back to article Britain's housing crisis: What are we going to do about it?

We talked last week about how macroeconomics is still pretty terrible at telling us what we ought to do about the world around us, which is why I always rather scratch me head at people who insist that rent control is going to be a good way of solving our current housing crisis. For amongst economists, there's a pretty good …

  1. Anonymous Coward
    Anonymous Coward

    Where I am.

    the opposite is almost true. Seaside town the rents are higher than purchasing the property.

    House I bought worked out over £100 less per month to buy and it would have cost to rent. Several friends who have bought found the same thing. This is probably due in part to the seaside tax. Lots of people moving down here because they do like to be beside the seaside, staying in flats or apartments while they search for a new job etc.

    Then the realize they get paid about 30% less for doing the same job they were doing before, and the nearest "insert common highstreet store which isn't a clothes shop" is about an hours drive away.

    Rent stays high (for locals) because the richer folk from london etc move down here temporarily and can afford it, and houses stay (relatively) lower because none of these rich folks want to stay when they realize we have sweet FA down here.

    1. Anonymous Coward
      Anonymous Coward

      Re: Where I am.

      > House I bought worked out over £100 less per month to buy and it would have cost to rent.

      Sorry but this isn't new, when I first tried to get onto the housing ladder, more than 30 years ago, my wife and I had exactly the same problem in outer London. We couldn't buy anywhere because the needed deposits were going up faster than we could save and the rental costs were higher than mortgage would have been if we could have got one. Once we could buy somewhere out out goings dropped significantly.

      How much have the rental values shot up since the demise of 100% mortgages? I'd be willing to bet that its a lot more than house prices have. A few people cocking up there mortgages have caused problems for the massive majority that wanted to buy houses.

    2. Anonymous Coward
      Anonymous Coward

      Re: Where I am.

      "House I bought worked out over £100 less per month to buy and it would have cost to rent."

      So the money you put it with current ~zero interest (and 30 year loan?) is still ~free when the interest rate is 10%, likely in next 10 years? AFAIK fixed rate loans are very much US thing, not usually given in Europe.

      As the housing bubble is at maximum point now, it's also obvious that the value of housing assets can only go down in same period of time. Some say 50%, some say less: A significant amount of money in any case.

      Depreciating, heavily taxed asset (house, apartment) isn't something you'd want to buy in asset bubble, no matter what. Even gold, as non-taxed asset, would be better.

      1. JeffyPoooh Silver badge
        Pint

        Re: Where I am.

        AC: "...the housing bubble is at maximum point now..."

        1) It's not a bubble

        2) It's rarely a bad time to buy real estate (exceptions are obvious)

      2. LucreLout Silver badge

        Re: Where I am.

        "when the interest rate is 10%, likely in next 10 years"

        Whatever else may happen, this will not.

        Base rates are forecast to rise by 0.25% per quarter to a towering height of around 5%. That will take about 5 years, by which time we'll be getting ready to cut rates again due to the next recession.

        10% may come, but its unlikely to do so before 20 years time, by when you could have paid off any mortgage taken today.

        1. Anonymous Coward
          Anonymous Coward

          Re: Where I am.

          "Base rates are forecast to ..."

          These forecasts of which you speak, where did the crash of 2007/2008 figure in them?

          Tealeaves would have been just as effective.

    3. JeffyPoooh Silver badge
      Pint

      Move to Canada

      Or Australia, if you don't mind waking up to poisonous animals in your bed.

      I wonder if the aging demographics might result in more retired people moving out of the big metropolitan areas and into the far corners. I've already got some land on a small Asian topical island lined up. Hopefully it'll be wired up to the 'net before I get there.

    4. Anonymous Coward
      Anonymous Coward

      Re: Where I am.

      Ummm.... isn't that obvious? Any property is going to cost more to rent than to buy, otherwise the landlord would be operating at a loss...

      1. Anonymous Coward
        Anonymous Coward

        Re: Where I am.

        No, he's not running at a loss. You're paying the bulk of his mortgage, so he's gaining equity in the house while only putting in a small fraction of it himself. If he sells the house he realises the money you've contributed.

  2. Credas Silver badge

    MORE regulation might help the situation

    Perhaps an even more useful approach to the problem would be to make it as desirable to rent as to buy. Outside the social sector, at the moment renters are treated like serfs, on short-term leases that leave them liable to being thrown out with almost no notice, and with restrictions that make it a rarity to even be allowed to keep a small dog, or choose their energy supply. Compulsory standard rental agreement terms that allowed people to make a rental property their home, rather than some kind extended holiday let, might temper the obsession we have with owner-occupation in this country.

    1. Anonymous Coward
      Anonymous Coward

      Re: MORE regulation might help the situation

      ".....might temper the obsession we have with owner-occupation in this country."

      Not an obsession but a given goal, a result of continuous propaganda.

      Those guys with big money, banksters, get a lot richer everytime someone buys a house/apartment: Poor buyer pays the price once to seller and two times to bank (30year loan): No wonder banks (and rich people in general) have constant propaganda about "buying a house being a wise investment".

      News flash: In general it isn't. £250k to stocks bring you about 5% yearly, no tax whatsoever. With that you can pay the rent for ever and still have basically cash for whole amount, movable money.

      Which an house isn't.

      1. Adam Foxton

        Re: MORE regulation might help the situation

        Thats as may be.

        But if I had the £250k to buy the stocks and shares I wouldn't need a mortgage, would I?

      2. JohnMurray

        Re: MORE regulation might help the situation

        Bearing in mind that the bank didn't lend you any money. The balance they created in your account didn't exist until created. So you're paying interest on nothing!

        www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity

      3. LucreLout Silver badge

        Re: MORE regulation might help the situation

        "News flash: In general it isn't. £250k to stocks bring you about 5% yearly, no tax whatsoever. With that you can pay the rent for ever and still have basically cash for whole amount, movable money."

        Oh dear. You've got this badly wrong.

        Current FTSE 100 yield is about 3.5%, giving you just £8,750 to rent a £250k house. Good luck with that.

        If you think stocks are "basically cash" then you understand neither stocks, nor cash, and certainly not housing.

        1. Omgwtfbbqtime Silver badge
          Angel

          Re: FTSE 100 yield is about 3.5%

          True, however careful choice of investments can give somewhat higher. My SIPP is currently running around the 18% p.a. mark, if I had paid a little more attention and liquidated my small caps I could have made 25%+ this year. 30% if I wasn't limited in my choice of investment.

          Working for one of the big 4 I need to be careful not to invest in any of our clients, I really don't need internal compliance asking me those type of questions.....

  3. Dave Bell

    People can be silly

    Not every site is equal, and people can do the silliest things when picking pieces to build houses.

    For example, the sewage from one village is pumped, under pressure, over a couple of hills to a neighbouring village's sewage works. A developer applied for planning permission on some land in the valley, saying that all that was needed was a simple connection to this pressurised pipe.

    In the same area, the council granted planning permission for housing development on a site that was on noticeably lower ground than the sewage works. See also "flood plains".

    So people will do the silliest things. And the people who decide planning applications can be just as silly. But zero controls look pretty reckless. And some of the ways in which development is distributed are questionable. It looks as though new housing is often distributed in strict proportion to existing housing, without regard to local availability of either employment or services.

    The system is flawed, but can we throw away all controls to leave it to the market? The whole idea of the market assumes honesty and rational behaviour, yet we know that assumption is questionable.

    1. John Sanders
      Holmes

      Re: People can be silly

      Free market doesn't mean lack of regulation.

    2. Anonymous Coward
      Anonymous Coward

      Re: People can be silly

      "The system is flawed, but can we throw away all controls to leave it to the market? "

      No. The market is looking for maximal profit, now. Therefore it will buy a land outside of any eletricity/water pipe/sewer systems/roads, build houses on it to the hilt and then reap the enormous profits as the land (former moor) didn't cost a thing while the price of a house is almost constant outside of the city.

      Society is then almost forced to build everything from scratch to a far away place as there are thousands of people living there and builders&banksters made obscene profit while huge amount of tax money is wasted.

      Of course planning doesn't change much: When you have tens and hundreds of millions in budget, like market does, bribing planners is a rule and not an exception. Everywhere: That's painfully obvious when you see what happens in reality.

      1. Anonymous Coward
        Anonymous Coward

        Re: "bribing [councils] is a rule and not an exception."

        "bribing planners is a rule and not an exception."

        It's even legal in (some of) the UK. It's called Section 106. It's well documented, although rare to hear it explicitly called bribery. But that's what it is.

        1. Anonymous Coward 101

          Re: "bribing [councils] is a rule and not an exception."

          "It's called Section 106. It's well documented, although rare to hear it explicitly called bribery. But that's what it is."

          No it's not. A bribe is where the planners were taking the money in brown envelopes for their own use. The Section 106 money is paid to the council and is usually used for improvements to local amenities.

  4. Camilla Smythe Silver badge

    Solution

    "The LA said that actually, as it was now part of the park and had no planning, it was only worth £50k. That £1.4m was the value of the chitty that enabled housing to be built on that sliver of land."

    1) Take off and nuke London from Orbit.

    2) Everyone left over apart from those involved in the 'collateral carnage' watches Emmerdale Instead.

    3) Re-instate Chitty[s].

    4) Profit.

  5. Yet Another Anonymous coward Silver badge

    Economists solving the problems the last one caused

    Allow essentially unrestricted building in the south east

    Builders want to maximise profit - they still need you to pay as much as possible for a house. So instead of building high density low price housing on vacant lots they build estates of million quid McMansions on 1/2 acre lots (just like every US city from Houston to LA)

    You now have a suburb that stretches from London to Dover.

    The density is too low for public transport to work so everyone has to drive into London

    So you need to build 8 lane motorways into London (just like every US city from Houston to LA)

    So you need to knock down a lot of cheap high density housing on the routes into the city.

    Housing problem cured, transport problem is a matter or the government, can't expect developers to be restricted by red tape and costs of public transport, just privatise the roads - then economics will cure it.

    1. h3

      Re: Economists solving the problems the last one caused

      This article is nonsense. Rent Control is the way forward and the only answer.

      There is no reason for a house to cost more than the materials used to make it / cost of the land / cost of building it.

      (And I say this as someone who will probably get 0.5 million £ due to it that I don't need in the next 20-30 years).

      What these people want is a system where if you are born poor you die poor and there is nothing you can do about it which is absolutely wrong.

      1. Spoonsinger

        Re: Rent Control is the way forward and the only answer.

        Sorry, Rent Control isn't the answer. All that does is put an extra level of bureaucracy to a critical supply/demand situation. That extra level of bureaucracy will skew the rents by a) location of the administrators of the policy, (i.e. London), and b) Housing Benefit - which is seen as a base line to the actual rental market regardless of location, and c) The lack of control on people who still have a mortgage/debt but are able to get an an additional mortgage to buy a property in order to rent - The paid rent of which is probably backed up by Housing Benefit.

        1. Anonymous Coward
          Anonymous Coward

          Re: Rent Control is the way forward and the only answer.

          "All that does is put an extra level of bureaucracy to a critical supply/demand situation."

          False: There's no supply-demand situation here, but clear cut blackmailing: Either you pay what the seller is asking or you die to yard: It's cold outside.

