Michael Edwards texts

(2013 November) I just did a talk at Historical Materialism 2013 on housing and here is the PDF of the slide show HM13 edwards housing for PDF. I hope there will be stuff later from other speakers in the workshop. Some tweets at #HM13.

(2011) In a spirit of working in public, and seeking comment as I go along, there is a rough draft (March 2011) of a position paper outlining the work in my part of the project Restoring collective interest in urban development. Get to it in the menu above at March 2011 draft papers or click here.

A fresh version, shorter and without references or graphics, now exists here: Edwards land july 2011. It was discussed at a seminar on 21 July 1100h-1300h in London. Slides are in a separate file here: Leverhulme Edwards July 2011

Please don’t at this stage quote either version of the paper.  There is much to be done, permissions to be negotiated on a few of the graphics and conclusions to be added.  Comment here below or by email. Here below is best.

Full list of publications of Michael Edwards, properly maintained, is at https://michaeledwards.org.uk/publications-list/

Michael Edwards

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9 Responses to Michael Edwards texts

  1. Louis says:

    The following is copied and pasted from an email exchange stimulated by the paper:

    – Elena said:

    Michael, I’ve read the paper and it all looks very well argued.
    Just one comment about the inadequacy of the housing stock.
    At a seminar (excellent) on the work of Richard Sennett organised by LSE
    last week, Geoff Mulgan (Silvia, he was strategy advisor for Tony Blair
    until 2004 now director of the Young Foundation http://www.youngfoundation.org/about-us/people/general-/-all/geoff-mulgan) said that we now experience a phase in history when the life span of a man is longer than the life span of a building.

    Obsolescence (rather than embedded flexibility) is a problem both of
    quality and of value capture. Obsolescence can also be “planned” so that when needed, a building can be knocked down and rebuilt. The whole process, probably raising GDP more than a long lasting and functioning building.

    So poor quality of the built stock is a thorny issue.

    – Michael said:

    Dear Elena

    Your reply is the first and very welcome. I don’t attach much weight to
    Mulgan and have no idea where he gets his data for this assertion. I’m
    sure the lifetime of US buildings is shorter than ours because of our
    conservation / nostalgia practices, and because rent is lower there.
    Beyond that I’m not sure.

    Your other point is very stimulating, though I don’t fully understand it.
    Is the following an accurate interpretation or extension of it?

    Obsolescence is an interesting topic which I haven’t got to the bottom of.

    Is there any good literature?

    1. Analogy with cars: the faster we scrap and replace the fleet of
    vehicles, the faster their average efficiency and emissions performance
    improves. However the energy etc embodied in the replacement process has to be set against that. So the optimum rate of replacement is lower than the maximum possible rate of replacement.

    2. With housing the same would apply (and thus countries which preserve,conserve, etc would perform badly).

    3. But it’s more complicated than that because, in between replacing and retaining the building are many possible degrees of upgrading,
    retro-fitting windows, insulation and so on. Also possible extensions (out into the garden or up into the sky – all with or without abusivismo).

    4. The ideal set of policies, it seems to me, would encourage expenditure on replacement, retrofitting, extension etc, while discouraging spending which was simply driving prices up.

    5. Once upon a time in Britain we had a tax on the ‘imputed rent’ of
    owner-occupation of housing. It was called “Schedule A Tax”.
    Householders could deduct their actual (documented) spending on upgrades
    and maintenance from their taxable imputed income. So it was an incentive to invest in real improvements. I guess corporations are treated like that still.

    6. On the issue of what OUGHT to be counted in GDP: real investment in
    improvements should be part of any reformed GDP…..

    Further thought on this is required.

    I am copying also to Louis Moreno because he’s interested in things like
    this and may have useful comments.

    – Louis said:

    I’m going to get back to Michael with more detailed comments on his paper in due course. But on obsolescence and wider literature…

    The best analysis I’ve seen about technical change and buildings comes
    from Richard Barras in the 2009 Building Cycles book (http://www.amazon.co.uk/Building-Cycles-Growth-Instability-Estate/dp/1405130016). He unpacks fixed
    capital stock out into equipment and building and analyses the changing
    contribution each makes to production of surplus value, transitions in
    structure of building provision, and the urban form of cities.

