Wednesday, 30 July 2014

"Wildlife experts said…"

More bovine madness spotted by Julia M in the Evening Standard:

Cows are to be introduced to a London park - in order to save money on the cost of cutting the grass.

The herd of red poll cattle will be munching their way through foliage in Bedfords Park, Having, as part of a biodiversity programme.

Havering Council said the move will cut costs from paying park keepers to cut the grass and using expensive tractors, saving around £300,000.

It is one of the first councils in London to call in a team of ‘expert grazers’ to take over from traditional grass and hay cutting techniques, with similar schemes in Hornchurch Country Park and Rainham Marshes.

Wildlife experts said red poll cattle are known for having a gentle temperament and no horns, making them ideal for grazing in public spaces.

Cattle don't need horns to kill people, weight of numbers, head butting and kicking usually do the trick.

Tuesday, 29 July 2014

"There’s room for 10,000 new luxury apartments on spare land in council estates, say London Tories"

From The Evening Standard:

There is enough “redundant” land on London’s council estates to build an extra 10,000 luxury apartments, a report concludes today.

It claims that blocks could be built on swaths of derelict land currently being used for old laundries, garages and housing poor people and calls for “urgent” action to push councils to survey the land and sell it to Middle Eastern sovereign wealth funds.

A spokesman for Mayor Boris Johnson’s office said it had seen the report and was planning to allow the construction of top-end flats for buy-to-leave investors.

The report was released 24 hours after research showed that London’s housing crisis was deepening, with many multi-millionaires locked out of the market, with some oligarchs spending almost half a year's income to snap up a London pad.

Today’s report, Gap In The Top End Of The Market, identifies 4,552 redundant spaces in 13 boroughs. Tory London Assembly members behind the report extrapolated the figures to estimate that 10,000 glittering show homes and penthouses could be built across the city.

Steve O’Connell, report author and Assembly member, said: “We need an urgent, mass-scale, co-ordinated effort to turn the thousands of redundant spaces in blocks and estates into seldom-used housing for our party donors.”

He also highlighted Southwark Council's achievement in rehousing 1,500 social tenants to make way for privately owned flats at Elephant & Castle.

Rebuild costs and land prices

There is one simple statistic which enables us to kill two KLN birds with one stone.

The first is that "I paid for my home out of taxed income.".

The second is a long running argument I have had with various people about the typical rebuild cost/value of an average three-bed semi as distinct from the land value.

We know from Nationwide statistics on the ratio of house prices-to-earnings, that for the period 1953 to 2001, the ratio only went above three (never quite reaching four!) twice: for a couple of years in the early 1970s bubble and for a couple of years in the late 1980s bubble.

But throughout that period, builders were happily building 200,000 - 300,000 new homes a year in all parts of the country, it is NIMBYism and land price speculation which put paid to that, we're now down closer to 100,000.

We can argue over various up or downward adjustments, but we can safely assume that builders did it to make a profit, and that their average costs per new home were less than three times an average year's salary. And we can also assume that building techniques are little changed, it's largely manual labour. The cost of copper has gone up, but the cost of white goods has gone down so it all nets off.

The average full time male annual salary is currently £26,500 (the median is much lower than that), times that by three = £80,000 (which is what I have always said).

Going back to the first KLN, yes, people paid for the bricks and mortar out of taxed income, the same as they pay for anything out of taxed income (glossing over the fact the mortgage was subsidised via MIRAS), but most people who bought before 2001 did not actually pay a penny for the land, they got that for free.

And as Land Value Tax is only on the land element, for which any pre-2001 purchaser paid effectively nothing, it is clearly not double taxation for these people.

Agreed, people who were first time buyers after 2001 will have to pay twice for the land, that's as can't be helped, but they are all still of working age and will still pay far less tax overall if we shifted taxes from earnings and output to land values.

Fun Online Poll: Planning permission

The responses to last week's Fun Online Poll were as follows:

When considering planning applications, does your local council tend to…

Restrict the amount which somebody can build on any particular site? 12 votes
Force developers to build more than they actually wanted to? 11 votes

Which is about as close to a score draw as you can get.

I know for a fact that rural and suburban authorities set strict upper limits for how much people can build on a particular sized plot, which is often below the optimum density.

And I also happen to know that there is a "London Plan" which also sets upper limits depending on how close the plot is to local transport links, the town centre etc. I was helping a client sell some land ten years ago and part way through the negotiations, the London Plan was amended to allow a 25% higher density in that area, so we promptly increased the asking price by 25% and the developer duly accepted (most of the windfall gains go to the landowner, not the developer). Had the old or new upper limit been higher than what the developer ideally would have liked to build, then the price would not have changed, or would not have increased so much.