          There's no "demand" when not buying is not an option, at all: It's all mandatory and not even "market", but a race of who can blackmail most from other people.

          It has to have some regulation or it's just robbery. Some say it already is and I tend to agree with them.

          But one thing is obvious: There's no such thing as "supply/demand" when you absolutely must buy and there are no (viable) alternatives either.

      2. John Sanders
        Holmes

        Re: Economists solving the problems the last one caused

        """There is no reason for a house to cost more than the materials used to make it / cost of the land / cost of building it."""

        Yes, there is a reason and it is the same reason for every market imbalance in which the price is completely inflated: "Artificial Scarcity"

        One of the 'politicos' speciality.

        1. Alan Brown Silver badge

          Re: Economists solving the problems the last one caused

          > Yes, there is a reason and it is the same reason for every market imbalance in which the price is completely inflated: "Artificial Scarcity"

          And of course the people who can abolish this are the same people in a position to profit the most from the status quo.

          I live in surrey. The hypocrisy about "saving our village" (most of which is 1930s era housing) lumbers on and on and on - and the most fundamental objection raised to allowing new housing is that "it lowers property values"

          1. Tim99 Silver badge

            Re: Economists solving the problems the last one caused

            @Alan Brown

            The hypocrisy about "saving our village" (most of which is 1930s era housing) lumbers on and on and on - and the most fundamental objection raised to allowing new housing is that "it lowers property values"

            My late father was a (very) senior local government officer. He said that the most strident NIMBYs were always the most recent people to move into a village. He thought that their attitude was "I have moved here, now nobody else should be able to, and nothing must change". The people wanted new housing and new employment opportunities were almost always those who were born there.

            The people who did not want a new by-pass around villages were almost exclusively those who did not live there (or did not want it going past their very large attractive 100+ year old properties, on the outskirts, near the new road).

          2. LucreLout Silver badge

            Re: Economists solving the problems the last one caused

            " the most fundamental objection raised to allowing new housing is that "it lowers property values""

            I can see why, for the young, lowering property values is fundamentally a good thing.

            The difficulty is that it effectively bankrupts Generation X who had to buy the overpriced houses off the first wave of Baby Boomers, and are now stuck with large mortgages. The sceond wave of Boomers is sitting on more than enough equity to cushion the fall.

            Of course, when Gen X go bankrupt, that will bust the banks, and result in a depression so large, nobody will be able to borrow money for anything. The economy will fail, and things will turn bad, fast.

            The only realistic option for reducing the cost of housing is to return to MIRAS, allowing the interest to be discounted from earnings prior to taxation being paid - much like it is for Buy To Let.

            Building more houses won't work, because by the time the extra infrastructure is costed in (schools, hospitals, roads, dentists, doctors, trains, busses etc), nobody could afford to buy the houses in the first place - they'd be considerably more expensive than those already on the market. Let's face it, the government is broke, so they can't pay it, and nobody is going to vote to pay more tax to fund it - direct taxes are at breaking point as it is and can only realistically move down from here.

            1. Squander Two

              Re: Economists solving the problems the last one caused @ LucreLout

              > The difficulty is that it effectively bankrupts Generation X who had to buy the overpriced houses off the first wave of Baby Boomers, and are now stuck with large mortgages.

              Stuck for how long? 25 years. So phase in the change over 30 years. Problem solved.

              1. LucreLout Silver badge

                Re: Economists solving the problems the last one caused @ LucreLout

                "Stuck for how long? 25 years. So phase in the change over 30 years. Problem solved."

                Except that it isn't solved.

                Any change you telegraph over any timescale you choose has an impact starting the moment you announce it. See Gordon Brown and what will forever be known in the gold markets as "The Brown Bottom".

                Nobody will pay a 10, 20, or 30 year mortgage to get to the end of it and watch the state take half their house value. Everyone would look to downsize now or default on the mortgage.

                If you want to reduce the value over time, then you need to build enough to slow increases below the rate of inflation while telling nobody what the plan is... the problem is, we don't build even half the houses needed to achieve that.

                Prices can come down in real terms, without harming existing value, if you cut taxation. That would require significant real cuts to the public sector to fund it. Real as in the sense that your budget this year is X and next year it is 3/4 X. Again, not a vote winner.

                The simple fact is that the young prospective FTBs are going to have to make a hard choice, and right & wrong, morality, and ethics don't come into it.

                Option 1) If you want to live in the same sort of house in which you grew up, in the same sort of area, then you will have to work a lot longer than your parents to fund that.

                Option 2) Emigrate to somewhere with cheaper housing.

                Option 3) Buy a significantly smaller house or flat than you expect.

                For that list of choices, the Baby Boomers should feel everlasting shame, for it is they, not Gen X, that created the mess to their own advantage.

                Daydreaming of taking housing value from those that have it by state sanctioned theft, to give it to those that don't have it, is just that, daydreaming. Half priced houses aren't coming... if they did, you'd get outbid by prospective or existing landlords.

                1. Squander Two

                  Re: Economists solving the problems the last one caused @ LucreLout

                  > the Baby Boomers should feel everlasting shame, for it is they, not Gen X, that created the mess to their own advantage.

                  Couldn't agree more.

                  > Nobody will pay a 10, 20, or 30 year mortgage to get to the end of it and watch the state take half their house value.

                  In what conceivable way would the state be taking anyone's house value? The suggested policy is that the state give permission for more houses to be built.

                  > Any change you telegraph over any timescale you choose has an impact starting the moment you announce it.

                  Yes, which is fine. People can change their behaviour over very short timescales -- and changing behaviour is of course the whole point of the policy. The problem with mortgages is that they take your behaviour and preserve it for a quarter-century, putting you at a disadvantage to people who can change their behaviour quickly. So announcing the policy now stops people taking out inapproriate mortgages now while enacting it in 30 years protects the people who made decisions recently which were appropriate then but will not be after the policy is enacted. Yes, people's houses will end up being worth less than they've paid for them, but that isn't a problem if (a) they've paid off their mortgages in full, so there's no negative equity, and (b) the effect is market-wide (which it would be), so it doesn't impact the ability to upgrade to a better house.

                  Obviously there are problems with the policy -- I only said that my idea solves the problem, singular, not that it solves all problems. But there's a huge bloody great problem with allowing one selfish generation to blackmail all future generations too. At some point, we need to break the cycle. People need to be able to afford to live.

            2. Anonymous Coward
              Anonymous Coward

              Re: Economists solving the problems the last one caused

              "when Gen X go bankrupt, that will bust the banks,"

              You mean it will bust the banks AGAIN.

              If banks go bust, so be it, as it would be with any other business.

              If anyone needs protecting it's the savers, and the FSCS do that already.

      3. Tim Worstal

        Re: Economists solving the problems the last one caused

        Err, yes, that's what I'm saying.

        Currently we have "a house to cost more than the materials used to make it / cost of the land / cost of building it." plus the scarcity value of the planning chitty. So, issue more planning chittys and the total price of housing comes down. Issue enough of them (as in the 1930s) and houses will cost "no more than the materials used to make it / cost of the land / cost of building it."

        Where I work in Bohemia houses are actually less than the build cost because there is a surplus. These markets things really do work, even for houses.

      4. rubyduck

        Re: Economists solving the problems the last one caused

        Rent control would be foolish. I remember the 70s.

        A significant proportion of renters receive housing benefit. In the past it was common practice for housing benefit to be paid direct to the landlord. This changed under Labour.

        One consequence of the change is that landlords catering for the low end of the market have raised rents to cushion themselves against non-payment.

        Any landlord with two bits of sense to rub together would prefer a tenant whose rent is paid directly by the local authority, and would be happy to take a lower rent with that kind of certainty.

        WIth that reinstated as common practice, rents should tend to roughly align with the levels of housing benefit determined by the local authority (as long as the local authority is behaving reasonably, of course)

        1. Squander Two

          Re: Economists solving the problems the last one caused

          > Any landlord with two bits of sense to rub together would prefer a tenant whose rent is paid directly by the local authority, and would be happy to take a lower rent with that kind of certainty.

          That's an interesting theory, but is the opposite of what actually happened. The reality is that receiving rent direct from the state meant that there was (a) loads of bureaucracy to deal with and (b) zero chance of avoiding declaring the income, so landlords avoided it like the plague. Anyone who was actually looking for a place to rent before 1997 will remember all the ads which stated up front "No tenants on housing benefit."

          1. squigbobble

            Re: Economists solving the problems the last one caused

            For bonus points, in BradMet the housing benefit cheques go straight to the landlord. That's how my housemate ended up paying rent (after he'd started a job) while his landlord was, unbeknown to him, simultaneously cashing his housing benefit cheques when BradMet comprehensively failed to stop his benefits after he told them he'd started a job. 3 times. Though he ignored my advice of telling them in writing by recorded delivery.

            Out of him and the landlord, guess which one BradMet pursued for benefit fraud and demanded repayment from.

  6. FutureShock999

    But the author's analysis is really, really, simple minded.

    Supply meets demand - true in most cases. But not this one.

    The problem with the housing crisis is that a huge percentage of the top of the market is no longer being actually used to provide housing. It is INVESTMENT, and usually offshore, tax-free, and sometimes illegally-gained investment funded. These houses stand empty, great towering symbols for how wimpy the UK's laws are, and how we are simply being used as a giant game of Monopoly by Russian oligarchs, Arab princess, and drug lords. All because the UKs laws make it very, very easy to escape paying taxes if you can claim foreign investment or transfer of ownership.

    When such a situation exists, the "supply" and "demand" of housing is totally out of balance, because it breaks the relationship between housing and actual income used to pay for it. By making it essentially a tax free game of Monopoly investment for the top of the market, it has introduced distortions that have filtered down to every single level.

    IF you want to solve the UK's housing crisis, it is simple. Close the tax loopholes that have elevated the top of the market and made it a speculator's paradise. This will then correct down the market chain in a few years.

    Oh, wait...you see, that CORRECTION is actually reflected in lower house prices. Which we that are struggling to BUY houses really, really need - but the top 10% of the country (being landholders) do NOT want to happen.

    Which is why, in reality, the problem of housing in the UK is basically unfixable. Because to truly correct it, the landed gentry, and even the upper-middle class, will have to take a huge hit in house valuations. And NO government will let that happen...

    1. William Donelson

      SO TRUE! Well said.

    2. Anonymous Coward
      Anonymous Coward

      @ FutureShock999

      "Close the tax loopholes..."

      But we can't do that! Then who would give us the money we need to con voters into thinking we'll govern in their interests?

      1. Yet Another Anonymous coward Silver badge

        Re: @ FutureShock999

        Or just charge income tax on all house sale profits and inheritance

        1. LucreLout Silver badge

          Re: @ FutureShock999

          "Or just charge income tax on all house sale profits and inheritance"

          All that will lead to is nobody selling any houses.

          I buy at 100k. Sit on it 10 years and sell for 200k as that would be roughly the prevailing rate for the house. You then tax me 50k of that, leaving 150k. How do I buy my next house when it's now 50k out of my reach?

    3. P. Lee Silver badge

      Supply always meets demand - its just the price point where they meet tthat changes.

      The problem with SE England is that its extremely difficult to increase supply - there isn't a great deal of land left where its (politically) possible to build. Supply is reasonably fixed.