    He says that the increasing obsolescence (and cheapness) of equipment
    relative to buildings means that buildings and cities are shaped by the
    increasing rate of reinvestment in equipment…

    “the shift in the locus of embodied technical progress from buildings to
    equipment appears to be accompanied by a growing fusion of the different
    constituents of capital in terms of their productive capacity. Thus, it is estimated that over 20% of total construction costs are now accounted for by the mechanical, electrical and IT systems installed in buildings […] A good example is the emphasis in the late 1980s building boom on
    providing new offices with large floor-to-ceiling heights and raised
    floors to accomodate cabling for computer networks; by the mid-1990s, many of the more extreme design solutions to this perceived need were rendered obsolete by the miniaturization of the technology, while older and apparently less suitable buildings were given a new lease of life (Barras and Clark 1996). However, as buildings and equipment capital become more integrated, there is a risk that the rate of obsolescence of the building component could become more closely tied to that of the equipment component, shortening the life of the building and depressing its investment value.” (Barras 2009: 87)

    He makes a different point about this with regard to non-commerical
    property. But I’ll pick this up in my comments on the paper…

    Louis

  2. Yvan Johnson says:

    Michael, thanks for giving me the chance to comment on the paper which I enjoyed a
    lot. I’ve jotted down my notes and some sketchy general questions which I
    hope can push the discussion on…

    The background analysis is very useful in explaining something which is
    very difficult to grasp. Namely, the way the production of the built
    environment has created environments optimized for a very narrow range of
    forms of production (finance, construction) and consumption (welfare
    through property ownership).

    The remedy of long-term capture of market value is an interesting
    proposition, but I wonder if there is a way to position the concept in
    relation to the problematic integration of real estate and financial
    markets ? Could it be framed as a counter-cyclical measure working with
    and against the building cycle? Could it act as a circuit breaker or
    ‘thermostat’ when property markets are over heating?

    In terms of positioning – is there scope to take advantage of the
    hot-topics of localism and inequality? You mention a national approach regarding the overall building stock, but I wonder if there [is] a more regional/urban and spatial approach – i.e. the inter-relationships large core-cities have with their surrounding cities and towns. I hear Michael Storper has recently discussed the notion of ‘spatial equity’. I haven’t read the paper, but what I understand is that it suggests some kind of
    regulation of powerful agglomeration economies which pull labour and capital away from weaker places. Might a more spatial and relational approach work, looking at the interdependencies of labour markets, transport links, firm linkages ? Could this offer a way to frame spatial equity sharing schemes ? Perhaps to regulate the socio-economic ‘backwash’ inequality effects scale economies create.

    This brings me on to another point, I realize there’s more to come through
    on industrial policy and urban development, but it’s diffficult to really
    discuss the kind of social-economic planning you envision without having a
    simultaneous discussion about where new employment and opportunities will
    come from. The value I think of the Barras book is to take a look at the
    long term contribution built environments play in re-staging the way cities and technologies affect productivity and competition. Mainstream economists often take a dismissive view about the contribution of the built environment to productivity in a high tech economy. But it’s something which needs to be addressed particularly around the problem of respecialization, path dependency, and environmental change.

    Perhaps this is where the structure of building provision approach helps ?
    More investigation and explanation of the way built fabric actively socially shapes the economy of cities (and transforms our relationship to the environment and other cultures) and to widen the political debate about civil society and urban politics. How will respecialization to a base wider than finance, construction and public sector happen. Where’s the vision ? What dynamic mix of landscape, skills and institutions are
    needed ? What about the most impoverished places (and spaces in cities) at the sharpest end of disinvestment and globlizaion, what kind of development approach would work for them? We heard a lot at the end of the last gov’t about new industries and new jobs and spatial
    strategies but there was very little work done exploring the way the production of cities shapes the regional distribution of economic opportunity.

    Who will do the analysis and research about starting point for places on
    different economic trajectories. And thinking about urban solutions that
    aren’t simply off-the-shelf ‘be more like London or Cambridge’ or ‘you
    need a creative cluster’ solutions ? Obviously a role for universities
    here – particularly integrated built environment schools like the Bartlett and programmes like the UCL Urban Lab.

    Sorry lots of questions. But perhaps they can be reduced to a few Harvey sets out in one of his lectures. And I think they form a good check list for thinking about the kind of complex commodity / human resource complex that we want cities to be in future…

    What kind of relation to nature and technology do we want our towns and
    cities to articulate ?
    What kind of everyday life and welfare do we want our cities to provide
    people with ?
    What kind of social relationships will the economy of cities promote ? If
    we’re pouring public services into particular places will this create
    monotonous places ?
    What kind of identity/mental conceptions does the place want to project
    into the world ?

