Housing Economics Geoffrey Meen • Kenneth Gibb • Chris Leishman • Christian Nygaard Housing Economics A Historical Approach Geoffrey Meen Department of Economics University of Reading Reading, United Kingdom Kenneth Gibb School of Social and Political Sciences University of Glasgow Glasgow, United Kingdom Chris Leishman School of the Built Environment Heriot-Watt University Edinburgh, United Kingdom Christian Nygaard Department of Economics University of Reading Reading, United Kingdom ISBN 978-1-137-47270-0 ISBN 978-1-137-47271-7 DOI 10.1057/978-1-137-47271-7 (eBook) Library of Congress Control Number: 2016936401 © The Editor(s) (if applicable) and The Author(s) 2016 The author(s) has/have asserted their right(s) to be identified as the author(s) of this work in accordance with the Copyright, Designs and Patents Act 1988. This work is subject to copyright. 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Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Cover illustration © Geoffrey Meen Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Macmillan Publishers Ltd. London Preface The cover illustration1 depicts the Long Alley almshouses in what is now the Oxfordshire town of Abingdon; the almshouses were first built in 1446 by two medieval guilds, the Fraternity of the Holy Cross and the Guild of Our Lady.2 The former received a Royal Charter in 1441, although it appears to have been in existence as a voluntary organisation for much longer, whereas records of the latter date back to 1247. The Fraternity operated as a mutual self-help society with assistance provided to its members suffering sickness or poverty; its objectives were partly religious, but also secular with an involvement in major civic infrastructure projects. A part of its Royal Charter mandate was to make provision for ‘thirteen poor sick and impotent men and women’ and Long Alley was built to meet the requirement. The Fraternity thrived through the fifteenth century, but both Guilds were suppressed and the assets seized shortly after the Reformation and Henry VIII’s Dissolution of the Monasteries. Nevertheless, only a few years later, in 1553, the lands were restored under a new Royal Charter to a secular governing body Christ’s Hospital, which took responsibility for the provision of relief to the poor 1 Produced with the permission of the Governors of Christ’s Hospital of Abingdon. See Preston (1929) Christ’s Hospital Abingdon, Oxford University Press, for a more detailed description of the history of the Abingdon Almshouses. 2 v vi Preface in the town more generally in addition to those located within Long Alley. Christ’s Hospital remains the governing body today. The provision of social housing support therefore has a very long history. The first almshouses in Britain date to the tenth century, although by no means all provided the beautiful accommodation of Long Alley. Today, almshouses only account for a very small proportion of the total social housing stock, catering mainly for the elderly, but they illustrate that a duty to provide basic accommodation for the poor has been accepted throughout history, although not always with good grace. Next to Long Alley stands St Helen’s church, the earliest parts of which date to the thirteenth century and was originally the site of a Saxon church. Its Lady Chapel possesses a beautiful medieval painted ceiling. A few metres away lie East and West St Helen Streets; the former is made up of a very expensive, diverse mixture of primarily residential properties built between the fifteenth and twentieth centuries. A plaque on number 28 denotes that William III stayed there in 1688 and the street also claims involvement in the English Civil War. The western branch, however, is made up of late-twentieth century residential and retail properties built on the site of a former clothing factory. This example is, of course, not unique and countless other cases could have been chosen from across Britain but, within approximately 50m of the church, three housing submarkets exist, based on tenure and dwelling type. The question arises therefore whether mainstream urban economics alone can fully explain the richness and diversity of the urban environment, and particularly the dynamics of