      The problem isn't McMansions, the problem is the unwillingness to see low house prices as a good thing, leading to the ever upward pressure. The reason rent control is attractive is that it discourages investment-buying of second and third houses. With less rental income, you can't pay for high mortages, with lower mortgages more people can afford the houses which already exist and everyone is left (after a painful re-adjustment) with more money in their pocket.

      Of course, this assumes that supply is fixed (which it is, in the short term) and that there isn't too much externally sourced demand which will flow in offsetting the drop in domestic demand.

      In short, if you want people to be richer - help them get rid of their debt. Debt is bad for individuals and the economy and the UK is less solvent than places like Greece and Spain.

      1. Alan Brown Silver badge

        "The reason rent control is attractive is that it discourages investment-buying of second and third houses."

        Except that's not what happens. Rent control leads to situations like Rigby's Rising Damp. People will still buy 2nd and 3rd hourses, but in order to maintain income from then, they won't invest in maintenance/repairs.

        Rent control is the path to the rise of the Slumlord. In any case, the SE of the UK is short at least 100,000 dwellings and no amounyt of rent control is going to build new dwellings in the numbers actually required.

        1. Anonymous Coward
          Anonymous Coward

          "In any case, the SE of the UK is short at least 100,000 dwellings"

          Is it really short of that many dwellings or is it just that it is short of dwellings at a certain (perhaps) unrealistic price point? When demand is measured is it what I would term "realistic demand"? I mean, I really really want a nice brand new Aston Martin but there's just such a shortage of them at the £10k price point.

          I agree that rent control will not solve anything but I also am doubtful of the "need for x hundred thousand properties in area y over the next year or two" as it always sounds like a property developer puff piece. Once you stop overseas investment in property - you know, having houses for housing people that actually live here - where does this magical demand figure then sit? My guess is it evaporates much like the shitty rabbit hutch building property developers.

          1. Anonymous Coward
            Anonymous Coward

            population rise

            The number of new houses required is based upon the rise in the population of the UK - The UK population is projected to grow by 400k in 2014, for example, due to a relatively high birth rate and steadily increasing life expectancy.

      2. Chris G Silver badge

        @ P.Lee

        I gave you an upvote but must point out that Spain is very unlikely to be more solvent than the UK when the average Spaniard according to what I have read here is, as a family spending as much as 12%/annum more than their income. Many Spaniards buy cars and other consumer goods over periods of up to 8 or even 10 years after 5 a car is often in poor condition but they are unable to sell it for as much as the balance of the loan so they extend becoming worse off.

    4. Anonymous Coward
      Anonymous Coward

      Perhaps there should be a list of domiciles that are left vacant for >12 months.

      Squatters rights etc. I wonder if that will affect the investment crowd?

    5. Anonymous Coward
      Anonymous Coward

      "And NO government will let that happen..."

      Surely the Labour party exists to do things like this? Although they do have a blind spot on planning... indeed it was them who introduced the Town and Country Planning Act. Has any other piece of UK law done more to transfer wealth from the poor to the rich?

    6. John Sanders
      Facepalm

      """But the author's analysis is really, really, simple minded."""

      No it is not, it goes strictly to the point, artificial scarcity of a good over time produces a distorted market.

      Remove the cause of the distortion and the market fixes itself over time, It will not happen the next day obviously in the same way it took a few decades for the prices of the houses to sky-rocket.

      And I have to say that you're mixing things, what purpose do the people who pay high prices for the house have (being it investment or not) has nothing to do with the cause for the conditions which propitiate the price increase of a good.

      The high prices of any good reflect the market reality, this is the perceived value of the good by the person/s who want to acquire such good.

      There are no dark forces at play here, overseas investors consider the London house market to be a good investment value because they consider that the price of the houses will not go down in the short/medium term, their prices high as they are, are quite stable.

      And that is because houses are scarce thus price rises.

      It is the same with anything really.

      1. Anonymous Coward
        Anonymous Coward

        "artificial scarcity of a good over time produces a distorted market."

        Yes and what do you think "investment housing" is?

        Artificial scarcity at it's finest: Empty houses which restrict the supply and raise the price while generating obscene profits for the owners.

        It's obvious that price (of housing) don't rise 20% per year by itself. And yet it did, in 2012 and _again_ in 2013.

        1. Eddy Ito Silver badge

          Does London not have a property tax? Not that long ago there were a bunch of overseas investors buying up anything in the LA basin and many paying cash over the asking price today the prices are coming back down and more is becoming available because the investors found that paying property taxes at a rate of 1.5-2% on an empty house was a pretty bad investment on top of the 6-10% closing costs but then prices aren't rising 20% annually either. In comparison there are many housing units sitting empty in China and the owners are happy to hold them since it isn't costing them anything to do so.

          1. J.G.Harston Silver badge

            "Does London not have a property tax?"

            Effectively: no. The only property tax in the UK is Council Tax, which is banded up to £320,000 and EVERYTHING above £320,000 pays the same, which in many London boroughs tends to be in the region of £1500 a year (eg https://www.westminster.gov.uk/council-tax-bands-and-rates) Peanuts.

    7. Richard Jones 1
      Mushroom

      So What If Houses Go up in Price?

      My understanding is that the very top end of the market consists of a very few percentage points of the total housing stock, though due to being very over valued a large part of the value. The number of >£10million houses is still small, the number of >£5million is larger but still small, it is only when you come down to the >£500,000 that numbers are large enough to matter with the number of <£500,000 houses being almost as small as those >£10million. To blame the super expensive houses for the housing shortage is plain stupid.

      The argument then shifts to 'if builder could not build >£10million house and flats they would start building crappy little <£250,000 flats, no they would not; they would stop building all together. What is needed is something to stop the famine of building land and building permits that currently exists. That can only be achieved by a devaluation of both the land and the permits. In effect flooding the place with both, so that buildings can be created in sufficient quantity and at a sufficient price to mop up the demand. Yet this can be done as I have found since I returned to the country some years back. After working for many years outside of the UK where sometimes I did 18 hour days on the trot I came back in urgent need of a new house. I bought a new build outside of London and sold the previous small place I had owned- it was not possible to fit my family into the old place. The planning permission for the 'new build' had been contested as it lay on the edge of the town, but as ex-war department land there was no bar to re-cycling the land. Since then a number of other small scale builds have been completed, a filling station site now has >60 flats, an old pub will have perhaps 10 chicken coups and a burnt out work shop was replaced by half a dozen or more new, tiny houses. In fact, the trend to re-cycle land is seeing a number of larger properties being replaced by impractical tiny residences, which after a few years need to sprout loft extensions or other space generating warts. A side effect of planning moves to encourage smaller dwellings.

      Is this the end of space as we know it in the area? No, there is still probably the equivalent of 10% of the built area, perhaps more that is currently derelict brownfield or otherwise blighted land. So now we have the other limitations, transport, water sewerage, schooling and power. Just like London we have the issue of ageing and failing ground plant exploding and causing power cuts

      Oh I forget another 50 or 60 dwellings were recently built on ex school land - no not the playing fields as such, some very uneven land to the side of the school plot and near to the road.

      So in spite of any nimby effect the town has built perhaps an average of >50 new dwellings per year, with the greatest rush of building in the last 3~4 years. However, this is the recent record; go back to the 1980s when industry was dying and the once great industrial engines that built the district were ending and the suitable buildings were converted to flats. The unsuitable ones were bulldozed and replaced by hundreds of flats. So where once wooden aeroplane parts were built, now later generations can sleep peacefully

      None of these were intended for or sold to absentee owners and while some do now fetch well over £500,000, many still fall well below that level. Most have between excellent, very good or good access to rail 'services' into London. Using brown field sites the town had quite likely increased its population by between a third and a half in 30 years, so expansion on brown field land is highly possible and at far more 'affordable prices'.

      This is considered and expensive area, my daughter recently bought a house in the adjacent town for less than £160,000, OK that is considerably more than the <£20,000 we paid for our first house in the 1970s, but the value of money has been wreaked, not by bankers, but by 'spend what you like' politicians.

      As I remember it we had rent controls in the past and we also had slum landlords to go with those controls, the name Rackman comes to mind.

      So, it is wise to repeat failed experiments and expect a different answer: NO!

      Is it better to discover what works and how it can be improved, now that is difficult. (The answer is YES by the way.

      As a final shot, I guess my house has more than doubled in value since I bought it, so what?

      It will mean more IHT but that is of questionable value to me, in fact the increase in value of the house is more of a disadvantage than a benefit; discuss.

      1. lars.r

        Re: So What If Houses Go up in Price?

        I’d have to concur. High houses prices are on balance not good for anyone other than those providing the construction input (equipment, land, materials etc). The people building the damns things will do about the same either way. And given the volume factor, the builders are probably better off with lower prices.

        As for the residents I’d say that lower is better. A high price simply means that it is expensive to live there, and the higher the price the higher the opportunity costs. Something which is mostly neglected from consideration. If the value of your house goes up 10% a year it means that you pay 10% more every year to live there. You are just able to easily ignore it since you don’t get a bill in the mail every month. But you pay just a surely. So, so much for the economics.

        The main reason to live in an expensive property (as opposed to a merely large, or conveniently located one) and accept the high and growing opportunity costs of ever rising property prices is simply snobbery – keeping out the riff-raff. This is a significant boon to many, probably most people and something that they are willing to pay for. There is also the show-off factor: The phrase “conscious consumption” was coined over a century ago. Though I wonder what the attitude would be it the true financial costs was made plain.

    8. Whiskers

      There is certainly something to be said for taxing (or even confiscating) housing that isn't being lived in. But that would have only a tiny effect on the actual housing supply.

      House owners are easily dazzled by the large prices being quoted for property; but those prices aren't real money - if you have to pay an equally inflated price to buy your next house, the inflated price you can sell the old one for has no meaning. You can only turn that into real money if you buy a cheaper house or no house at all, or if your heirs are in a position to do that instead of using the sale of your house to pay off their own mortgages or get themselves onto the 'house owning ladder'.

      But the government does have a nice little earner in the form of 'death duty', based on the total market price of all you possess. So they have good reason not to let house prices fall. (The tax is payable whether or not your heirs actually sell any of your stuff).

      But London's gridlocked housing market can only be eased by either making more houses or reducing the number of people wanting to live in London. The only way to do either of those things in a humane sustainable manner, is to let market forces do it - which is where local and national government regulations do have a useful part to play; not by fixing prices or forcing people to go away, but by ensuring that their laws and taxes no longer create an artificial shortage of housing or glut of people in London.

    9. Triggerfish

      Depending on the source its said that between a quarter to a third of our MP's are private landlords who have bought through buy to let schemes.

  7. William Donelson

    Removal of rent control HARMS the economy in general, by forcing a higher proportion of income away from the local economy and into the pockets of landlords.

    1. Eddy Ito Silver badge

      It's a catch 22 in that the landlords have effectively been given monopoly power by the lack of building permits that nobody wants because they won't be able to recoup the investment in a new rent controlled building. At this point the bubble is apparently stable, for now.

  8. keithpeter
    Windows

    Relax rules about what you can rent

    "Compulsory standard rental agreement terms that allowed people to make a rental property their home, rather than some kind extended holiday let, might temper the obsession we have with owner-occupation in this country."

