We have slowly climbed out from the longest and deepest recession since the publication of comparable data in 1955. The dominant news headlines have also returned to the pre-recession favourites – the strong rising house price trends, especially in London and the South East. Figures from the second quarter of 2014 show that the average UK house price is around £186,000, but over £400,000 in London; which represents an 11.5% annual increase for the country and a big leap of over 25% in London. Considering the average starting salary for graduates is around £20,000 and slightly more in London, it is not a surprise that there is major ‘housing affordability’ crisis in this country. The difference between the ‘haves’ and the ‘have nots’ is all about having access to property ownership; as well as having inheritance from family members who accumulated major housing wealth through price inflation.
It is the right time to have a grown up debate of how to tackle the housing crisis that will damage the life chances of our future generations. The reasons for rising house prices are clearly due to demand exceeding supply. The culprits are many, including the stringent planning system, greedy landowners, speculative developers, selfish ‘nimbies’ and petty political squabbling, though probably a cocktail of all these factors. However, more importantly, there is a need to seek major funding to deliver quality homes with good infrastructural provision and easy access to employment opportunities and social amenities.
Since our Asian counterparts also experienced a major financial crisis ten years before Europe, it is interesting to see whether there are any transferable lessons or ideas to be learnt. During the Asian financial crisis in the 1990s, a significant sum of foreign direct investment was redirected from elsewhere in Asia to China. The consequence of globalisation and rapid economic growth following the introduction of market forces has triggered the wider process of restructuring in large cities, symbolised by high-rise office buildings, large shopping malls, and more varied housing styles.
Up until the late 1990s, housing units in China were developed by the public sector and state enterprises for allocation to their workers. Due to a lack of resources to realise its urban development vision, the state gradually reduced its share of housing investment and introduced a comprehensive framework of housing market policy in 1998. The commodification of housing has led to extraordinary increases in house prices: newly constructed housing in 35 major cities rose by 240% in real terms between 2000 and 2010.
The triple helix of market reforms, globalisation and the extraordinary rate of urbanisation are seen as the driving forces that motivate key stakeholders to develop regional plans to express their visions of territorial development and to coordinate regional growth patterns in China. In spite of significant efforts to produce strategic urban plans, they failed to provide a strategic horizon to address the socio-economic and environmental pressures brought by globalisation. The way the UK Coalition Government has managed the economic downturn has been to dismantle regional planning and strategic planning in England. But, while we have abolished strategic and regional plans, the state government in China has initiated their preparation, including the well-known regional plans for the Pearl River Delta and the Yangtze River Delta. These regional plans are informal, but they are powerful strategic instruments to coordinate major regional infrastructure systems, industrial development and the use of development resources across planning departments and other related sectors.
In financial terms, it is surprising to know that local government in China enjoys much more autonomy than in Britain. China has a multi-level government structure that shares national tax revenues through financial transfers. Although local government does not have discretionary power to modify taxation, they are allowed to generate non-tax revenue. The profits from land leasing (that is, the sale of land-use rights subject to central government restrictions) constitute 30-50% of municipal revenue. Under China’s dual land system, urban lands are defined as state lands with property rights ascribed to state agencies, whereas rural lands are collective lands with property rights assigned to rural villages. The expropriation of collective-owned land to urban development transforms the value of land, especially for land near cities. Land expropriation of arable land has become a major revenue stream for urban government and led to the phenomenon of planned urban sprawl. The fiscal revenue of many cities has become over-dependent on the profits from land sales, and the gains from using rural land played an important part. In the longer term, the exhaustion of basic farmland is a real possibility.
The discussion shows that there is not any easy solution to resolve a housing crisis and the two countries have very different policy, institutional and cultural traditions. However, the sharp contrast between the British and the Chinese approaches is that the latter still regards planning as a lubricant to oil the growth machinery by coordinating land use and to enhance the circulation of capital, commodities and information. The evidence of the latest regional planning trends in China largely confirms its strategic value as a means to ease resource constraints for urban growth and to get all key stakeholders around the planning table. There is nothing wrong with an open source, local-oriented style of neighbourhood planning in England. However, if we want to tackle the major housing crisis and provide affordable homes and infrastructure, the strategic coordination of spatial development and clear leadership from central government has to be part of the policy package.
By Professor Cecilia Wong, Professor of Spatial Planning and Director of Centre for Urban Policy Studies, the University of Manchester.