  3. Corinna says:

    You may be interested to read this blog about housing in the UK and the plan to cut housing benefit.
    “We could all benefit from real housing solutions” info@aworldtowin.net

    http://aworldtowin.net/blog/we-could-all-benefit-from-real-housing.html

  4. Peter Bowman says:

    Submitted on 2011/06/21 at 15:12

    Peter Bowman wrote:

    Dear Michael,

    I have only just found your paper on “Why Britain must tackle the land
    problem” and appreciate that these comments may be on a draft that has now
    been updated. It is very heartening to see that serious attention is being
    given to the land question with sufficient depth to bring some clarity to
    the underlying circumstances of our present crises in housing and urban
    development.

    A few points (if you don’t mind me commenting as invited on the draft):

    1) Some basic principles (p18) I would encourage you to be open-minded
    about how deep-seated this land issue that you have uncovered actually is.
    Looking back further than is usual in this sort of study the rise of the
    working class as a class preceded industrialization and was an effect of
    earlier land enclosures going back to the sixteenth century. The
    commoditization of land at this time was a spur to the growth of finance
    since the price of land has always been such that few could pay for it
    with cash.The whole development of economics as a subject from the time of
    Adam Smith has tended to take privately owned land for granted and rarely
    questioned its significance.

    M.E.: Agreed. I’m not a historian and am not trying to write a historical paper, but should certainly insert something on these lines, and some refs.

    2) Origins (p2) Going back to the 1970′s to trace the declining return to
    labour at the expense of rent was a very helpful analysis. A question
    rarely asked is the role of the incidence of taxation on this decline. In
    an economy where 40 – 50% of GDP goes to the state the effect of the
    incidence of taxation is highly influential. Directing taxation onto labour
    and not on rents has been highly influential in directing investment away
    from production. In addition a high incidence of tax on labour makes it
    uncompetitive, both compared with mechanised alternatives and with foreign
    competition. This increases unemployment which requires further taxation
    to finance and leads to a decreasing spiral.

    M.E. This is a very interesting angle indeed. Have you written a fuller version of it – or can you refer me to someone who has? It would be excellent to be able to chart this over time and among nations…. Is it part of the Will Hutton argument about the diversion of investment away from production? (Probably not I guess – too theoretical and leftish for him ??) I’ll discuss it also with a colleague and PhD student Elena Besussi who is working on tax issues.

    3) One effect of the present speculation-dominated housing sector which
    was not referred to in the paper but is worthy of consideration is the
    paradox that there is at a same time as a housing shortage a low rate of
    occupancy of the stock we have, it being claimed that there are around a
    million empty homes in the UK.

    M.E. I’m not sure it’s a paradox but certainly it is a very striking outcome. I had drafted a bit for the next version of the paper on second homes etc, and on the speculative vacancies so evident in London, but shall look again at it. Making sense of it seems to me to require two approaches:
    (i) housing as consumption in a society of growing inequality – the rich simply consume lots of it and some of their dwellings will be empty when they are not there. I have a second home myself and one or other of them is almost always empty – and I’m just a lecturer. The queen has lots, and there are growing numbers of people in between;
    (ii) housing as ‘investment / asset’ where the cost or inconvenience of renting out one’s properties is too high, lots of speculators will just hold them empty until they choose to sell and realise their profit, and vacant units are easier to sell (and perhaps better as security if they want to borrow on them). A bit like Centre Point in its early years.
    (iii) in many cases both i and ii may apply.
    In policy terms it points towards disincentives for consuming too much space

    4) Taxation-based strategies. (p20) I strongly agreed with your analysis
    on tax-based strategies that more general: land value tax would be more
    effective in regulating the land market than attempting to capture land
    value gains on a piecemeal basis. Approaching the issue from a development
    perspective rather than a purely economic one you made a very valid point that
    the consequences would be highly dependent on planning regulations. As you
    imply the key to an effective land value tax is that it has to relate to
    best PERMITTED use. There is here the opportunity for much greater
    community involvement with the community deciding for itself what sort of
    environment it wants by deciding what is and what is not permitted at a
    particular location. The advantage of an LVT system is that the
    consequences are both environmental and financial. If the community wants
    low density housing and a pleasant environment then it would have higher
    land values and therefore a higher tax. On the other hand if it decided to
    have the waste disposal unit or nuclear power station that no-one else
    wants close by there would be a reward of much lower taxation due to the
    lower land values.
    It is very encouraging to see that you recognise that there is sufficient
    merit in the concept of LVT to warrant further discussion.

    M.E.: I take your point but I don’t think the draft was clear enough on this (or maybe just that my thinking has moved on). While the arguments for a LVT are compelling (and it may be the thing to campaign for in the short run), there is a fundamental problem with it and I’m interested whether you agree:
    The problem is that LVT places MARKET relations and market prices at centre stage—that’s what is being taxed—and thus embeds a market where decisions should be non-market decisions. I take your point that, if ‘the plan’—the document which specifies how land could/should be used—were more democratic then things would be not so bad. But the attraction of LV capture through collective ownership has the greater attraction of taking these issues out of the market. That would be something to discuss….