    Security of tenure, yes.

    But at present, in the UK, I *think* there are quite severe limits on what you can convert/use/rent as living space. I *recollect* that our present 'government' said something about relaxing these limits, allowing surplus office blocks/factory units(*)/unusual buildings to be converted into housing. As there are plenty of these standing idle in the area just around the centre of Birmingham I imagine they could be rented basically for the amortised cost of conversion and maintenance plus a reasonable ROI.

    Could be fun for younger people and oldies like me who just need about 400 sq. ft. + bathroom/corridor somewhere interesting. Could increase the supply of lower end housing, thus easing pressure on rented/purchased traditional housing. Might lead to genuine 'innovation zones' as a mix of low cost housing and workshop/office space becomes available and small service businesses attracted (genuine 'vibrancy').

    Joseph Mitchell was a journalist who moved to New York in the 1930s/40s/50s. When he first moved to NY, he deliberately moved around the neighbourhoods, renting a new appartment each six months or so, because he wanted to explore the city. I'd love to have a vibrant, secure rented sector with sufficient supply to allow that to happen now.

    How do we get from where we are now to something like that? What actual policies would need to be implemented and in what order to ensure a transition without huge price spikes and idiotic levels of risk to low income groups?

    (*)Subject to checks on certain categories of factory: plating and etching is common round here, very nasty chemicals, might be too expensive to clean up.

    The Tramp: low income groups need to have a secure roof over their head if you want your rubbish taken, offices cleaned, children minded, buses driven &c

    1. John Sanders
      Meh

      Re: Relax rules about what you can rent

      """It makes the assumption that the so-called market will find the ideal situation for all concerned. First, let's begin with the fact that there is no such thing as a perfect market."""

      A completely free market does not mean an unregulated "Survival of the fittest" kind of market.

      Never ever has a completely free market been allowed to exist in modern times, except with the exception (for a short while) of the Internet (Because politicians did not understand it) And check how it has influenced the overall economy.

      No market is/can be perfect because humans are not perfect, any system will have people who will get a bad deal, the key is in choosing a system in which the least amount of people get a bad deal.

      Note the current system is shit and does make the majority of the people get a bad deal.

      More free market fixes things but does not so in a couple of nights, takes time until the system re-balances.

      People who wants solutions now in the form of more government intervention should look at Venezuela, a country which produces oil, where there is a drought for which people can not buy bottled water because they lack plastic bottles.

      1. Anonymous Coward
        Anonymous Coward

        Re: Relax rules about what you can rent

        "A completely free market does not mean an unregulated "Survival of the fittest" kind of market."

        It does, by definition of "free". Otherwise it's not a free market, but regulated market.

        1. John Sanders

          Re: Relax rules about what you can rent

          I suggest you read more into what a "Free market is" I insist that a free market is not one with no rules.

          Most people confuse government intervention with regulation.

          For example a free market for food should include regulation to protect consumers from people selling food which is not appropriate for consumption.

          An intervened market is one where the government (or any other entity with sufficient power) says that some can sell, some can not, how much quantity and fixes the price of the food. Obviously with all the best intentions in the world, leading to the typical Marxist failure, IE: Venezuela, Cuba, North Korea, etc.

  9. Identity
    FAIL

    Where do I begin?

    While I cannot speak to the UK housing situation, this essay is fraught with error of both fact and ideology.

    So, let me start with the latter: plainly, this is written from an economic rather than social point of view. It makes the assumption that the so-called market will find the ideal situation for all concerned. First, let's begin with the fact that there is no such thing as a perfect market. Joseph Stiglitz won his Nobel proving this. People are always trying to 'warp' the market to suit their own desires.

    I am familiar with rent control in New York City. This is a very expensive place to live, exceeded by few (I think San Francisco, London and Tokyo are among them, but that's neither here nor there...). Rent control is the only way many can afford to live there (example follows). Strictly speaking, if the essay were right in its assumptions, that there are plenty of places to build in the city, economic constraint would not hinder it — any new construction can be rented at whatever the owner wants. Further, the rules of rent control are called, strictly speaking, vacancy decontrol. Which means that when the occupant departs, rent at whatever desired level may ensue. (Again, really neither here nor there) my father lived in a rent controlled apartment in Manhattan. He was the Creative Director at a smallish advertising firm, belonging to Litton Industries. He was middle class (remember when there was such a thing?) and when he died, he left an estate of only a few thousand dollars. His rent was $300/mo, which he'd been paying since the '60's. At some point, the building went co-op and he had the choice of buying his apartment (for around $30K) but declined, because he "didn't want to be tied to those nuts" — the other owners. God knows what the costs of owning (in taxes, fees, repairs, assessments, etc.) would have been, though... When he died, that one bedroom apartment went for $300K. He (or at least, I) would have been richer had he bought, but he thought like an ordinary human with personal wishes and not like a theoretical economist.

    One last issue, and then I'll leave off (though there's more to say): when an insurer pays a claim on your destroyed house, they are paying (ostensibly, at least) the cost of rebuilding less deductible. This does NOT include the land. If your house was worth 10x the insured value on the open market, once the builders are done, you can turn around and sell it for that!

    1. Throatwobbler Mangrove

      Re: Where do I begin?

      "I am familiar with rent control in New York City. This is a very expensive place to live...Rent control is the only way many can afford to live there."

      Respectfully, you and the author of the article conflate "New York City" with "desirable parts of Manhattan". There are plenty of apartments in NYC that are affordable or even cheap, but they're in the outer suburbs or in undesirable parts of Manhattan.

      Rent Control operates primarily in Manhattan to give a relatively small number of tenants cheaper accommodation. In my entirely anecdotal observation, many of those tenants are middle class desk workers who could afford market rent (although TBF that might just reflect the fact that I mostly hung out with other middle class desk workers). It also creates lucrative opportunities for rent controlled tenants to illegally sublet their apartments to people who pay more-or-less market rate - so the tenant gets the cream for free.

      There might be an argument for preserving social diversity through intervention in the market like rent control - but I don't think that rent control in NYC really achieves that and I don't think there has been a real discussion about who pays the cost of that (coz nothing comes for free).

      1. Identity

        Re: Where do I begin?

        "It also creates lucrative opportunities for rent controlled tenants to illegally sublet their apartments to people who pay more-or-less market rate - so the tenant gets the cream for free."

        That's illegal, and generally against the terms of the lease — which is not to say people don't do it...

    2. Anonymous Coward
      Anonymous Coward

      Re: Where do I begin?

      Dunno about New Yourk City, but as far as UK is concerned it is spot on.

      Current planning regulations are designed 100% to ensure that the remnants of the middle and working classes (whatever 's left of them) remain where they belong. The attitude that bore the 1947 act is alive and kicking.

      If you own a 2M+ property outside London (and a few banker cities like St Albans where the prole/non-prole border is in the 3-4M now) you can tear it down, rebuild it, change it and do anything you like to it. The only thing the planning people will ask is "how would you like it sir, with coffee or with ice cubes".

      If, however, you are unfortunate to own one of those 120-400K middle class hideously fugly cubes any planning application that will make your cube look different from the one down the road will be bounced. That is what the planning code says and that is what it enshrines - that the middle class (actually paying tax) scum does not jump over its statute.

      This is why things like the regeneration of the city centers as it has happened in Amsterdam, Rotterdam, etc can never ever happen in Brittain. There shall never be individuality unless you are in the 2M+ band - proles do not deserve one. There shall never be character unless you are in the 2M+ band - proles do not deserve one.

      Signed - sincerely, someone who has had to modify a planning application which would have made my house into something nice, comfortable and distinctly European so it looks exactly like the fugly Emmerdale cube next door. And I now know my prole place in life.

  10. Anonymous Coward
    Anonymous Coward

    Economists wear mental blinkers

    Economics isn't a science; it's barely even a craft. Boiled down to essentials, it consists in looking for patterns in people's economic behaviour that can be analyzed mathematically. But already this forces economists to over-abstract from the real world. Consider the example given: the shortage of toilet paper in Venezuela was caused by the enforced low price for it. If you are an economist, you feel an irresistible urge to generalize from this single observation (really just a theory). But what happens when you consider the market for labour rather than toilet paper? If employers force the price way down, does that mean there will instantly be a shortage of labour? Only if people want to lose their houses, their families to starve, and their quality of life to plummet. There is no parallel between supplying toilet paper (you can use the same resources to do something more profitable) and supplying labour (because for most of us, it's the only asset we've got).

    As for building houses, well yes: only 2-3% of the land is covered with houses right now. (Presumably that doesn't include roads, shops, government buildings, parks, etc.) How much of the land near you would you LIKE to be covered with houses? Half? Nine tenths? Thing is, economists can only think about one thing at a time, so then they can figure out how to optimize it. But to live a decent life you need scores of different things - breathable air, drinkable water, decent food, somewhere comfortable to live, clothing, a source of income which probably entails working, job satisfaction, pleasant colleagues, a good boss, security, exercise, hobbies, companionship, love, a chance to have children and bring them up to enjoy all those things, a good education system, freedom from excessive taxes, freedom from oppressive laws and authorities... and on and on and on. An economist is happy to say, "Well, you could easily have far more housing" because he doesn't care about all the other things you'd have to give up to get it.

    That's why economists are not much use except to discuss other people's mistakes - in hindsight. In other words, as far as I can see, they're not much use.

  11. Rich 2

    Solution

    Less people?

    1. AndrueC Silver badge
      Headmaster

      Re: Solution

      Solution

      Less people?

      What - so we can build smaller houses?

      Actually you do have a point. the UK has an obesity crisis at the moment so 'less' people would be a good thing ;)

      Anyway - sorry but less v. fewer is becoming a pet hate of mine.

      1. Whiskers

        Re: Solution

        I'd rather like there to be less of me. But not fewer, as there is only one and I'm irreplaceable (just like everyone else).

      2. Squander Two
    2. JeffyPoooh Silver badge
      Pint

      Re: Solution

      "Less people?"

      That's incorrect. It should be "fewer".

    3. John Sanders
      Meh

      Re: Solution

      Less people is incredibly short-sighted.

      What you want is not less people, but fewer people all living in the same crowded spot.

      The world is not ending, we're not running out of anything and we're not overpopulated, not popular thinking I know, but the truth.

  12. Pen-y-gors Silver badge

    Why ask economists about the economy?

    "The only function of economic forecasting is to make astrology look respectable" J K Galbraith

  13. MalcontentUK

    Reform focused on a high-rise London and discouraging foreign speculator

    I think you make some valid points, but I don't agree that whole-sale repeal of the act is the way forward. Despite it's flaws, there are some good reasons to have development controls and even a green-belt. But I think the laws are certainly abused by NIMBY type attitudes that dominate planning committees, particularly in the affluent commuter belts of London, and should be reformed.

