Tuesday 7 February 2017

UK in Housing Crisis according to the Government

Really, Sajid Javid has a reputation as a high flying City Banker, lowering himself in service of his country by taking a Government job.

Allegedly, his ego remains that of a City High-Flier.

However, coming out today to say there is housing crisis, young people can't buy or rent and the Government should do something about it is pretty thin. Rarely these days do the labour opposition make any good points, but to say the Government is complicit in not doing anything serious about housing for 7 years is spot on. Allegedly there were some ideas about planning reform floated last month, but these do not seem to have seen the light of day.

Actually, now is a good time to get building. The higher end property market has gone for a burton, freeing up labour and companies to look again at more mid-range projects where prices are more inelastic (as are the profits though..).

A good old house building boom is long-overdue. Indeed if this comes alongside falling immigration and falling household formation then more is the better - we could see a real improvement in the situation.

Of course a real improvement also means house price falls (or, no nominal increases) for the foreseeable which will be very unpopular with our Banks and Lenders. But suffer they must, jus don't buy any shares in them.

The real issue though is the Government has not really committed to anything as per usual, so not doubt I will be re-writing this post again every year for the next decade. I somehow doubt prices can go beyond 8x income ration which is where they have reached, but then again I thought that at 6x Income and 7x income!


Roderick said...
This comment has been removed by the author.
Roderick said...

Nimbygration and aggressive land-banking need to be sorted out first.

Nick Drew said...

when I was doing the Housing job (as a councillor), reducing "over-occupancy" by single elderly folk was an intractable issue of great theoretical potential

as a believer in personal freedom there's no way I'd propose anything other than carrot-based approaches, i.e. attractive down-sizing opportunities or even simple £££

can be few easier ways of achieving net housing gain

Steven_L said...

Since the government is so skint, and there's such a huge pent up demand for secure tenures, and the government is in the unique position of being able to write the housing laws, and grant itself planning permission, and borrow money at <3%, and claw back directly at least 35p of every £ it pays people...

...why don't they just build a shed load of housing and rent it out?

Electro-Kevin said...

We are importing over 600,000 people a year according to NI figures.

For that alone we need to build, say, 300,000 houses per year if these people expect a bit of privacy.

Do the maths.

I suppose we're going to have to import more builders...

Did Brexit not signal anything at all ???

Electro-Kevin said...

Nick - If I were an older person I'd sit tight, force my house price up, take out equity release and live the high life.

If I were to be blamed for everything from Brexit to the NHS crisis I may as well act like a ****.

Anonymous said...

How much capacity is available in converting town centres? The High Street isn't coming back any time soon, so the usual regeneration idea of new shopping centre is a non-starter, they already have existing communication links and amenities.

Just as city centres saw a boom in homes, so could town centres.

markc said...

Blue Eyes won't like it but the answer is simple (at least in principle). LVT.

Or at least charge the landbankers tax on any land with planning permission not yet developed. And repeal the Town and Country Planning act.

Blue Eyes said...

CU perfect post, pretty much exactly what I thought when I saw this news. It is shockingly embarassing that the useless opposition comments actually sound on the mark.

The coalition promised to ease housebuilding and maybe they did but a building boom there has not been. There are plenty of cranes in London but they seem to be building things which people on even pretty good salaries cannot buy. And don't get me started on all the leasehold scams that buyers of new builds can get trapped in.

One problem is that there are votes in NIMBYism but of course people who can't movr to an area can't vote for more housing in that area.

Some suggestions:
- make a general right to develop already developed land. Osborne made a start by making conversion of commercial space to residential permitted development. Take that further.
- a new right to buy derelict land for development
- planning permission only lasts say two years before being revoked, or pay a significant renewal fee to keep it going
- we keep hearing about state-owned land for development. Let's actually have it sold off
- huge increase in loans to housing associations to build at all price ranges
- reduce the grounds for objections to development in existing areas.
- reform land taxation so councils have a financial incentive to say yes - that probably means a big increase in council tax. let's have a debate about it. taxes are on the rise anyway, why not have them go up in a way which helps this issue.

Electro-Kevin said...

Blue - It isn't just housing in crisis, you know. Coincidentally the schools are full too.

Why didn't anyone see this coming ?