change, or whether it needs to be augmented by other disciplines, notably urban history, geography and social policy. This book has had a long gestation period and was originally driven by the simple observation of different housing markets existing very close together more generally with no obvious reasons for the boundaries. Our thinking was, first, heavily influenced by research on social interactions modelling and, then, by recent tests of path dependent outcomes using long-run historical data sets. This literature implies that the ability to provide accommodation today and the overall urban structure are constrained by the decisions of earlier generations; even very large external events may not necessarily change the nature of housing markets. In the Preface vii case of Long Alley, the Dissolution did not produce fundamental longrun change; since the poor remained and the state did not want to take on the responsibility, the re-establishment of a similar form of governance was the easiest option. Many of the Governors of Christ’s Hospital were dignitaries from the earlier Guilds. An analytical problem is that long-run, intra-urban data rarely exist in the form necessary for empirical research and it takes a lot of resources to put them together. Over the years, a large number of friends, relatives and students have helped to compile the data sets used here. The starting point was the development of case studies, typically, small streets in major cities. These turned out to be interesting in their own right and our admiration for the painstaking work of local historians grew. It was easy to become fascinated by the lives of individual families from the nineteenth and early twentieth centuries. Some of the most poignant information came from Australian First World War records. However, the case studies showed what could be compiled on a city-wide scale, given sufficient resources. Finally, the finest of British economists/economic statisticians working in the field of housing, Alan Holmans, died earlier this year. Alan’s work placed a strong emphasis on historical analysis in explaining housing markets and as an aid to good policy. He was right. October 2015 Geoffrey Meen Reading, UK Kenneth Gibb Glasgow, UK Chris Leishman Edinburgh, UK Christian Nygaard Reading, UK Contents 1 Introduction: Why a Historical Approach? 1 2 A Tale of Three Victorian Cities: Exploring Local Case Studies 25 3 Key Concepts from the Literature 51 4 Geology and Cities 83 5 Wars, Epidemics and Early Housing Policy: The Long-Run Effects of Temporary Disturbances 111 Speculation, Sub-division, Banking Fraud and Enlightened Self-interest: The Making of the Contemporary Glasgow Housing System 137 Building Our Way Out of Trouble 165 6 7 ix x Contents 8 Residential Density Revisited: Sorting and Household Mobility 191 Path Dependence, the Spatial Distribution of Immigrant Communities and the Demand for Housing 217 10 Affordability and the Rise and Fall of Home Ownership 243 11 On the Persistence of Poverty and Segregation 275 12 Final Reflections 297 9 Index 303 List of Figures Fig. 1.1 Fig. 1.2 Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 2.4 Fig. 2.5 Fig. 2.6 Fig. 3.1 Fig. 3.2 Fig. 3.3 Fig. 3.4 Fig. 4.1 Fig. 4.2 Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 5.4 Fig. 5.5 London and Saffron Hill from the Agas Map, circa 1562 The development of Tower Hamlets. Upper left: 1854–1901; upper right: 1906–1939; lower left: 1949–1992; lower right: contemporaneous Field Lane Little Saffron Hill, circa 1903 (a) Saffron Hill looking north. (b) Saffron Hill looking south North Melbourne, 1858 North Melbourne, 1875 (a) Chapman Street. (b) Harris Street The Kauffman buttons and threads model The stability of segregation (Zhang 2004a, b) Stochastic stability Poverty traps The geology of London The geology of Melbourne Slum clearance programmes, 1860–1975 London-wide death rates, 1838–1910 Local death rates relative to the London average, 1838–1910 Crude and standardised death rates in Tower Hamlets (2001 = 100) Overcrowding (change in rooms per person), 1921–1961 11 15 31 34 35 38 40 40 61 63 63 67 90 96 118 121 122 124 125 xi xii Fig. 5.6 Fig. 6.1 Fig. 6.2 Fig. 6.3 Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 10.1 