Introduction

The human capital or skill level of the urban population is frequently identified as the key factor determining urban growth and competitiveness. In the US, for example, the growth rates of cities in the 1990s were closely correlated with the level of residents’ education (Glaeser and Shapiro, 2001). Crucial to this relationship is the link between human capital and housing. Housing plays a critical role in the economic performance of cities through its influence on the locational choices of the more highly skilled members of the labour force. There are links between housing, on the one hand, and social and environmental capital, on the other, and we comment on these in this chapter. The central concern of this chapter, however, is with this crucial relationship between housing and human capital.

The population structure of cities depends to a considerable extent on the housing choices of residents over their life cycle, and housing demand typically varies with both demographic and economic circumstances. From an analytical perspective, we need to understand the key factors that determine residential location and its impacts on the skills base of cities. Looked at from a policy perspective we need to assess the extent to which policy measures might impact on the locational choices of, in particular, more highly skilled members of the labour force. We need to examine what policies might serve to retain the more highly skilled within cities or attract those who have left back to cities. In addition to understanding the housing decisions and location choices of the high skilled, we need to consider the reasons why the low skilled become trapped in particular (usually inner-city) locations. Consequently, we need to understand segregation. The research set out to address the relative lack of quantitative evidence in this country that can be brought to bear on the extent to which housing markets actually contribute to or detract from the economic performance of cities. It also assesses the extent, in turn, to which policy can have any impact on this.

To anticipate, our conclusions do not make comfortable reading: our work suggests that the probability of attracting households back to cities once they have left is rather small.