    Best wishes, Peter Bowman
    as Vice Chairman
    Coalition for Economic Justice
    http://www.c4ej.com/

    Dear Peter [I replied – this was an email exchange ]

    Very glad to have your comments. See below (now above). They are very stimulating indeed, as you can see from my reactions.

    Can I put this exchange on the blog site? (pref with your name, but ANON if you prefer)?
    [he agreed]

    Maybe we could meet? And please can you come to a seminar about it on 21 July, probably about 1100??

  5. Seminar 21 July 2011(on the July draft ) generated a very helpful discussion. My attempt at a sound recording failed so here I am typing up the very few notes I made. If any participant can correct or add please do so. (NB notes typed away from internet – Virgin dead for 24 hours – so some stuff not yet checked against google or other sources.)

    1. There was strong general support for the line of argument. The conclusion of the session seemed to be that a pamphlet (rather than a research paper) should be an early output of the work. It was proposed by Vicky Chick that we should meet again in September to try to finalise.

    2. A pamphlet could just be on the scope of this paper, or could be more of a joint effort with Bob Colenutt.

    3. The argument could fairly readily be (mis-)construed as favouring de-regulation as a way of boosting supply and bringing prices down. The objections to doing that need to be made clearer and stronger. (from different perspectives by Ian Gordon, Duncan Bowie, Bob and others). I reported Barrie Needham’s comment received earlier that morning – see that post. Nick Falk stressed the importance of NW European innovations/practices, all of which showed strong collective land ownership as an ingredient (Recent URBED publications on this are referenced in the longer text.)

    4. Bring in the potential of bond issues for development and infrastructure. (Actually it would be bringing the topic back, since bonds figured in the longer March draft, and in my earlier papers on Thames Gateway for 2008 UEL book and 2006 Mute.)

    5. Strengthen the link with financialisation / banking and with the need for bank regulation / consequences of de-regulation (Louis Moreno and Vicky). Someone even said I should submit to Vickers committee on banking regulation (!) – really I am no banking expert. And the deadline may have passed.

    6. References to ‘shadow banking’ / ‘shadow planning’…. I’m really not sure what they mean by this. The shadow banking idea seems to be something like the creation of fictitious capital rather than offshore or furtive banking which would be my common-sense interpretation of the phrase. What the analog in planning is I don’t know: there is no fictitious city…. Discuss with Louis. Also on the links with production labour process, architecture, etc – where Louis and I have agreed to prepare a joint paper for Anna Haila in Helsinki.

    7. Need to point out the contradictions which show how disastrous or problematical it is for sections of capital / contradictions…

    8. Gavin Poynter made a reference to financialisation in the sociology literature. I made an inadequate note and must ask him more.

    9 References to follow up: Heywood Smith on ?Insurance // Tony Fielding ??…

    10 No comment on the idea of FAQs as a way of dealing with some of the stuff.

    11. My inclination is to do this as a 2-layer document with the top layer as a pamphlet, backed up by a more fully theorised and references layer.

    12 Nick Falk suggested Smith Insitute as a possible vehicle.

  6. Barrie Needham says:

    (by email 20 July 2011)
    Thank you for this version. As you know, I can’t be with you tomorrow, but I did promise to send you comments on the paper, so here goes, albeit at the last moment.

    Actually, I don’t have much to add to what I said about the first version, so I will limit myself to your thoughts about ‘solutions’.

    First, there are the consequences of the fact that there is a great variety between locations. This is a geographical fact, but the consequences can be reduced by actions to ensure that infrastructure and services are as nearly as possible the same throughout the country.

    Second, there is the question of house and land prices and the consequences of the huge amounts of money going into those (and therefore not going into other things). I agree with you that de-regulation is no solution, also Land Value Taxation in its usual form. A Georgian land value taxation would help. Instead of LVT, the Georgian variant levies a tax on the actual value of the land, not on the value in its ‘highest and best’ use. But that is the weakness of the Georgian variant, namely that it is impracticably difficult to determine the value of the land. I come back to what I said the first time, namely measures to increase greatly housing supply. But then you have to break the power of the landowners and the housing developers. Since I wrote that, I have learned more about compulsory land readjustment. That does seem to be a way of breaking that power, with limited expenditure of public money and few risks.
    Here, as elsewhere, the statement is valid that: If I wanted to go there, I wouldn’t start from here. In other words, the situation has reached a point where it is very difficult to change it (because of the entrenched interest of the majority of house owners in high and rising prices). That is why I said, in my first comments, the first step is to increase supply sufficiently to stop prices rising further, and then to keep the supply so that prices rise no more. That is a long journey, but it would in the end change radically the market for land and buildings.