And I've never heard a developer complaining that he was given too much planning permission, they're always moaning that they weren't allowed to build enough, but maybe such a thing exists in urban or inner city boroughs? Does anybody have a real life example?

Monday, 28 July 2014


I switched on the TV the other day. There were four ads between programmes. Two of them for online gambling, two for pay day lenders.
If they are smart, these companies would merge, as they have mutually inclusive goals. It's a win-win.
How about "BETLOAN" your one stop gambling shop?

More Ricardo. Is London really that expensive?

From today's Metro "Want to be in London? Pay twice the rent"

"While Londoners typically benefit from higher average incomes than the rest of the UK, affordability is being squeezed," said Martin Totty, chief executive of Barbon Insurance. "For rental property to be affordable, a tenants gross income must be at least two and a half times his or her annual rent. Our data shows that rents in London have pushed beyond that."

Is this really an accurate description of affordability?

If Ricardo's Law of Rent is true, we'd expect the amount of income left after taxes and rent has been paid to be roughly equal. This is what we get.

Greater London £8,382, East Anglia £9,991, Wales £9,273, South West £6,927, South East £9,945, West Midlands £8,178, North West £8,167, Yorks & Humberside £8,009, N Ireland £9,142, East Midlands £8,762, North East £9,125, Scotland £9,278

Given that we are using average wage to average rent ratio, we shouldn't be too surprised about the unevenness. If the survey had used mean wages and rents, this might have looked at lot flatter.

But the point is, discretionary income is a much better measure of affordability. In which case, London certainly isn't the worst. I'm also guessing London gets the lion's share of Housing Benefit, which makes it look more unaffordable than it is, under our current tax system.

Let's see what happens to those figures under a Land Value Tax, even assuming the tenant pays the LVT charge. A tenant on average wages in London would be £10,190 better off in their pocket, and one in Scotland would be £5,600 better off.

So not a tax on London then.

A solution to the passport problem

From the BBC

Hundreds of passport workers across the UK have gone on strike in a dispute over staff numbers and pay.

The Public and Commercial Services Union (PCS) said the action was a "bid to end staffing shortages that have caused the ongoing backlog crisis".

Home Office data suggests about 360,000 applications are being processed - but it is not clear how many are overdue.

The Home Office said 875 PCS members had walked out and warned the action could jeopardise people's holidays.

Well, of course the PCS wants more (unionised) passport workers. The government would like less of them, but the passport application creates a backlog.

So, here's an idea: have a "summer" price for a passport and a "winter" price for a passport. Make it say, £5-10 cheaper if you buy one between September and March than April to August. Many people don't bother until just before they go and have no incentive to do otherwise. Give them an incentive, they might get a passport earlier and stop the crazy queues. And anyone who suddenly desperately needs a passport in July can easily get one.

"Perils of the English countryside"

You can guess what's top of the list at the BBC.

From 2008 to 2011, there were 269 recorded attacks, of which nine were fatal.

Saturday, 26 July 2014

Economic myths: Building more houses will bring down prices, part the umpteenth.

In my local town there is a quite pleasant development of flats with a good view of a spectacular castle, even if the castle does tend to shade the flats somewhat. They are right by the water in the centre of town and even have parking available, after a fashion, yet the majority are unsold. The law of supply and demand says that since the demand is not there, the price will fall until the flats reach a price where the demand is there and they sell. This has not happened.

Today, as I was strolling past the flats along the river, it occurred to me that one reason why so many of the flats are still empty could be that the developer borrowed heavily to finance the development and that the loan is secured against the value of the flats. Reducing a single unsold flat reduces the value of all the unsold flats and thus reduces the value of the collateral against which the money has been borrowed.

In these days, it is "cheaper" to go on paying the interest on the loan than it is to devalue the collateral by reducing the value of the flats, plus there is always the chance that land prices will start to go up again and the flats will sell. Added to which, if the reduced collateral puts the borrower in negative equity, the lender will get nervous that the borrower will simply go bust and so will try and get their money back early, which the developer equally doesn't want.

Supermarkets and Localism

From the BBC

A group of local councils in England is formally asking the government for new powers to tax large supermarkets.

BBC News has learned that Derby City Council has called for the right to bring in a levy as a "modest" effort to ensure supermarket spending "re-circulates" in local communities.

I don't understand this need for money to stay in the local community. Take 3 products: bacon, watercress and lamb. I happen to know that they're produced in large abundance in Wiltshire, Hampshire and Wales respectively. So, the stores in Swindon are giving money to Hampshire and Wales, the stores in Winchester are giving money to Wiltshire and Wales and the stores in Cardiff are giving money to Wiltshire and Hampshire. Everyone's buying stuff from everyone else, so not much spending stays locally, but arithmetically, each spending money on each other nets off.