    But I think the solution needs to be more London focused, as that is the really where the problem is in the UK - there is no housing shortage outside of the South East of England. We need to be prepared to build upwards much faster than the recent slow increases. We should look at New York which has it's own periphery limits - partly physical from the Rivers and sea and partly political from the adjacent state of New Jersey; a big part of the solution has been to build upwards. I agree their rent control is not the way forward however. Instead we should actively reform planning laws within London, perhaps even have a totally separate planning process within the confines of the M25 to centralise and free the process even more from the NIMBY style council politics (this process has started with the Mayor's powers but should go much further). I would even go so far as to zone entire areas of London as having a minimal/streamlined process for high rise developments and new infrastructure to support it. We should create new high-rise/high-density residential hubs. We need Londoners to adjust their expectations to a more New York style of life - you can live in a modern high rise development and have a good quality of life, even raise kids - you don't need a house to do that. Unfortunately the debate remains overly focused on finding land to build houses in a densely populated part of the UK.

    But the other part of the solution is to try and stop the rampant price speculation that is distorting the market. A big upward pressure on prices and demand is the influx of money from abroad (particularly the far and middle east) buying up property as an investment in the "always rising" market. The law and tax rules currently incentivise this behaviour (for example only recently have we required non-residents to pay capital gains tax on such properties), and is making the housing shortage even worse. I seriously question the benefit to the UK of this type of "foreign investment"; all it does is lock up housing stock in our capital city and does not give the same kinds of gains we see from foreign investment in businesses. It's also encouraging builders to build expensive (and apparently large numbers of unoccupied) "high end" developments for foreign owners, rather than middle end developments to meet the section of market demand that supports London's core Businesses and activities. Add to that the overseas Mortgage market - where foreign middle class investors can take out cheap mortgages to buy London property - and we're also opening the London property market up to the risk of future price fluctuations should the worst happen to the global economy. We need to start being more selfish - the London Property market should be regulated in a way that favours the people who need to live and work there to keep it prosperous.

    1. John Sanders
      Pint

      Re: Reform focused on a high-rise London and discouraging foreign speculator

      """But I think the solution needs to be more London focused, as that is the really where the problem is in the UK"""

      A pint for you sir!

  14. smartypants

    On the topic of 'land in Surrey devoted to housing'...

    "(yes, we could actually double the amount of land in Surrey devoted to housing without touching agricultural land or undeveloped land)."

    This is a bit silly.

    A golf course is just a series of fields planted with grass and silly sandpits.

    Replacing a golf course with the crop-growing field it displaced is easy. Just plough it up.

    Replacing a golf course with a housing estate renders the land unusable for crop-growing for the forseeable future. It's effectively yet another of those one-way transfers of land use from non-built up to built-up.

    If you want to bless Surrey with endless bland Barratt hutches and triple its population, by all means make the argument, but don't make out that this is something we can do without impacting the countryside.

    1. Alan Brown Silver badge

      Re: On the topic of 'land in Surrey devoted to housing'...

      Most of the golf courses in Surrey are built on fairly poor quality land from an agricultural point of view.

      For that matter, most of the "greenbelts" are too. The T&C planning act was intended to stop the entire south of england turning into strip suburbia and give ciutydwellers access to greenepaces - but all the greenbelt land is effectively fenced off from City Dwellers.

      The entire clusterf* has been mismanaged from the start and amounts to an unwritten farming subsidy (greenbelt land pricing is substantially depressed from prices outside the greenbelts.). It'd be better to create parks, reserves, flood control areas and let the rest be used for whatever purposes come to mind.

  15. Yet Another Anonymous coward Silver badge

    Economics lesson 2

    "Economic fact: There can be no cheap housing because landlords won't build housing to rent for lower profits"

    If only there was some public organisation devoted to the common public good rather than profit. They could build housing and rent it for affordable rates, enough to cover further building. It would also be helpful if the same organisations were in charge of public transport and were able to decide which public land to use.

    Next week Tim demonstrates the impossibility of having an army, since no customer would pay for a tank that might not be used to defend them.

    1. Squander Two

      Re: Economics lesson 2

      That would be an excellent point if Tim had written "There can be no cheap housing because landlords won't build housing to rent for lower profits." Oh, but he didn't. So, er, why did you put it in quotes, exactly?

      The entire point of the article (did you read it?) is that there can be cheap housing.

    2. LucreLout Silver badge

      Re: Economics lesson 2

      @YAAC

      I assume you're happy to pay more (a lot more) in taxes to fund all of this? I'm certainly not going to pay for it, and that subsidy has to be funded somewhere (the subsidy being the difference between what a private landlord would charge for the property and what the housing association charge).

  16. hammarbtyp Silver badge

    Surely the problem started in the 80's when greed was good

    Surely the problem began when council housing was sold of at knocked down prices during the Thatcher years in order to buy an election and then the money was not re-invested in more social housing.

    The net result was a short term effect where those who won the sell-off lottery became well off house owners, but future generations were consigned to high-rent private sector and the mortgage bubble.

    Housing is one of those things that should be a right and not something which is driven by market demand.

    I think as we have seen in recent years capitalism without regulation produces few winners and many losers. Somethings cannot be left to the market.

    1. John Sanders
      Facepalm

      Re: Surely the problem started in the 80's when greed was good

      ""I think as we have seen in recent years capitalism without regulation produces few winners and many losers. Somethings cannot be left to the market."""

      I suggest that you read a bit more about what regulation is in place for what, you will quickly come to the realization that a huge part of the modern problems we face is the over-abundance of useless regulation.

      Note: I do not propose any form of complete de-regulation at all, I propose that the regulations are made smaller, simpler and enforced accordingly.

  17. Anonymous Coward
    Anonymous Coward

    "there is no housing shortage outside of the South East of England. "

    Yet more useless Worstall clickbait, but since I'm here

    Worstall: "High housing costs in SE England are simply caused by the rules and laws that restrict the building of housing"

    Absolutely nothing to do with liar loans, interest only mortgages, 110% mortgages at ridiculous income multiples, biy to let mortgages, etc, then?

    A house is not, in any real terms, an investment.

    A house, in real terms, is barely an asset (it needs money to be spent on maintenance, otherwise its real value necessarily reduces).

    So many people have been convinced that the "value" of their house relates to their wealth, but how is it an indicator of wealth when all you can do with it, for most people, is trade it for another house of equally inflated value.

    Shame arithmetic and logic are such undervalued skills these days,

    Someone: "there is no housing shortage outside of the South East of England. "

    Why is there a housing shortage in the South East of England? Nothing to do with planning regulations, that's for sure, the regulations across England have been on the developers side for many years now, as any objector will tell you (even if the objection is "you're building on a flood plain").

    Stop the rest of us unnecessarily subsidising infrastructure in the South East and watch the jobs move elsewhere once the South East becomes unaffordable for anyone outside the 1%? We're nearly there already in affordability terms, but so long as the financial sector benefits massively from ever-larger numbers of ever-larger mortgages, the consequences are obvious...

    1. Tim Worstal

      Re: "there is no housing shortage outside of the South East of England. "

      "A house is not, in any real terms, an investment."

      Quite true, and the house itself doesn't particularly change in value either. However, the value of that planning chitty, subject as it is to artificial scarcity, does change and so can be considered as an investment. Which is, again, somewhat my point. Issue more chittys and the value of them comes down.

  18. Steven Jones

    That 2-3% figure of land occupied by buildings, according to the UK National Ecosystem Assessment is what's left of the 10.6% of England categorised as urban after removing the space occupied by gardens, allotments, parks, playing fields, open water and other green spaces.

    So yes, you can build more, but at the expense of higher density housing, loss of green spaces, loss of gardens and a general reduction in amenities. Also, all that new housing requires amenities so that 2-3% number is highly misleading.

    The real problem is too many people, but as nobody is going to come up with a solution to that any time soon, we are stuck with it.

    So it's certainly possible to increase the supply of housing and, probably, decrease the price, but the environment will get more crowded, there will be less public and private space per person and it will be made even worse by attracting yet more people into the most overcrowded parts of the country. The price of space will continue to go up with the population.

    The demand is not that of people already resident in the UK but those with the aspirations to be residents as well.

    1. Steve D

      If the problem is too many people, how many should we have?

      If the problem is too many people, then on what basis do you decide the optimum population size for the UK? How would you decide what the maximum, minimum or optimum population size should be? What factors should be included?

      It is standard ranting to say "The UK has too many people, so we must do <horrible thing>", and a quick trip to a Godwin. I do not want to start that kind of a flame war. I want to know how you decide, because I've never seen it discussed.

      1. Yet Another Anonymous coward Silver badge

        Re: If the problem is too many people, how many should we have?

        Re-introduce wolves

        Simple solution to overcrowding, obesity, the elderly, fat cats, city folk that move to the countryside, foxes, overpopulation of deer etc etc

      2. Alan Brown Silver badge

        Re: If the problem is too many people, how many should we have?

        "It is standard ranting to say "The UK has too many people, so we must do <horrible thing>", and a quick trip to a Godwin. "

        The UK is one of the EU countries with the smallest population growth figures. Things are mostly crowded in the SE due to decades of economic policy which has resulted in a lot of intra-country migration - hence why there are areas in the north where you can't GIVE housing away because there are more houses than people.

        There's a lot to be said in favour of encouraging economic growth elsewhere, but england's schitzophrenic political/planning structure precludes proper transport infrastructure being built and the existing stuff is all centred on London. Companies find they can do OK up to a certain size outside London and then they HAVE to move there or face rising costs.

        (One way of encouraging growth would be to push ahead with HS2 as a Birmingham-centric process. Whilst all the planning isues are being nutted out down south the lines could easily be built northwards and economies of the areas would benefit once it's completed - even if never built down to London.)

    2. AndrueC Silver badge
      Unhappy

      The real problem is too many people

      ..in one corner of the island. As another poster wittily pointed out "The problem is London". Successive governments have steadfastly refused to do anything serious about encouraging businesses to take root 'oop north'. With today's internet connectivity making location less important it's surely gone beyond a joke.

      I suppose some might argue that HS2 is an attempt to address this but it can't carry anywhere near enough people and anyway my point still stands: Why the *bleep* do so many people have to gather within such a small area in one part of the country just to sit at a desk with a keyboard and monitor. We do have such things in other parts of the country you know.

  19. Nick Kew Silver badge
    FAIL

    There is no market

    Housing in the UK is not a market by any normal definition. But that's nothing new: every government initiative since 1945 (and probably before) has done damage in one way or another.

    There's just too much public money in it. Housing benefits push rents upwards, which in turn raises yields for landlords, which in turn pushes "market" prices up. Whereupon politicians see it's unaffordable and throw yet more money in, both directly and by proxy such as loose lending, not to mention a succession of initiatives in the name of "low cost" or "affordable" housing. Wave upon wave of ill-conceived and poorly-built houses since 1945 that just serve to put massive pressure on any half-decent stock. And finally, paying builders incentives to build more (like today's "help to buy") just serves to push the price of land up another notch.

    As for rent controls, they do tend to be counterproductive, though data is short on what is actually to blame. The 1977 rent act may have been the biggest disaster of all, but it did a lot more than just impose rent controls to kill the market off.

    Anyway, rent controls would be quite superfluous if we didn't do so much to push rents upwards!

    In summary, the housing market is a mechanism for transferring wealth from the productive (taxpayers - bearing in mind hard-earned income is the only thing we really tax seriously) to the rich (property owners).

    1. dogged

      Re: There is no market

      Or we could just go with Occam's Razor and remember that over 25% of MPs are landlords.

  20. Mage Silver badge
    Boffin

    Planning

    You STILL need planning laws.

    Otherwise mad stuff happens.