Fig. 10.2 Fig. 10.3 Fig. 10.4 Fig. 10.5 Fig. 10.6 Fig. 11.1 List of Figures London boundaries, 1881, 1951 and 1971. (a) Registration District Boundaries 1881. (b) Metropolitan Borough Boundaries 1951. (c) Local Authority District Boundaries 1971 The distribution of Glasgow rental values in 1881 Private and public housing completions in Scotland from 1920 (nos.) Housing permits in Glasgow, 1873–1914 (nos.) Total housing completions (England and Wales (000s), 1856–2013) Housing investment as a percentage of GDP (UK, 1861–2012) Housing completions, private and public sectors (England and Wales (000s), 1923–2013, financial years until 1944/1945, calendar years thereafter) Real house prices (£) and prices/earnings (2006 = 100), UK, 1930–2013 (1939–1945 interpolated) Housing user cost of capital (£ pa), 1935–2013 (1939–1945 interpolated) US and UK mortgage debt relative to household disposable income (2000 = 100), 1955–2013 Housing activity and mortgage debt, 1970–2014 Housing user cost of capital (£ pa) with and without mortgage rationing, 1963–2013 Equilibrium and outturn (2002 Q1 = 100) real house prices, 1963–2013 The relationship between local house prices and deprivation in the English local authorities 132 143 147 152 169 170 186 249 250 254 256 259 265 284 List of Tables Table 1.1 Table 2.1 Table 2.2 Table 2.3 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 5.6 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 6.6 The age distribution of the English Housing Stock, 2008 (% of dwellings in each tenure) Dwellings, population and mobility: Harris Street Occupational distribution of Harris Street, 1903–1980 (nos.) Occupational distribution of Chapman Street, 1954–1980 (nos.) Geology and house prices in London and England Geology and house prices in Melbourne, Australia House prices and geology: London House prices and geology: Melbourne Variable descriptions Slum clearance activity in London, 1860–1973 Death rates in the Empire (deaths per 1000 living residents) Death rates in the London Registration Districts Distribution of deaths from cholera in the London Registration Districts (% of total) The London Registration Districts and the Second World War Population change and the Second World War Glasgow population change, 1780–1912 Birthplace of migrants to Glasgow, 1851–1911 (% of city population) Population and migration change, Glasgow (nos.) Building cycles, Glasgow 1873–1914 Density and death rates, Glasgow, 1881 The occupations of City of Glasgow bank borrowers (£) 14 41 43 45 99 103 105 106 106 119 120 122 128 129 131 139 140 140 141 142 154 xiii xiv List of Tables Table 6.7 Table 6.8 Table 7.1 Table 7.2 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Table 8.5 Table 8.6 Table 8.7 Table 9.1 Table 9.2 Table 9.3 Table 9.4 Table 9.5 Table 9.6 Table 9.7 Table 10.1 Table 10.2 Table 10.3 Table 10.4 Table 11.1 Table 11.2 Modelling the number of linings Modelling house prices in Glasgow Net additions to the housing stock and population/dwellings (London, 1871–1901) Tenure and segregation in the New Towns London population by birth location, 1881 (%) Local population gains and losses (London, 1891–1911) (percentage increase or decrease in inter-census period) Household heads in each zone by social class in London, 1881 (numbers and percentages) Melbourne sample characteristics Nineteenth century London parishes Probit model for moving probabilities—Melbourne (1949–1980) Distance moved in London, 1881–1901 Migrants in the nineteenth century Selected spatial distribution of migrants in 1881 Distribution of Polish migrants, 1881–2001 Spatial distribution of migrants, 1931–1961 (London Metropolitan Boroughs) Distribution of Indian and Jamaican migrants, 1971–2011 (% of total) Migrant shares in 1951 (dependent variable = xijt) Migrant shares in 2011 (dependent variable = xijt) Tenure in England (%), 1918 to 2013–2014 The long-run determinants of house prices [dependent variable: ln(g)] Regional home-ownership (%) Modelling house prices (dependent variable: Δln(g)) Dissimilarity and isolation in London in the nineteenth and twenty-first centuries The effects of the London Olympics on house prices 160 161 174 180 194 195 200 204 210 211 212 224 226 227 229 230 233 234 244 264 268 271 281 288