From ghetto to des res

The north-south divide is at its most obvious in housing. The gap in average house prices has increased by something like £100,000 in a decade. That is real money when you have to earn it, whatever interests rates are.

The urban regeneration contrasts are also stark. Whereas local authorities in northern England want to save or clear abandoned neighbourhoods in many inner cities, in London proposals are being discussed to provide social and key worker housing among the many high-priced developments in the inner city.

But averages are only half the picture, with prosperity and poverty refusing to divide along simple geographical lines.

In the North, the pressure for housing development on greenfield sites in prosperous neighbourhoods around every city is intense, and at the same time, loft living in city centres has surpassed all expectations. Values in both types of location are now rising faster than anywhere else in the country.

In the South, meanwhile, concentrations of poverty in many areas, often close to pockets of prosperity, are signalled only by crime and violence.

But both the "save or clear" strategy and the "key worker" policy, with their attendant funding schemes, run the risk of dealing only with the symptoms of the underlying problem.

The difficulties associated with housing in a flexible free market are well known: better neighbourhoods attract all the investment and house prices soar, while the worst neighbourhoods are abandoned.

If you don't believe me have a go at the computer game, Sim City 2000, which illustrates this beautifully. Where you provide residential areas close to jobs, shops and public services and have good infrastructure and relatively low taxes, the Sim population will inhabit your city, bringing increased tax revenues. Get it wrong and the Sims will decamp for neighbouring towns, money becomes short, infrastructure collapses and the neighbourhoods burn down. Sounds familiar, doesn't it?

In particular, in times of prosperity, those in poorer neighbourhoods will obtain jobs and, for the first time, be able to move out to somewhere better (particularly in the North, where house prices are more affordable). The rich will buy houses in the most affluent neighbourhoods.

It is no surprise then to find that housebuilders (with a few honourable exceptions) almost totally focused on the relatively few high-value neighbourhoods where demand is buoyant and viability relatively assured. This, as much as any difficulties with the planning system, is why housing output has fallen to a 77-year low.

Some market leaders are recognising that they have to create places, not boxes, and are recruiting people with the skills to allow them to achieve that. Eventually, the whole industry will move in this direction

So the solutions to the connected problems of too few homes, abandoned northern neighbourhoods and key-worker housing shortages in the South-east, may not be funds to pay for affordable housing (thus either reinforcing ghettos or further inflating house prices) in the South-east, nor funds to clear abandoned neighbourhoods in the North (further reducing the economic viability of the inner cities), nor unlimited greenfield development (increasing environmental damage).

The real solutions to the underlying problems seem much more likely to be to invest heavily in the deprived neighbourhoods of the South-east, assembling sites (particularly in poor low-rise local authority estates), improving the public realm, security, schools and public services to attract the more prosperous households by creating large numbers of high-quality homes.

And in the north the remedy should follow a similar pattern: shut off the greenfield housing land supply and then build on the success of town and city centres, again investing heavily to create attractive neighbourhoods around these centres.

This will require a substantial change in the planning system, as was recognised by the planning green paper, which looks forward to a system that is proactive rather than reactive.

The missing bit in this jigsaw is the public sector enabler. Who is going to do the site assembly and provide the pump-priming to achieve sustainable change in the most deprived neighbourhoods?

It is housing-led, so this rules out the regional development agencies, but it involves getting your hands dirty, which rules out the Housing Corporation and regional government offices.

What is required is a national enabler of urban renaissance, supporting the neighbourhood-level partnerships in delivering their plans for physical change (again, as envisaged in the planning green paper). Watch this space.

All this would, of course, be helped by the removal of the institutionalised anti-regionalism of the government and most of its quangos, which continue to show a strong bias against key investments, particularly in science and research, going outside the South-east.

It will also require a massive cultural change in the housebuilding industry. Some market leaders are recognising that they have to create places, not boxes, and are recruiting people with the skills to allow them to achieve that. Eventually, the whole industry will move in this direction, but it will take time. The slowest will not survive and the individuals who resist will gradually be replaced.