Actually, for years we were being told that our birth rate was too low. In fact that has been the main reason given for introducing mass immigration.

Blue Eyes said...

Lol at "markc".

EK /ND it isn't pure greed and selfishness on the part of old people with big houses. On a personal note my parent rode the property cycle perfectly (by complete chance of course): buying our big family house in London just as the market bottomed out. My mum downsized just at the pre-crash peak, and then has watched her smaller but still large house double again in value. She would quite like to liquidate some of her capital but the sums simply don't work for her: the transaction costs in downsizing to a small but decent home would swallow up a lot of the capital released from her house. If she moved somewhere much worse it might work but why should she?

How about making the market more liquid by getting rid of stamp duty? Reform inheritance tax so parents can give their big houses to their children before they die? There are loads of things stopping rich old people from selling up.

Nick Drew said...

How about ... There are loads of things stopping rich old people from selling up.


Steven_L said...

Mr Wadsworth has been banging on about replacing stamp duty, IHT and council tax with something akin the old domestic rates for nearly a decade now. Is that you both coming around to his way of thinking at last?

Electro-Kevin said...

Blue - How about your Mum max out on equity release and blow the kid's inheritance ! I'd help her do it !!!

Blue Eyes said...

SL it isn't a case of the stupid coming around to the inspired's ideas as you imply. Mark Wadsworth is interesting but a fanatic and an extremist. You can agree with more efficient property taxation without nationalising all land as he would effectively do.

Steven_L said...

So you don't agree with 'full-on' land value taxation to replace pretty much all other taxation. Fair enough, not many people do.

But do you now agree that his more modest practical proposal to abolish stamp duty, IHT and council tax and replace them with an annual percentage charge on imputed residential land rents is better than the status quo?

Anonymous said...

A short burst of noise, some hope for the naive and then - nada.

What might help is a political movement from the young. They have nothing to lose by getting together and voting out all incumbent councillors and later on MPs. A bit of 'creative destruction' among the political classes might destroy the conspiracy to 'do nothing' and overcome the terror MPs feel when they look at the DT and DM demographic and the finger wagging from the BoE. Politicians need to feel the noose around their necks before they take action.

To be sure none of the existing parties will do anything at all.

Sebastian Weetabix said...

No, it isn't better. It turns us all into tenants of the state.

L fairfax said...

We could easily solve the problem, make all pro single parents share with another one and not pay anyone to live in London who doesn't work there.
This would free millions of empty homes. I would probably be put into negative equity by this plan, but I wouldn't mind too much as it would make Britain a fairer society - saying that I don't think it will ever happen.

Electro-Kevin said...

Roger - I've long argued (here and elsewhere) that the Conservatives are at risk of losing their propertied working voters. Mrs Thatcher knew better than anyone how much people want a stake in society.

It beggars belief, however, how many of the young "Luv EU !" yet fail to see the connection between the freedom of movement of labour and the increased competition for local resources, including houses.

Personally, it does annoy me to see an old lady rattling around in a huge house in a area of shortages but the price of bungalows and suitable appartments is at a premium 'round 'ere.

We can build over our green and pleasant land. It doesn't actually address the real issue, which is manifest in the pressures on just about anything you care to look at.

Electro-Kevin said...

L Fairfax - They tried that and it was called 'social/ethnic cleansing' by the Left. We had unemployed wimmin wailing "Warrabaat my s'port network ????" and so it was stopped.

(I do recall Blue's neat response "How can it be fair that I work and can't be by my support network ?")

Steven_L said...

It turns us all into tenants of the state

Having your own freehold does kind of depend on there being a state to defend it, both with force and rule of law.

Tax is inevitable, and taxes on labour make us all servants of the state. Why is being a tenant worse than being a servant of the state? Tenant is after all more realistic given that it is the state that defends the land and private titles to the land.

Anonymous said...

I like the idea of scrapping Stamp Duty: the State spends too much money anyway. Some of the ideas put forward here are alarmingly authoritarian, Statist, nasty. As for this "house building boom" where is it going to take place? On more greenfield sites? Some people have failed to notice that there's a finite amount of countryside here - and the English landscape is among our most precious assets. Everywhere I travel, I see yet more ghastly unimaginative developer boxes sprawling out from towns & villages: housing shortage? What housing shortage? Of course, those who inhabit the semis lining (say) the Western Avenue for miles on end might have a different opinion about the value of the countryside. But lots of us still live in the country - because we prefer it to Acton or Dagenham. Stop mass immigration - I mean, stop it dead. A few hundred, possibly a very few thousand, highly skilled/qualified immigrants each year can afford to buy in The Smoke and won't require ticky-tacky boxes built on farmland. Me, a NIMBY? You bet.

