Welcome to Hotel California: ASI's proposals for more microflats

Those lovely consequentialist neoliberals over at the Adam Smith Institute have come up with their latest wheeze to solve London's houisng problems - really tiny flats:

Living in micro-homes could "expand choice" for young professionals and help tackle London's housing crisis, a report has suggested.

A neoliberal think tank is calling for the Greater London Authority (GLA) to scrap its rules on minimum floor space.

The Adam Smith Institute said homes in the capital with less than 37 sq m of floor space could be an "affordable opportunity" for young people.

Now I appreciate (and the ASI make this point in their report) that our neoliberal friends also want a "profound reform of housing regulation" but the problem with the microflats idea is that it gives another excuse for housing's key problem (lack of land supply) to be ducked by authorities. It's also likely that, despite the ASI saying Londoners were "comfortable with living in smaller apartments", this covers over another problem with housing supply - even if we build good numbers of new homes, if they're flats we're not meeting the need for family housing.

A decade ago my colleague Huw Jones (former strategic housing guru for Leeds City Council among other achievements) talked about the idea of shared living as a stepping stone from being a student (where micro-flats with shared facilities are the norm) to regular housing. Huw would point out that shared living allows for that social environment that young people living alone desire (without the 'on top of eachother' problems with flat sharing). So the ASI's idea isn't without its merits.

The problem is the transition - moving on from renting a small apartment into family housing - is increasingly difficult for many young people earning good money in big cities like London (and increasingly Edinburgh, Manchester, Bristol and Birmingham). Unless there is this transition the effect of increasing the supply of rented flats (whether micro- or not) is to create Hotel California - "you can check out any time you want but can't ever leave".

The winners under such as situation are not the young people paying big rents for a well-proportioned cupboard with a window but the businesses renting these micro-flats out. Not only do microflats increase the rental yield but, by providing "communal amenities such as games rooms and open living spaces", a further yield generator is provided - the service charge (justified because someone has to clean the shared space, look after any equipment and manage programmed maintainence).

Microflats can be added to a series of other wheezes - densifying suburbs, taller towers, more council housing, subsidised mortgages, rent controls - that give excuses to the wealthy folk living in London's green belt. Excuses that allow MPs to say stuff like this piece of spectacular NIMBYism from Crispin Blunt:

The proposed Redhill Aerodrome development is not an isolated issue. Under the current planning system, local authorities such as Reigate and Banstead and Tandridge, situated in the Green Belt, are being put under unreasonable pressure to build unrealistic numbers of new homes by the Planning Inspectorate. Leaders of all 11 Surrey borough and district councils agree that most of Surrey is heavily constrained by the Green Belt and other important designations, imposing severe limitations on their ability to meet local housing targets.

This (not allowing the owners of previously developed land like aerodromes to realise value and develop much needed housing) is the problem and building microflats in Battersea or Camden will only give the Crispin Blunts of this world another excuse to pretend that housing need for London can be met without thousands of new family homes in Surrey (or Kent or Berkshire or Hertfordshire or Buckinghamshire).

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No Dr Pirie, you can't say that. It ain't so. Taking the Adam Smith Institute to task on the elderly.

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The Adam Smith Institute is one of the good guys. I like their consistent defence of liberty and classical liberalism. Sam Bowman, the Research Director is one of those amazingly and eclectically brainy people that challenge how we look at things.

Sometimes they get stuff badly wrong:

Popular perception of the circumstances in which pensioners live is somewhat out of accord with modern reality. The image of a woman with a blanket over her shoulders, huddled over a fire and wondering if she can afford to toss another stick onto the flames does not accord with present day reality for most pensioners. Some 86% of pensioners live in households with assets in excess of £50,000. The average income of over 65s is £15,400. A young person working on current minimum wage for a normal working week earns just under £13,000. Yet the young person is taxed while the older person is guaranteed a triple locked pension that will rise with inflation, or average earnings, or 2%, whichever is the highest. On top of this comes a winter fuel allowance, a Christmas bonus and a free bus pass.

Don't get me wrong here - I have some sympathy with the argument being made (although the 'it's all baby boomers fault' schtick is a load of nonsense). But if you're to make an argument do it in a way that doesn't open you to having your argument blown out of the water.

"Some 86% of pensioners live in households with assets in excess of £50,000"

Yes. And this is a consequence of twenty or thirty years paying off a mortgage plus maybe fifty years squirrelling money away in a pension pot. Nothing to do with taking money from the young. And does Dr Pirie really think assets of just £50,000 is such a great big deal - especially since those assets, most commonly, represent the person's home and the savings they'll need to see out today's long retirement. More to the point, Dr Pirie is deliberately conflating assets with income to make his point.