    I agree Rent control doesn't work. But this is very very hard stuff.

    Also increasing Rent allowance or 1st Time buyer Grants etc doesn't work. Also "buy to let" doesn't work either (you get incompetent landlords). The supply only increases a little and prices go up.

    There needs to be conditions on providing Infrastructure or the Developers won't do it.

    Nor oddly are Developers smart enough to build houses or the kinds of apartments people want where they want them. We have a shortage of housing in Ireland yet empty ghost estates.

    Selling off Council housing is only laudable if councils build more accommodation to rent. That increases supply and keeps rents down. It's absolutely the only way to help with housing for poorer. Giving poor increased rent welfare only creates a marginal increase in supply. Mainly it puts the price up.

    1. Anonymous Coward
      Anonymous Coward

      Re: Planning

      Which is roughly the Dutch system. There, local government (latterly devolved into housing corporations) has been building houses for "affordable" rents for decades and continues to do so. But there is also a lively private rental system for larger/desirable/Amsterdam based housing. Also there is less in the way of ego in the Dutch character that exhibits itself (for instance) in my nephew the Supreme Court judge still living in the same, ex council, terraced house that he bought 25 years ago.

  21. John 156
    IT Angle

    If only economists ruled the world

    I think we should have totally open borders, no planning laws, people on housing benefit being able to live at taxpayers' expense wherever they want with their landlords to be able to charge whatever they want; improve the help to buy scheme so that buyers only have to pay back loans if they really, really wish to i.e. operating a bit like student loans.

    Furthermore, all houses for sale should be advertised in every country in the world with an absolute ban on British people being allowed to purchase a new built property since allowing people to live in properties which could more usefully be purchased for investment purposes by foreigners would be a clear market distortion.

    All this will work because the government has a bottomless pit of money from which to draw and we have an endless supply of land; let's face it, what are farmers for if we can import all the food we need? Come on, get out those concrete mixers, you know it makes (economic) sense; we could become more wealthy and successful even than Ireland before their housing based economy crashed.

  22. jason 7

    I'd like to see...

    Housing and rentals being priced per square foot rather than the silly bedroom rule.

    If we need more land then we should look at all the land the MoD has under its belt, most of which it probably hasn't used for decades.

  23. Anonymous Coward
    Anonymous Coward

    So what are we going to about this...?

    Nothing please; my pension and retirement depends on it.

    Selfish I know, but every contractor reading this will surely agree.

  24. adnim Silver badge
    Joke

    Feed the homeless.....

    to the hungry.

    Two birds, one stone.

  25. Ken Hagan Gold badge

    Abolishing the green belt would hurt

    The problem lies with all those people whose houses adjoin the green belt. Since, under current law, they are immune to some jerk building an eyesore on the other side of the fence, these properties have a higher market value than others. Since the laws have been around for donkeys, it is almost certain that the properties' current owners have paid that higher value when they bought it. If you simply abolish the planning laws at a stroke, you wipe that out at a stroke. Abolition is an attempt to transfer thousands of pounds from the pockets of voters into the pockets of developers.

    I say "attempt", since this is almost certain to face a legal challenge, just as the proposed HS2 route did. HS2, however, affected relatively small numbers of people along a single route. Green belt abolition would affect far more.

  26. Tony W

    In one word - transients

    Economists should take lessons from electronic designers. Calculating steady state response is easy, but often it's the transients that will blow the fuse. Abolishing planning will make some people instant millionaires and push others into major debt (yes a house does have very real value when you downsize or move to a cheaper area.) Included in the latter will be a lot of old folks who have no way replace their lost asset.

    So how do you get from here to there? Any hint of a possibility that the law might change will lead to instant upheaval and instability. That's not a political problem, it's a real economic effect - just one that most economists that I've read don't deal with.

    Add to that, the idea that free market heaven would be established if planning were abolished is nonsense. A few big companies would carve up the whole thing between them, take control of the vital transport links and (as usual) those that shout loudest about the free market would be the ones working hardest to fix it in their own favour.

    Of course when we had few controls, what happened was that people built to take advantage of the existing often state-established transport networks, and the state scrambled to keep up with water, sewage, schools, hospitals and so on. Not an ideal model, but hard to work out how to replace it without some ... planning.

    And no, I don't support rent control in the least - I'm old enough to remember its dire effects in London.

    1. Tony Haines

      Re: In one word - transients

      //So how do you get from here to there?//

      Perhaps by changing the rules so far off in the future that the changes will be priced in by the time we get there? I've heard this method proposed a the strategy for reducing agricultural subsidies.

  27. Gray
    Facepalm

    Perverse reaction

    So the author laments, "And yet I know of at least three different countries (or parts of countries) where rent control is seriously advanced as the solution to housing problems."

    Yeh, bucko! And how many times did yer mother scream at ye:

    "Don't touch that hot burner!"

    "Don't yank that cat's tail!"

    "Don't chew on that cord!"

    "Don't ... don't ... don't!"

    And ye did! Did'nt ye? Yup ... over 'n over ye did! 'N ye expect that others'll be smarter? A nation's leader group is nothing but a bunch of clots sittin' 'n fussin' with each other, where the IQ of the brightest of 'em divided by the number of 'em present is the IQ of the collective ... and ye expect a smart decision to come from 'em?

    Don't get yer hopes up!

  28. Anonymous Coward
    Anonymous Coward

    I completely agree with the article but I see a fundamental issue with the solution, an issue that will haunt us for generations probably. A huge number of people in this country now have a huge amount of debt because house prices have been very high for quite a while. If we suddenly made it such that enough houses could be built then all these expensive houses would suddenly be worth about what they should be worth. Cue huge numbers of people stuck with negative equity unable to move to find work etc etc. It would be a complete disaster.

    The way I see it all we can hope to do is reverse the stupidity slowly enough that people don't feel the pain. Free up enough land to hold house prices and let inflation work it's magic. I can't see this happening any time soon though with a still growing population.

    1. Squander Two

      > If we suddenly made it such that enough houses could be built then all these expensive houses would suddenly be worth about what they should be worth.

      So don't do it suddenly.

      > Free up enough land to hold house prices

      Why only hold? Why shouldn't house prices go down?

      The reason a major drop in house prices would be disastrous is that people's behaviour is based on the assumption that it will never happen. That behaviour is manifested in mortgages. Mortgages last 25 years -- 35 in a few silly cases. So just phase in the removal of artifical scarcity over 30 years, and there's no disaster.

      1. LucreLout Silver badge

        "The reason a major drop in house prices would be disastrous is that people's behaviour is based on the assumption that it will never happen. That behaviour is manifested in mortgages. Mortgages last 25 years -- 35 in a few silly cases. So just phase in the removal of artifical scarcity over 30 years, and there's no disaster."

        Unfortunately you haven't thought that through very far.

        For a great many people paying these large mortgages, their house is their pension. They need to sell it and downsize to fund retirement, and they made that choice decades before you want to start meddling with the market.

        Do you think someone is going to pay 3 times the value of their house in mortgage interest and debt repayments, just to get to the end and see its value cut in half? All your proposals would do is destroy the housing market today, with the depression that would bring, and prevent any price uplift for a whole generation.

        Allowing prices to fall against inflation might work, provided it was very carefully managed and extremely well communicated. The other problem you then have, of course, is what do you do with the increase in population over the next 30 years until you get to relax the planning system?

        Most homeowners are or were tax payers during the life of their mortgage. Why would they possibly want to vote to reduce the value of their life savings so you can buy a cheaper house?

        1. Squander Two

          > Why would they possibly want to vote to reduce the value of their life savings so you can buy a cheaper house?

          So their children will move out?

          > For a great many people paying these large mortgages, their house is their pension. They need to sell it and downsize to fund retirement, and they made that choice decades before you want to start meddling with the market.

          Who's meddling with the market? The state, not me. The proposal in question here is to stop meddling with the market, not to start.

          The decision to use houses as pensions has already been screwed by that meddling in the market, as insane house price rises increasingly lead to people having to use their houses to fund their children's houses. It doesn't look like a particularly reliable decision either way.

  29. James 47

    negative equity

    I don't see how negative equity should be used as a emotional bargaining chip. When housing markets collapse people who made unwise investments MUST be burned. Otherwise people will not think twice about getting in that position and will assume everyone else will bail them out, either through artifically high house prices or receiving taxpayer funds directly. It *will* all eventually collapse at some point, and when it does, it'll affect everyone simulateously. Just look at what happened in Ireland.

    The government mortgage guarantee scheme was a terrible, terrible idea. It's a bluff.

    Governments should have nothing to do with the private property market at all.

    1. Red Bren

      Re: negative equity

      "When housing markets collapse people who made unwise investments MUST be burned."

      As I recall, the people who made the unwise investments, i.e. the lenders, got bailed out by the taxpayer. The people who got burned were the borrowers just trying to get on the property ladder before house price inflation outstripped their salaries.

      Don't confuse property speculation with the need to put a roof over your head during a housing bubble.

    2. LucreLout Silver badge

      Re: negative equity

      @James 47

      Ok, I see. Let's ban government intervention, and then nuke the housing market.

      One thing you've overlooked is that I won't be paying back the mortgage on a house I've already owned for 10 years, when its value is artificially halved by the government. Nor will I be paying any more taxes.

      So the bank, the one you've been saving your deposit in for years, they will go bust, and no, the government won't replace your lost savings because "Otherwise people will not think twice about getting in that position and will assume everyone else will bail them out". So now you have nothing to buy these cheaper houses with. Both of use go back to square one, and the banks bond holders, primarily pensioners, get given all the reposessed houses to make good their position as primary creditors.

      So now you have a lot of reposessed houses that the owners declined to pay for, a lot of prospective buyers that just flushed their deposit down the drain, and a lot of busted banks that can't give loans to fund building even were they inclined to do so. The government is now bankrupt, so nobody in the public sector is getting paid.... what you've done is secure a cheap house in what resembles a warzone. It'd have been better if you just went to live in one of the pre-existing warzones with cheap houses instead.

      1. Anonymous Coward
        Anonymous Coward

        Re: negative equity

        "the bank, the one you've been saving your deposit in for years, they will go bust, and no, the government won't replace your lost savings "

        Right now and for quite a few years, in the UK, personal savings are protected up to a limit of £85000 per person. It may even be £85K per regulated savings institution (eg I could have £85K at Barclays and £85K at HSBC and I'd have £190K of protected savings), I can't remember.

        http://www.fscs.org.uk/protected/ says

        "Your savings are protected

        The Financial Services Compensation Scheme (FSCS) is backed by government and protects your savings up to £85,000 in the unlikely event that anything should happen to your bank, building society or credit union.

        You'll probably never need us. But it's nice to know we're here"

        It is entirely possible to put an argument together that there should be no such protection, that the savers who want low risk should look to institutions with a record of low risk, but the UK financial sector has such a history of non-transparency that punters wouldn't be able to make a well-informed decision based on objective facts.

        So in the present scheme, the profits are localised while they exist, and then when an institution fails, everyone *except* those responsible is left to pick up the costs. Good innit.

  30. Anonymous Coward
    Anonymous Coward

    "For amongst economists, there's a pretty good consensus on price controls."

    Yes and "economists" are people who can't predict a depression three _months_ beforehand. As we've seen. As an engineer I wouldn't pay a dime for any "economist advice".

