phase began in the 1980s to underline the extent to which financial leveraging has caused the greater acuteness of the current crisis compared with the other 3 major global crises since the 1980s. Figure 2 shows that financial leveraging added another 20% to the underlying banking crisis, thereby bringing the current financial crisis up to an equivalent of 40% of global GDP, compared to earlier crises, which rarely went beyond 20%.
- securities by investors, in a market where the outstanding value of derivatives was $630 trillion, or 14 times the value of global GDP. The total value of financial assets (which is a form of debt) in the US stood at almost five times (450%) the value of its GDP in 2006, before the crisis was evident. The UK, Japan, and the Netherlands, all had a similar ratio (McKinsey & Company, 2008, p. 11).25 From 2005 to 2006 the total value of the world’s financial assets grew by 17% (in nominal terms, 13% at constant exchange rates) reaching $167 trillion. This is not only an all-time high value; it also reflects a higher growth rate in 2006 than the annual average of 9.1% since 1980. This points to growing financial deepening. The total value of financial assets stood at $12 trillion in 1980, $94 trillion in 2000, and $142 trillion in 2005.
- There is a profound irony in this crisis of confidence: the brilliance of those who make these financial instruments became the undoing of a large number of investors (besides the undoing of the modest-income families who had been sold these mortgages). The toxic link was that for these mortgages to work as assets for investors, vast numbers of mortgages were sold regardless of whether these home-buyers could pay their monthly fee. The faster these mortgages could be sold, the faster they could be bundled into investment instruments and sold off to investors. Overall, sub-prime mortgages more than tripled from 2000 to 2006, and accounted for 20% of all mortgages in the US in 2006. This premium on speed also secured the fees for the sub-prime mortgage sellers and reduced the effects of mortgage default on the profits of the sub-prime sellers. In fact, those sub-prime sellers that did not sell off these mortgages as part of investment instruments went bankrupt eventually, but not before having secured fees. In brief, the financial sector invented some of its most complicated financial instruments to extract the meager savings of modest households in order to produce an ‘asset’—the mortgage on a house. The complexity of the financial innovation was a series of products that de-linked sub-prime sellers and investors’ profits from the creditworthiness of consumer home mortgage-buyers. Whether the mortgage is paid matters less than securing a certain number of loans that can be bundled up into ‘investment products’. The crisis of home-buyers was not a crisis for financial investors, even though millions of middle and working class families now live in tents in the US. For finance it was a crisis of confidence. But it showed the importance of the systems of trust that make possible the speed and orders of magnitude of this financial system. The crisis of home-owners (valued at a few hundred billion dollars) was the little tail that dented the enormous dog of trust in the financial system. In other words, this type of financial system has more of the social in it than is suggested by the technical complexity of its instruments and electronic platforms (Sassen, 2008a, pp. 355– 365). The critical component that brought the financial system to a momentary standstill was more of an old-fashioned speculation gone wrong: the $62 trillion dollar credit-default swap crisis that exploded on the scene in September 2008, a full year after the sub-prime mortgage of August 2007 (see Figure 4). This was more than the combined domestic product of all countries in the world, $54 trillion. Figure 4 shows the extremely sharp growth over an extremely short period of time, from 2001 to 2007. While much attention has gone to sub-prime mortgages as causes of the financial crisis, the $60 trillion in swaps in mid-2008 is what really got the financial crisis going. Declining house prices, high foreclosure rates, declining global trade, rising unemployment, all alerted investors that something was not right. This, in turn, led those who had bought credit-default swaps as a sort of ‘insurance’ to want to cash in. But the sellers of these swaps had not expected this downturn or the demand to cash in from those whom they had sold these credit-swaps. They were not ready, and this catapulted much of the financial sector into crisis. Not everybody lost. Among the winners are also those who ‘shorted’ sub-prime mortgage securities: once again, Soros is the emblematic actor in this parallel circuit, making well over $3 billion on the sub-prime mortgage crisis, just as he did on the British pound’s fallout from the European Exchange Rate Mechanism (ERM).