    I wish you a good exchange of ideas tomorrow.

    Best wishes
    Barrie

    • Barrrie: Thanks. Can I clarify one thing? You say:
      “…Instead of LVT, the Georgian variant levies a tax on the actual value of the land, not on the value in its ‘highest and best’ use. But that is the weakness of the Georgian variant, namely that it is impracticably difficult to determine the value of the land…”
      What did they mean by “actual”? It sounds rather absolute – like an innate characteristic of a plot. That’s surely crazy (empty) as a concept in any school of economic thought. Do I have to go back to Henry George? (Hope you had good holiday.)

  7. Ian Gordon says:

    Michael, (by email)
    That was a very stimulating session this morning, thanks very much for it.

    In my ungracious way, I failed to start by saying how good and useful, the (new) paper is – though (as instructed) I shall refrain from direct quotation.

    I had a few staircase thoughts – none very central:
    1. I’m a bit wary of some of the rather vague (almost conspiratorial) talk about shadow banking and its implications. It seems to me that one of its significant aspects was that ‘they’ succeeded in fooling ‘themselves’, since the sector itself ended up holding a lot of the dud assets they had created – though it was alright (for them) because ‘we’ then had to bail them out. [Alternatively, if you tell a micro story, you can say they created internal incentive structures which proved self-destructive].

    2. I think the last step in the chain here is the crucial one, i.e. the bail-out, or rather the reliable expectation (source of moral hazard) that if necessary they would be bailed out. So, one thought is that you might consider three kinds of (perverse) redistribution as proceeding – in relation to incomes, wealth and risks – with connections between them that are not entirely simple. My feeling is that banking behaviour is rather more relevant to the last than to the other two;

    3. I’m not sure whether I know less about money or about housing, so this is guess work. But my conjecture (from this morning) would be that, in both US and UK (as I think you are saying) surplus savings plus an enhanced capacity to leverage these, alongside relatively weak domestic investment demand found a couple of outlets in the private housing market and in supporting personal consumption (perhaps ‘secured’ via housing assets). In the UK, I think you say, a very inelastic housing supply led to accelerated house price inflation rather than increase in the stock: I guess that means that the cash either went into personal consumption, or further boosting the pile of savings needing outlets ? Is that what you are saying ?

    M.E. Comment: What happens to the money? Yes I guess you are right + some of it is sitting there as un-realised capital gains in the ownership of the dwelling stock. Since the distinction between stocks and flows is respected only in the pages of textbooks, it can sit there as a reservoir of potential consumption until needed. That must be just one more factor loosening the purchase of interest rate policy on aggregate activity.

    In the US (about which I don’t think you talk) where housing supply is a lot more elastic, there should have been a greater quantity impact in the housing market – and less assurance of continuing price boosts as a consequence (?) – with the extra houses being occupied by marginal owners, without adequate security to protect them if price inflation did not continue (but with loans heavily sold to them on a targeted basis). Hence (irrespective of degrees of regulation, the (essentially US) sub-prime phenomenon, underlying dodgy assets that British banks then also happily marketed (to themselves as well as others). Is that at all right ?

    M.E. comment: I don’t know much about the USA but there is interesting work by Gyourko and others which I talk about briefly in the March version of my paper. Look at page 15 of it (attached again) and there is a bibliog item with a link. As I understand it: YES, in those cities where land supply is more elastic a lot more gets built and prices don’t escalate so much. Paul Cheshire good on this, I’m sure.

    4. As you might expect, I’m not terribly happy with heavy invocation of a neo-liberal ideology as explanation (and would support your reluctance in making much use of this). My two basic reservations, from different perspectives, are (a) that it is often not the ideology which is the problem, but the set of real forces that it rationalises (in several senses); and (b) that in important respects it embodies a realistic representation of the patterns of behaviour and (many of the) institutions of the actual existing economy – and a basis for relevant ways of thinking about action within this framework. I guess that makes it a proper / powerful ideology, but not something which is ‘just’ ideology, to be argued away and replaced by a more friendly one.

    M.E. comment: I certainly don’t see it as “just” ideology. The ideas have a strong force and do offer a largely (for many people) convincing rationalisation of what is going on. Yes.

    Enough – probably not helpful, but evidence you made me (start to) think.

    All best and thanks,

    Ian

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