    Also "economics" isn't even science, it's a bulls*ting way of making a lot of money from naive people: Basically legal stealing for people who can't do anything useful.

    OK, about rent: No control means that rent is raised 10% per yer _and nothing is done_ as that's the way to maximize profits and _everyone_ is in the business for maximal profit, in the short term. Quartely profits trump over anything else in current economy. And economists know it. It looks like the guy who wrote the article, doesn't.

    And yet some lunatics claim that rent control destroys the houses while it's obvious it doesn't anything like that, it's _just capping the money you can steal for shelter to other people_.

    Plenty of profit still there, there's no doubt about that and anything else is just "more profits for me", greedyness and lies.

  31. Rol Silver badge

    Supply and demand anomally

    In the article it considers rent fixing below the current "equilibrium" to be a cause for greater demand, which in custard doughnuts case is true, but people will generally only rent one house, while I would eat 1p custard doughnuts to an early grave.

    Demand is inelastic, as in, rent fluctuations have little effect on rental demand.

    What lower rents would achieve is a re-appropriation of property, less people will see the buy to let as a good ride and sell / not buy in.

    This would indeed reduce the availability of rental property, but it would also reduce purchase prices back to something sensible and within the reach of those who historically never had a cat in hell's chance of buying a home.

    Those new home owners have now reduced the demand for rental property, perhaps to a level that if rent fixing were removed, the market would find the new equilibrium was little different to the fixed price.

    The final cure to Britain's woeful housing shortage is for us to fall in love with high-rise once more, but this time don't fill them with children and junkies, keep them for the privileged few who have made it into their thirties without feeling the urge to grow some sproggs or indulge an habit society can ill afford. That ill-fated group would fair far better at ground level anyway.

    1. Tim Worstal

      Re: Supply and demand anomally

      "In the article it considers rent fixing below the current "equilibrium" to be a cause for greater demand, which in custard doughnuts case is true, but people will generally only rent one house, while I would eat 1p custard doughnuts to an early grave.

      Demand is inelastic, as in, rent fluctuations have little effect on rental demand."

      That is to consider the two bed apartment as the same thing as the 4 bed house. And also to assume that a place with small rooms is equal to a place with large rooms. SE England has some of the highest housing prices in Europe. It also has some of the smallest (in sq foot) new build sizes in Europe. There is a connection between these two points: that being that while you're right that most people only have one dwelling not all dwellings are equal.

      1. Rol Silver badge

        Re: Supply and demand anomally

        Argh. Yes, I missed that one. Thanks for pointing that out before my next cabinet meeting...ha, ha. I wish.

        Still, fixing rents would be a great mechanism for cooling the markets gently if they were let's say fixed at today''s price with no opportunity to increase them for five years.

        I was going to say at a lower point than today's market, but just how that arbitrary figure can be arrived at without overly penalising the fair landlords that exist already or piling huge costs on councils being required to trundle out armies of surveyors to fix it at 0.5% of rateable value beats me.

        Sometimes a mass extinction event seems far more preferable than the work necessary to properly fix things. Oops, I think I've contracted BOFH syndrome. ..and I like it.

  32. John Savard Silver badge

    The Missing Piece

    Obviously what is proposed is only part of the solution.

    Since letting people build desirable housing close to London cheaply will decrease the value of existing properties in the area, obviously the government will have to compensate those people who, in the past, paid inflated prices for their houses due to the artificial restrictions now being repealed.

    That way, a government can solve the housing crisis without "losing the Home Counties for decades".

    Of course, they will lose the votes of whoever the money to do this would have to come from.

    1. Rol Silver badge

      Re: The Missing Piece

      The housing market is one huge artificially manipulated cesspit, so far removed from an economist's ideal it might as well be measured in Narnian lions teeth.

      Every breath government takes impacts on house prices and anyone buying in either knows the risks or is plain stupid.

      If your house is an investment, well you have to take the downs with the ups.

      If your house is your home it matters not one jot how many lions teeth it's worth now.

      If you think the beautiful landscape out of your kitchen window came with the deeds, well you're either Lord Muck or completely deluded.

      If you think I'm paying one penny towards sharing their loss, then come outside and I'll attempt to share some of the pain from other Tory legislation that clearly had no impact on you.

      1. Doctor Syntax Silver badge

        Re: The Missing Piece

        "If your house is your home it matters not one jot how many lions teeth it's worth now."

        If your house is now worth less than you paid for it, and specifically, if it's now less than the outstanding mortgage what happens if you need to relocate? It reduces mobility in the labour market. It makes mortgages sub-prime and look where that lead.

        The problem with house prices isn't just a shortage of houses, it's an over-supply of money, and specifically cheap credit. I don't know about US politics but here we had Gordon Brown charging the BoE to regulate interest rates based on a measure of inflation which excluded the cost of housing. His measure of inflation was held down by cheap imports whilst the overall inflation rate, including housing costs, ran away.

        1. Squander Two

          Re: The Missing Piece

          > If your house is now worth less than you paid for it, and specifically, if it's now less than the outstanding mortgage what happens if you need to relocate? ... It makes mortgages sub-prime and look where that lead.

          Sub-prime mortgages were actually sub-prime due to their customers' inability to pay for them, not their properties' value.

        2. Red Bren

          Re: The Missing Piece

          "we had Gordon Brown charging the BoE to regulate interest rates based on a measure of inflation which excluded the cost of housing"

          Excluding the cost of housing from inflation calculations has been a con trick played by governments of all hues for as long as I can remember, to keep wages in check. Now there will be those that argue that wage restraint would keep the property market from overheating. In reality, it becomes a bidding war between those with assets to borrow against vs those trying to borrow against future earnings, so those trying to get on to the property ladder get priced out. But these people still need somewhere to live so they end up renting from the very people who priced them out the market. Demand in the unfettered rental market causes rents to rise so people have less to save towards a deposit of their own, or they have to claim benefits to meet the shortfall from their stagnant pay packets. This (taxpayer subsidised) rental income is then used by the landlord class to buy up even more property, the cycle repeats and the chance of owning your own home fades as house price rises outstrip pay increases by an order of magnitude.

      2. LucreLout Silver badge

        Re: The Missing Piece

        "If your house is an investment, well you have to take the downs with the ups."

        Its not a down with the ups. It's deliberate state sabottage of a market in which the rules have been well known for generations.

        "If you think I'm paying one penny towards sharing their loss, then come outside and I'll attempt to share some of the pain"

        ROFL. You're not actually serious, right?

        Why is it you think you can dream & scheme away soemone elses wealth yet expect your windfall to remain untouched?

        If you want a house you'll have to work harder, and for longer, than you would possibly prefer. Tough shit, frankly.

  33. David Roberts Silver badge
    Facepalm

    Build council houses

    See title

    1. Tim Worstal

      Re: Build council houses

      To do that you've got to issue more planning chittys, don't you? So at root it's the same answer.

      1. Caoilte

        Re: Build council houses

        Enforce a use it or lose it. The supermarkets have massive land banks.

        1. Alan Brown Silver badge

          Re: Build council houses

          "The supermarkets have massive land banks."

          Yes and Tesco recently announced it's going to start builing housing on a lot of the land it's currently banking.

          At which point all the NIMBY objections will start being raised by people whose property values will be affected by a loosening of the supply.

          ANYONE who buys into deals based on artificial scarcity should be sweating, but perpetuating an artificial shortage is causing substantial economic damage which only the very rich actually get to proft from.

          If house prices fall, you'll have your mortgage, but if you want to "step up", the price for that property will have fallen too. As with house price rises, falls don't overly matter if you're actually on the property ladder, it's just an issue when getting on/off.

  34. Caoilte

    The problem with economics is that to the tidy mind it offers superficially attractive remedies to very complex problems.

    1. Rol Silver badge

      Yep. The economic model used to play master astrologer has absolutely no bearing on the real world.

      It's fundamental flaw is in assuming a perfect market, with homogeneous products, universal knowledge, no one person or group having unfettered control and all players act rationally.

      Trying to factor the reality of just one of those anomalies into the model would be like knitting live cats and each individual model acts and is acted upon by all the other discrete models to make one hell of a tangle, even at its most naive level.

      Another way of looking at it, is the model is perfect, we are just not living up to its impeccable standards.

      Then again I'm sure capitalism could be readily defined as anything that tries to defeat the model.

      1. Squander Two

        > It's fundamental flaw is in assuming a perfect market, with homogeneous products, universal knowledge, no one person or group having unfettered control and all players act rationally.

        Not really. There's a whole branch of economics devoted to studying the interesting ways in which people don't act rationally (for a given definition of "rationally"). Also, it's authoritarian centralised pricing that assumes universal knowledge -- specifically, that it is possible for a person or a committee to have enough knowledge to decide the "right" price. The reason to prefer markets is specifically and explicitly that no-one does or can have universal knowledge and that markets are an excellent mechanism -- the best yet devised -- for aggregating the little bits of imperfect knowledge of everyone into an optimum price.

  35. Anonymous Coward
    Anonymous Coward

    There is an early statement which moe than undermines the author`s credibility.

    In paragraph 5(?) economists are linked to expert opinion This appears to be an oxymoron certainly as a generality.

    " i asked n economists and received n+x ( where x is greater than one) opinions".

    There are undoubtably a few who have some innate grasp of trends but it is no more than that of a tipster in horse racing.and just as reliable on any specific question of outcome.

    There is nothing wrong with a hand waving opinion piece, but that is all it is

    "opinions are like assholes, everyone has one, they all stink, but some stink worse than others".

    Mine not excluded.

  36. Chris G Silver badge

    So where does the infrastrucure come from

    I have come up against Town Planners a few times in the past, they can be quite annoying and obstructive. However they are a necessary evil that could probably do with some reform, without them builders will be cramming buildings next to each other with insufficient space between them for reasonable light to pass through the windows, something that happens a great deal in Spain and I am sure other places without Town Planners.

    There is also a lot more to siting a building than worrying if it is on a flood plain, geology, geography and a host of other items to consider must be addressed by somebody other than a profit hungry developer.

    The biggest item though not addressed in the article is infrastructure, doubling the population of Surrey might sound like a great way to reduce housing shortages and bring down the relative value of housing but who is going to build the required access roads, sewers, power supplies, gas supplies, cable, fibre. public transport etc? Maybe it should be done like the early days of Milton Keynes when a lot of government money went into pre-building the gridded infrastructure and then people filled in the spaces.

    The only trouble with that is the price, who will pay for it? Taxes, no one will like paying higher taxes so that they can see their property values come down when the taxes are spent on the new housing that is designed to generally devalue in monetary terms the housing stock.

    Since the largest bone of contention in the article and in many of the comments is affordability, maybe it would be a good thing to bring back Council Housing. What is left of the old Council House system is a load of apparently Non Profit trusts who manage badly so that the money they save can be used to pay huge salaries to the Trustees. at least with a council they are somewhat more answerable to the public and with the correct oversight built into a new system perhaps could be more efficient than some of the old councils were.

    I have had some up close experience with the management of council houses in the old days and a couple of South London councils actually were able to maintain their houses well and turn a modest profit which had to be reinvested in the stock. A right to buy could work if the money paid for an existing house was obliged to be used in periodically building more or in purchasing refurbishable structures as they become available and converting those into housing.