"The average income of over 65s is £15,400. A young person working on current minimum wage for a normal working week earns just under £13,000. Yet the young person is taxed..."

First we've compared average income for the elderly with minimum wage for the young. Secondly most working young people are earning more than minimum wage. And while its true that the personal allowance is higher for those elderly over 77 (and they don't pay national insurance), it's not true to say that old people aren't taxed. And the basic state pension is included in that calculation.

This whole argument is out of the same box as the idea (which I'm sure the ASI would criticise) that somehow the rich have got that way at the expense of the poor. It really is nonsense - by all means say that pensioners get too much of a good deal but it's simply not the case that there's a great deal of 'redistribution from relatively poor young people to comparatively affluent older people'.


Finally most of those assets and that income will, in the end, get spent (quite rightly) on providing social care (mostly delivered by those low paid young people).

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The Adam Smith Institute should start with reading planning policy on Green Belt

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I have some sympathy for the view that London's Green Belt needs an extensive and comprehensive review. And I know this is difficult - politically and practically - given the range of differing interests and the multitude of interested public bodies (starting with over 50 local councils). Indeed the scale of the requirement is such that, however much Londoner might whimper about localism, conducting a review would have to be under the direction of national government.

Various organisations are chuntering about the need for change and the Adam Smith Institute is at the forefront. The problem is that the ASI appears not to have done the basic first job of reading the actual reasons for having a 'Green Belt' in the first place:

The research done by bodies such as the Adam Smith Institute and London First contradicts the popular image of the Green Belt as green and pleasant land. Far from the daisy-strewn meadows and woods teeming with wildlife that the term suggests, much Green Belt land is farmland, with monoculture fields by no means friendly to wildlife or accessible to people.

The first step in re-evaluation might be to classify Green Belt land into the different types that comprise it. There is genuinely green land, the fields and woods that everyone likes. There is damaged or brownfield land, partly made up of abandoned buildings, gravel pits and the like. And there is farmland, much of which is not environmentally friendly.

It is very good of these people to do this research telling every planner and most local councillors exactly what they already knew - that the 'Green Belt' is not either all green or entirely worthy of protection on environmental grounds. But what we also know - which the ASI seems to have missed - is that prettiness (for want of a better word) is not the reason for having a 'Green Belt'.  The policy gives five reasons:

To check the unrestricted sprawl of large built-up areas;
To prevent neighbouring towns merging into one another;
To assist in safeguarding the countryside from encroachment;
To preserve the setting and special character of historic towns; and
To assist in urban regeneration, by encouraging the recycling of derelict and other urban land 

None of these reasons relate to the use of land in the 'Green Belt'. The fact of needing to achieve those five policy objectives is met by controlling the uses to restrict those that do harm to the 'Green Belt'. And that 'harm' isn't some form of torture but rather anything that runs counter to the five reasons set out in policy. In simple terms the primary issue is 'openness' not the aesthetic of that openness.

We have a 'Green Belt' primarily in order to control the development of urban areas. This isn't about protecting special places in the countryside - we have other designations from 'Areas of Outstanding Natural Beauty' through to 'Regionally Important Geological and Geomorphological Sites' that are intended to protect places we think are beautiful, ecologically-important, historically significant or otherwise somewhat unusual or unique.

London has a problem with housing supply - we all know that. And reviewing the 'Green Belt' would be a good idea in helping to meet that problem (although I wish those charged with review well and hope they have very thick skins). But the ASI's approach is completely misplaced - the 'Green Belt' isn't about protecting woodland and flower meadows but about making sure we concentrate development within existing settlements rather than allowing those settlements to extend to the point they lose their identity and become just a part of the London built-up area.

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A special thank you to the Adam Smith Institute for exposing more NEF nonsense.

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As you know, dear reader, the New Economics Foundation is one of my very favourite institutions - a source of endless 'hand-to-face' moments, squeals of delight at ignorance and general 'do these greenie lefies really believe that' occasions.

It seems I'm not alone and the venerable Adam Smith Institute gets a similar pleasure - here commenting on NEF's solution to the housing supply problem:

Well, if you work for the nef, you suggest that taxation on property development should be raised. Quite ignoring that taxing something produces less of it. You then insist that private sector organisations shouldn't be allowed to get planning permission. No, really, reducing supply is well known to reduce prices, isn't it? Finally, we'll bankrupt most of the current developers by taking away their land banks which already have planning permission.

Oh, and joy of joys, they also reinvent the collaterialised debt obligation (CDO)* but this time it's the government's housing benefit payments that provide the collateral.

Great stuff.

*CDOs were at the bottom of the the foetid pile of dingos kidneys that is the US banking system, since you ask