Understanding the UK housing market, and all the problems associated with it, is important for a wide variety of reasons. This is why the Economic and Social Research Council (ESRC) has made housing one of its priorities and, in particular, has decided to help set up a UK Housing Evidence Centre to act as a knowledge hub for housing research.
Stephen Millard is a Senior Economist in the Monetary Analysis Directorate at the Bank of England. He is also a member of the ESRC UK Housing Development Group.
Why is the UK housing market interesting?
The UK housing market is always generating interest in the media and among policy makers. By way of illustrating this somewhat obvious point, the Bank of England’s blog — Bank Underground — has featured a number of blogs on this topic. For example, May Rostom’s blog (A lifecycle story of housing debt in Blighty) talked about the effect that problems in the housing market were having on the young, Arzu Uluc described Local Housing Boom and Bust (and boom again) and Philippe Bracke improved our knowledge of the buy-to-let market with his Five facts about buy-to-let.
It is fairly clear why a central bank economist like me should worry about the housing market. I need to understand the effect of movements in house prices on consumption and how these effects might depend on what caused house prices to move. And that’s if I can figure out what caused the movements in house prices and where they might be going in the first place! The housing market may affect labour mobility and, hence, productivity growth. A build-up of debt based on mortgage lending may pose risks to financial stability and so understanding trends in the housing market is clearly important for those of us working to maintain financial stability.
But the housing market is, of course, of interest for reasons well beyond the narrow central banking focus that I and my colleagues may have.
UK Housing investment has been low by international standards for several decades and there is widespread agreement that we are still not building enough houses, and perhaps not in the right places. This lack of supply is likely to be an important explanation of why affordable housing seems to be out of the reach of young people. Housing and housing choices are interconnected with a range of other outcomes including education, health, and inequality and therefore have implications across many aspects of government policy. Housing policy is intimately connected to attempts to reduce poverty and to strengthen communities of all ages. And the design and construction of housing, at individual, street and community levels, will also have effects on the environment and people’s wellbeing, as well as the longevity and prosperity of neighbourhoods and local economies.
Given this, the lack of a single, UK-wide, housing policy could be considered to be a big issue. Indeed, some have argued that there should be a long-term strategy for housing and that housing should have the same level of government focus as other areas of infrastructure in the UK.
A UK Housing Evidence Centre
Given the myriad of issues, and the need for research in them, the Economic and Social Research Council (ESRC) has made housing one of its priorities. In particular, as discussed in Julie McLaren’s blog, the ESRC has decided to help set up a UK Housing Evidence Centre to act as a knowledge hub for housing research.
The idea of a Housing ‘Observatory’ (or ‘Evidence Centre’) has been in existence for some time. The 2014 Royal Institute of Chartered Surveyors Housing Commission Report, chaired by former RICS President Michael Newey, advocated an Observatory to ‘bring together relevant private sector and university research on housing, planning and infrastructure provision’. The proposal was also referenced in the 2014 Lyons Review of Housing which saw the potential for an Observatory to produce ‘stronger objective information on trends in housing supply’. In parallel, the ESRC, working with the British Academy, used its convening power in 2014 to draw together a range of research providers and users of housing research and evidence to discuss some of the challenges associated with UK housing and to explore potential solutions to those challenges. The outcome of these meetings can be found here. This was followed with a roundtable meeting amongst stakeholders in spring 2015 which advocated the development of an independent evidence centre on housing.
The proposed Evidence Centre on UK Housing aims to fill a gap in providing robust evidence to inform housing policies and practices across the UK, while remaining independent from central government and other sector interests. The development of this proposal has involved the ESRC working in partnership with a coalition of other funders and research users, including other funders of social science research, policy makers in government — including Whitehall departments and the Bank of England, as represented by me — as well as practitioners. In order to help inform the development of the proposal for the UK Housing Evidence Centre, the ESRC held a consultation workshop on January 14th. This event brought together key stakeholders: policymakers, researchers and practitioners from government, commercial organisations, professional bodies and public interest associations, voluntary and community organisations, and others.
Over the next few months, ESRC will, in coordination with other partners, lead on the Centre’s commissioning. Once the call has opened, academics and their partner applicants will be able to make proposals showing how they would run such a Centre in order to meet the needs of policy-makers and practitioners, as outlined in the call specification document. The ESRC also anticipates holding a ‘town hall’ meeting for prospective applicants in Spring 2016.