- This shadow banking system has thrived on the recoding of instruments, which, at the limit, allowed illegal practices to thrive. For instance, it is now clear that credit-default swaps were sold as a type of insurance. But rather they were actually derivatives. If they would have been sold as insurance the law requires they be backed by capital reserves and be subject to considerable regulation. Making them into derivatives was a de facto deregulation and eliminated the capital reserves requirement. Credit-default swaps could not have grown so fast and reached such extreme values if they had been sold as insurance, which would have been the lawful way. None of the financial firms had the capital reserves they would have needed to back $60 trillion in insurance. Because they were recoded as derivatives, they could have an almost vertical growth curve beginning as recently as 2001.
- A comparison of the value of all residential mortgage debt (from high to low-quality mortgages) as a ratio of national GDP across developed countries shows sharp variations.27 To some extent, the variation in this value is a function of timing. In the US, the UK and Australia, the housing market has long been private and, importantly, the financial system is highly developed on a broad range of fronts. Thus the incidence of mortgages is both high and widespread in terms of the variety of financial circuits it encompasses. Central to this story is the difference between the value of housing loans as a ratio to GDP and the growth rate of such loans. Thus, the former is very low in countries with young housing markets, such as India and China, where it stands at 10%.28 In contrast, in more mature markets in Asia, this value can be much higher—standing at 60% in Singapore, and 40% in Hong Kong and Taiwan—but the growth rate is much lower.
- The next two tables (Tables 5 and 6) provide comparative data on the incidence of residential loans to total loans in several highly developed and so-called emerging market countries. These two tables also help situate the residential mortgage market in the rapidly growing and diversifying financial world of loans. Developed countries with multiple financial circuits, such as the US and the UK, clearly show that compared to other types of loans, mortgages are a relatively small share of all loans, even if most households have mortgages. It is important to note that the same low level of mortgage loans to total loans in economies marked by a small elite of super rich individuals has a different meaning in the US and UK: hence, Russia’s extremely low
- the ratio of finance as a whole to US GDP is 450%, as it is for the UK. The other story, then, is the extent to which finance has found mechanisms for raising its revenue that have little direct connection to the material economy of countries. In this regard, the securitizing of residential mortgages can be seen as a powerful instrument for the further financial deepening of economies. Finally, yet another way of understanding the mortgage capital is its share in total loans. Tables 5 and 6 show this share for developed and emerging market economies. There is considerable variability within each group of countries. But the general fact is that there is much room for residential mortgage debt to grow in both. And some of this growth may well take the shape of sub-prime mortgages, with its attendant risks for modest-income households and the added leveraging it brings to the financial system.
Driven by Mortgages, U.S. Household Debt Hits New High
- by Felix Richter,
- Aug 26, 2021
- U.S. household debt climbed to a record high of $15.0 trillion in the second quarter of 2021, as mortgage debt climbed to $10.4 billion amid a refinancing boom. According to the New York Fed’s latest Household Debt and Credit Report, mortgage debt increased by a whopping $282 billion between April and June.
- October 17, 2019
- The potential for global replication of the financial innovation that destroyed 15 million plus households in the US, therewith devastating whole neighborhoods is the systemic equivalent, albeit on a much smaller scale, of the global South countries devastated by an imposed debt and debt servicing regime which took priority over all other state expenditures. These are two manifestations of a systemic deepening of advanced capitalism, one marked by its potential to spread globally and the other marked by its full enactment in the global South.
- I see the sub-prime mortgage as extending the domain for high finance but in a way that delinks the financial circuit from the actual material entity that is the house, and hence from the neighborhood, and from the people who got the mortgage.
- It is akin to wanting only the horns of the rhino, and throwing away the rest of the animal, devaluing it, no matter its multiple utilities. Or using the human body to harvest some organs, and seeing no value in all the other organs, let alone the full human being—it can all be discarded. But unlike the clear realignments we see in vast stretches of the global South, it is not clear how these devastated urban spaces in the global North will be incorporated into the circuits of advanced capitalism. This systemic shift signals that the sharp increase in displaced peoples, in poverty, in deaths from curable illnesses, are part of this new phase. Key features of primitive accumulation are at work, but to see this it is critical to go beyond logics of extraction and to recognize the fact of systemic transformation, with its system-changing practices and projects—the expulsion of people that transforms space back to territory, with its diverse potentials.