    Infrastructure is also a consideration when talking about raising density, you cant just double the number of people in a zone on a 24/7 basis and expect the utilities to cope with it without upgrading and it all has to be paid for, obviously once an area is up and running everything will be paid on a day to day basis but some one has to pay to put it there in the first place, if utilities have to look at spending millions or billions creating new supplies or drastically upgrading existing services they will want the money in place to do it unless someone can talk them into believing it's a great investment they should pay for in advance.

    Just thought there were a few more things to think about than simply house/flats

    1. Alan Brown Silver badge

      Re: So where does the infrastrucure come from

      "I have had some up close experience with the management of council houses in the old days and a couple of South London councils actually were able to maintain their houses well and turn a modest profit which had to be reinvested in the stock. "

      The problem with the Thatcher-forced sell off was that councils were _prevented_ from reinvesting in housing stock. This was a deliberate, calculated move aimed at gutting labour-dominated councils whilst recruiting more tory voters.

      The greenbelt is an utterly shambolic solution to a problem which never really existed - there is a lot of publicly-accessible greenspace in urban areas (parks, reserves, etc, etc) whereas most of the greenbelt spaces are locked off from the public and only the rich get to enjoy them.

      Even if the greenbelts were abolished tomorrow, there are a lot of areas which are protected from development.

      As for the Chilterns, the sooner that area is urbanised, the better... :)

  37. DougS Silver badge

    Tim is wrong about New York City

    Rent control has exactly zero to do with his claimed "lack" of new construction, because rental control is grandfathered in, and not enforced on new construction. Even for existing construction, once the old lady that is paying $200/month for decades moves out or dies, rent control goes away. Entirely if it is a small place (6 units or less) or goes to "rent stabilization" otherwise. Which means up to $2500/month currently, but can and will continue to go up over time.

    The reason some land isn't built on in NYC (or has a seemingly tiny building compared to the ones around it) has to do with the cost and zoning restrictions. Cost because NYC (at least Manhattan in particular) is riddled with stuff underground. Subway tunnels (used or disused) sewer/water/electrical/gas/steam/etc lines, all sorts of stuff. It just isn't economically feasible to build something that's not practically a skyscraper because it costs so much just to work around all that and put down a foundation. Land that doesn't have a skyscraper has often already sold its "air rights" in the past, which prevents a skyscraper from being built there.

    NYC is way more complicated than "rent control is bad, and responsible for these places I can see in Manhattan where I think stuff should be built".

  38. DougS Silver badge

    Where rent control (sort of) works

    If:

    1) you have a TRUE lack of availability of new land upon which to build (so no hope of new supply) like for example San Francisco, or you exempt new construction and make it only cover existing stuff (i.e. NYC - it hasn't covered new construction since about 1950)

    2) you don't care about the reduction in quality, because you're more concerned with keeping prices low (i.e. assume that poor people being able to live near their jobs is worth having them live in places with creaky stairs and peeling paint)

    In reality, 2) eventually gets much worse than that, and you will eventually end up with "slumlords" renting property which is unsafe, unsanitary and infested with vermin. But that takes a while, by which point the politicians who pushed the change in law in through are no longer in office :)

  39. Anonymous Coward
    Anonymous Coward

    Housing crisis, what housing crisis?

    Stop building council houses, sell off the remaining stock to the 'social housing' sector, the end result being an artificial shortage of affordable houses, resulting in prices going through the roof, a win-win for the 'free' market.

  40. Anonymous Coward
    Anonymous Coward

    Rent controls also led to Peter Rachman.

    We are going to need to build more social housing and encourage builders to mid-rise apartments on brownfield and golf courses etc. Low rise modern estates are inefficient in land use.

    The less/fewer distinction was only a helpful suggestion, not a hard rule of grammar. We use 'more' for comparison of both discrete and continuos quantity increase. It does keep the pendants happy though...

  41. airbrush

    This is not a solution

    I'm afraid the free market only works with honest competition, that's about as likely as communism!

  42. rubyduck

    The housing supply could be increased massively by adding a storey to every house in the land.

    Where there are large numbers of late Victorian and early 20th terraces of well understood styles, local authorities should be producing designs for massive improvement and extension of these properties, making the plans available to the owners, facilitating individual and block development by signing up local builders willing to undertake the work at reasonable costs to the owner, and negotiating decent financing deals with local lenders.

    1. LucreLout Silver badge

      "The housing supply could be increased massively by adding a storey to every house in the land."

      Excellent - my 3 bed house can them become a six bed house. Great for me, but I'm unsure how that helps you?

      Unless, and I realise this is so oddball left field that it can't be what you meant, you actually mean add a storey to every house and then sell that to someone that isn't the house owner?

  43. Optimist

    The statement that only 2 or 3 per cent of the land area is for housing is misleading. The important point is that nearly 12 per cent of the land is classified as "built-up". Since this is the UK figure which includes underpopulated areas such as the Highlands of Scotland, the situation in England is far more critical. Some areas should never be built on, like flood plains, and for food security reasons we should protect farmland.

    The truth is that there are simply too many people for the space available. So we should be reducing immigration from the present level of ove 10,000 a week, and take steps to discourage large families.

    1. jason 7

      Solution...

      ...offer folks between the ages of 17 and 30 £1000 to be sterilised.

      There will be queues round the block. Will save the nation a fortune in the long run.

  44. Fihart

    The real issues.

    The issues in UK housing are fairly obvious.

    Internal North to South migration due to lack of regional economic development. Weakly controlled immigration from outside EU, uncontrolled immigration from within EU. Selling off stock by social housing providers, both Councils and Housing Associations -- sales often end up in the hands of commercial landlords.

    Permitting buy to let mortgages in a generally poor economy that makes property a better investment than productive, job creating, businesses. Tenants (and landlords) are ripped off by predatory letting agents. Landlords are often leaseholders and are ripped off by predatory freeholders. Result; even higher housing costs.

    Rent control has one particular benefit (aside from reducing rent inflation and improving security of tenure) -- it forces less efficient or greedier landlords to sell off their portfolios, creating opportunities for first time owner-occupiers.

    In London there are several tenant rights groups (notably in Camden and Brent and the national Generation Rent). If you want things to change, join one.

    1. Alan Brown Silver badge

      Re: The real issues.

      "Internal North to South migration due to lack of regional economic development. Weakly controlled immigration from outside EU, uncontrolled immigration from within EU. "

      You hit the problem on the head with the first point.

      The 2nd and 3rd points don't even come close to matching internal economic migration

      (a large chunk of immigration is to areas outside the SE of england - the main reason people go on about foreigners is because they're more visible and it's easy to blame the diffferent-looking one when times are tough. In some areas if it wasn't for immigrants, local economies would have collapsed)

  45. MrJonno

    Like 99% of problems in society housing issues are due to the people (and democracy) not governments

    The people who have houses are happy to see their value go up and they outnumber those who don't have them who aren't.

    There is nothing approaching a free market in housing and the (small) majority want to keep it that way

  46. Truth4u

    They are building lots of new high rises

    The trouble is they will be:

    . too small

    . too poorly built

    . too expensive (even for a small poorly built tower block)

    and in less than 20 years most of them will have to be demolished.

  47. b 3
    FAIL

    you forgot interest rates

    mr bean at the bank of england (aka mervyn king), kept credit way too cheap for way too long. (following his buddy alan "the financial genius" greenspan at the fed), this led to making it too easy to borrow to buy a property, pushing up prices.

    house prices were also dishonestly removed from inflation calculations, thereby bypassing the need to raise rates and slow down the economy (what he SHOULD HAVE DONE!), thereby pushing up prices.

    because of the crooked way people can register companies in the BVI, it's easy for international oligarchs and gangsters to park their money in uk property as a safe haven, pushing up prices.

    russians have £10bn invested in uk property, pushing up prices.

    chinese gamblers have been having a punt, buying up uk property and pushing up prices.

    i.e. the demand is FAKE. we need to introduce disincentives to foreign ownership of uk properties.

    oh and allow more shipping-container homes, enough people would be happy enough living in those.

    1. A Twig

      Re: you forgot interest rates

      Foreign property investment was a problem in South Africa - government simply announced a law saying that any profit made from investment in property was not allowed to leave the country.

      Funnily enough, foreign property investment dropped right off. Yes there will always be ways around such things, but the sentiment itself was enough to severely dampen the foreign investment market.

      It did screw over a fair few who had emigrated and were renting their houses, but then most of those that I know still had family etc in SA, so just spent the trapped money on their "returning home" holidays.

  48. Anonymous Coward
    Anonymous Coward

    more of Surrey is golf courses than housing

    "more of Surrey is golf courses than housing"

    I recall they investigated this static in Radio 4's More or Less.

    This statistic is true, but only when the 'housing' is defined as only the footprint of the buildings themselves. If you add in all the gardens, driveways, roads, pavements and other infrastructure, then the 'real' area taken by housing is considerably more.

    It is claimed that over 50% of new housing in Cambridge is sold to overseas buyers. So that gives you a near limitless demand! And according to a bloke in the pub whose brother lives in Thailand, our newbuilds have been seen advertised in the print media in Bangkok.

    UK 'housing' is far from a regular market; rather is has become a global 'investment' scheme.

    So simple rules of domestic supply and demand no-longer apply. And with the UK population growing at 400000 per year (last year), even the 'real' demand for accommodation will surpass any realistic building rate. We're screwed.

  49. Anonymous Coward
    Anonymous Coward

    Well i hvent read the article or any of the comments , so heres my informed opinion:

    At the end of the day this shortage, along with most other problems in society is down to overpopulation, so heres my solution - Reward people not having kids. i.e me!

    I should be getting a fucking medal for reducing my carbon footprint and general consumption of the worlds recsources by several lifetimes.

    1. Whiskers

      ... or perhaps a not fucking medal?

  50. ciaran

    The whole article is rubbish

    The author starts by saying that rent limits, an economic term, is bad. Then he generalizes from there to any sort of rent limit. A rent contract does contain limits - is that bad? In Ireland around the time of the famine they discovered that letting owners jack up the rent whenever they wanted was bad. So laws controlling rent increased and eviction were passed. Is that a limit? In France when you build 100 high-price buildings you also have to build a percentage of rent-controlled accommodation, does that break the free market?

    As for housing, the author is looking for some sort of building anarchy - if I can build it I should be allowed to build it. No planning for roads, sewage, emergency services. That planning is necessary is obvious, that a town plans in little bits is common sense. If economics says something that is the opposite of an obvious common sense approach, then its broken.

  51. Bathrug

    the point of this ...

    House prices are over valued, they have been since the 80's where estate agents were playing off buyers against each other in the golden age of " guzumping". Agents made a LOT of money, sellers made a LOT of money and the age of where a house was worth what "a man could pay on a single salary" over to both people needing to work highly paid jobs, lie about their income, have large deposits and extended terms to buy a one bedroom box with no garden.

    People now stress over loosing "value" on property that they over paid for in the first place, most of this and the next generation will be reliant on both sets of parents passing away in order to free up enough equity to purchase anything.

    We don't need more land for houses to be built on, there are houses everywhere that are unoccupied, what we need .... is housing that people can actually afford.

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