Introduction to 'Housing' Themed Issue
Gibb, Kenneth, Public Finance and Management
Housing offers shelter, possible asset growth and a tax base for local services. A housing symposium would therefore seem consistent with the interests of this journal. Housing is central to all of our lives, playing an important role in growing living standards, quality of life and the distribution of resources. Careful comparative housing research offers considerable insights. From a policy perspective housing is an interesting sector because it is where many disputes about the relative merits of markets and non-market interventions are rehearsed. As a field of study housing permits a wide variety of approaches and methodologies, adding a depth and richness to our understanding. This paper considers the economics and governance aspects of housing and identifies key contemporary themes: individual household housing choice behaviour; housing's role in the distribution of income and wealth; the economic governance and performance of social housing; and effective subsidy design to overcome market failures. All of these themes are further addressed in the following papers.
Readers of this journal will probably not be too surprised to find in front of them a themed issue on housing. After all, immovable property such as housing is a mainstay of taxation systems and housing has long been a significant sector for public expenditure and, more recently, public-private partnerships. Our cities and towns are characterized in large part by their built environment, which in turn is dominated by the housing stock. Indeed, this is one sector of the economy where the stock (i.e. secondhand housing) dominates new supply and where the evolution of the built environment is relatively important to understanding market and system performance.
For economists, housing is a fascinating arena for analysis. Quigley (1979) identifies the defining distinctive features of housing as a commodity that makes it at once difficult and challenging to research but also therefore of considerable interest. Housing can reasonably be viewed as a 'complex commodity'. It is a durable good, leading to the creation of consumption and investment markets, as well as suggesting issues around depreciation and maintenance. Durability is also related to high cost relative to average earnings, which explains the pivotal role of finance in housing. It is also spatially fixed, which raises questions of accessibility, neighbourhood effects, market definition and also the likelihood of the pervasive effects of spatial externalities. Housing is fundamentally heterogeneous, implying that measuring prices on a consistent basis is problematic and indicates that segmentation and submarkets may be important considerations. Housing supply is inelastic and adjustment between equilibria may be lengthy. This also means markets may be volatile and could in part explain why government intervention, be it regulatory, financial or as a provider, either to enable or replace markets, has been so pervasive around the world. As Maclennan notes (1982), many commodities have some of these features; rarely do we find them all in one place!
As a housing economist, not surprisingly, I can find plenty of themes and issues within the sub-discipline that could justify this special issue. However, in addition to my self-interest, there are several important reasons. First, housing is central to all of our lives, and as I suggest below, there are several important themes or trends observable in housing systems across OECD countries, which are relevant to living standards, quality of life and the distribution of resources.
Second, this issue has an international flavour, drawing on papers from the Netherlands, the UK and Sweden. Comparative policy and market analysis of housing is a valuable exercise (McCrone and Stephens, 1995; Lowe, 2004) though like all policy transfer work, it has to be examined carefully and skeptically. As in many spheres of public policy, lesson learning from other countries can often be of most use as a negative warning about policy failure or the non-transferability of specific programmes. …