L fairfax said...

I don't care if people call it social cleansing, it is the easiest, fastest,fairest and cheapest way to solve the housing crisis. Failure to do this might give us a communist/fascist government one day.

Blue Eyes said...

A lot of people in London already have close to communist views on housing.

Electro-Kevin said...

L Fairfax

You are being selfishly London-centric there. I can assure you that there is crowding and pressure in the provinces too, as well as hard working and productive people who don't want the problem dumped on them either.

The 'simplest' solution is actually to get REALLY tough on welfare and force these people into work and to stop rewarding feckless fathering.

L fairfax said...


My apologies for being London centric, but surely pathfinder etc shows there is some space in Liverpool (or was before Prescott tried to destroy it all)?
I agree with you about welfare.

Electro-Kevin said...

Thanks and no need to apologise. I am not worthy.

Blue Eyes said...

The BBC have an interesting article called something like how to buy by 25. Several couples who got onto the property ladder young are asked how they did it. Of course they were thrifty and single-minded, good for them. But what interested me is how little their homes cost, showing what massive differences there are. One couple had bought a new-build semi in Oldham for 83 pence or thereabouts. A couple of years ago my brother joked that he had bought the last flat in London at a quarter-million.

Anonymous said...

BE - you can still buy somewhere to live pretty cheap, in places like Durham/Northumbria, the Welsh Valleys and one other area I'm keeping quiet about.

170 houses at less than 50K in County Durham a/c/t Rightmove, a fair few at 15 or 20.

You can also buy cheap places, nice stone properties, in Bradford, Burnley and other Pennine towns. I'm probably not allowed to say what the drawbacks are, but I wouldn't want to raise daughters there. Mind, I wouldn't want to raise kids anywhere in London, and that's expensive.

Steven_L said...

But what interested me is how little their homes cost

They'd maybe be equally astounded by your Londoners salary? I still never see any local government jobs advertised in areas where housing is cheap, and plenty in places where housing is dear. A Trading Standards Officer in North Tyneside could buy a nice 3 bed house on 2x salary and a nice 3 bed house in a really nice area on 4x salary. In Aberdeen it's more like 4-5x salary for an ex LA 3 bed house in a rough area (and rough areas in Scots cities are very rough) or 6-10x in a nice area.

Surrey and other parts of the south can be more like 15-25x. I did the sums once on a job in Surrey. Unlike central London you have to run car. I worked out by the time you'd rented 1 bed flat, paid bills and ran a cheap Ford Fiesta you'd be left with the same as you get on JSA. They are always advertising far and wide for staff and places like Newcastle and Durham never advertise for staff but tend to recruit internally (which is basically nepotism). I wonder why?

It's probably the top 20% of earners in any given area can easily afford to buy property these days.

Blue Eyes said...

Yes that may be about right on a wider scale. A friend just bought a nicely refurbished house in an OK bit of Manchester. He seems to he able to afford it comfortably on his salary as a secondary-school teacher. So I think it does vary locationwise.

ThomasBHall said...

In reference to the points about cheap/expensive houses- we all know that house prices are mostly a function of cost of credit, and local wages. As per Stephen_L's comment above, housing is just as affordable/unaffordable to buy everywhere (with some small local variations, sure)- and the only way to make it appear differently is to move from a high wage area to a lower wage area. Unless you can work remotely or are happy to travel a long way each day however, you can never capitalise on this difference (unless you have some nice windfall on a London flat of course!)

L fairfax said...

Surely, housing affordability varies a lot? Even in London some boroughs relative to wages are a lot cheaper than others (they are not always nicer e.g. compare Haringey to Bromley, cheaper and nicer)
(This used to be true but it changes a lot).

Charlie said...

Are we still pretending that high residential property prices are a supply problem? Perhaps in London, but elsewhere? No, the lack of housing affordability is due almost entirely to cheap credit and yield-chasing.