The FT today published a splendid follow-up letter by Henry Law to the one by Roger Sandilands, but it also published two Home-Owner-Ist diatribes:
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Sir, I have been following your Letters column with increasing consternation as various theorists come up with ever more convoluted argument for further increasing taxation of our non-income producing homes.
The latest arcane concept introduced is that of "imputed rent". May I suggest that if such a tax is to be levied it is only fair that payment is to be with an imputed cheque: that is to say invisible, intangible and unspendable.
Clifford Lawrence, London SW1.
So a home is a "non-income-producing asset" is it, and Homer-Owner-Ists should be able to pay their land value tax with an "imputed cheque"?
May I infer that the home of a tenant is also not an "income-producing asset" and that the tenant be allowed to pay his rent with an "imputed cheque"? Or that the mortgage lender should be happy to accept "imputed monthly mortgage repayments"? If Mr Lawrence were to sell his house, would he be happy to accept an "imputed cheque" from the new owner of the "non-income producing asset"?
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"Sir, Roger Sandilands' land tax (Letters, April 6) sounds too close to state ownership. Today's property owner has already paid for the land. Better perhaps to have a retail price index-linked capital gains tax?
Ian Thompson, Surbiton, Surrey
So is income tax not state ownership of part of your labour? Is VAT not state confiscation of your output? Is corporation tax not effectively part-state ownership of each and every profitable business?
Income tax, being state ownership of part of your labour, is economically equivalent to making you work two or three days a week for the government unpaid, so yet again, we note that Home-Owner-Ism is just another version of Socialism - only instead of Party apparatchiks living in the nicest houses and owning Dachas on the Black Sea, it's a different, narrow and self-perpetuating class.
Young people and the productive economy are at the back of the queue - they're the one doing the unpaid work while Home-Owner-Ists enjoy the "imputed" benefits.
In any event, it's the 'community' or 'society' or 'the nation' which create, and maintain, the rental value of urban land. It would be too fiddly for each land 'owner' to compensate every other individual or business for their share of the value they have added, so by default it is only the government which can collect that on everybody else's behalf (obviously, cutting other taxes £ for £ is key to all this, that goes without saying).
Stormlight
5 hours ago
38 comments:
One of your main arguments in favour of LVT is that property only exists because the State exists, and guarantees legal ownership via the Land Registry and the courts. And thus it is fair that property owners pay taxes to fund the State that allows them the monopoly of their bit of land.
So far so good.
But why does this not apply to everything I own? My ownership of money, a car, a TV, some food, whatever, is ultimately guaranteed by the State, via the criminal law, the police and the courts. If they did not exist the only way I would have of keeping what was mine would be to fight people for it, as in days of old (which incidentally I would have had to do to protect my land - property ownership existed in some form prior to the existence of 'the State', its just been privately enforced by strength of arms, not the law).
Thus why is it 'fair' that land owners are taxed because they benefit from the protection of the State, but all other asset/goods owners get a free ride? If I live in a small house but have £1m in the bank, am I not benefiting as much from the existence of the State as someone who lives in a big house but has no savings? Why should I pay no tax on my savings income, but they have to pay LVT on their home?
S: "But why does this not apply to everything I own? My ownership of money, a car, a TV, some food, whatever, is ultimately guaranteed by the State, via the criminal law, the police and the courts."
We've covered that endless times.
1. Car or TV ownership is far from 'guaranteed' by the State - sure, the police will register teh theft and make a half-hearted attempt to track them down, but by and large people deal with this via insurance. If your goods are vandalised but not stolen, the police can do nothing for you.
2. As it happens car owners pay their fair share via fuel duty (a kind of LVT for roads) and TV owners (over)pay their fair share via the TV licence fee.
3. A car or a TV is worth the same whether it's in Mayfair or Blaenau Gwent. The value of your car or TV is entirely independent of whether it's near a railway station, a good school etc. The 'community' contributes nothing to the value of your car - and if the state organises things that TV reception in your area improves, then the value of your TV does not go up - the value of your land goes up.
4. No car owner or TV owner is depriving other people of a car or a TV in any realistic sense.
5. A car or a TV has to be manufactured first using people's skills, capital and labour; that's what creates their value; they are not created or destroyed at the stroke of a civil servant's pen (like when you get planning permission, you can tap into all the wealth that the community has created; if the planning lapses, you lose that source of income again).
6. As to tax on £1m in the bank; putting a tax on it is exactly like taxing the interest income (it makes no odds whether you pay 40% tax on the interest or a flat 2% of the money in the account).
7. I'm against income tax as such, but to the extent you're covered by deposit protection scheme (which you aren't with £1m in the bank) then yes, a small charge seems appropriate, but that's more than covered with income tax anyway.
8. If you have cash in the bank you have foregone consumption opportunities in the past, and your money is being lent to somebody else who can put it to more profitable use.
You just apply 'common sense' to these things and look at actual hard facts of life rather than being melodramatic.
Just because the police are ineffectual doesn't mean that the system is not in place that says 'I own this' (whatever this is). If I have money in the bank its mine. Why? Because the law says so. Who makes and enforces the law? The State.
If there was no State we would all have to protect our goods and money (whatever that might be - another point is that all people benefit from there being a single legal currency - another thing the State provides) by the strength of our arms. We all benefit from the State's existence, why should only some people have to pay for it?
As for there being an unlimited supply of everything - its nonsense. There is a limited supply of natural resources on the planet, just as land is limited. While me owning a car here in the UK does not stop you owning a car here in the UK, it very possibly may stop someone in China or India from doing so. At the end of the day resources are zero-sum.
S, do I really have to explain it to you again?
OK, let's look at cars. I can't dispute that the police to some extent reduce car crime. So let's assume police in Town A are shit hot and there are no car thefts; and the police in Town B are pretty rubbish and cars get stolen all the time.
Answer me these simple questions:
1. Are cars worth more in Town A? Can you drive your car from Town B to Town A and sell it for a profit?
2. Are house prices in Town A higher than in Town B?
And resources (steel and rubber) are so far from being zero-sum limited that they are to all intents and purposes unlimited. The bulk of the cost of a car is labour and half the people on this planet are either unemployed or doing something pointless (like subsistence farming or being a quanogcrat). I might think differently in a few centuries' time.
Yes, kudos to Henry. I've always admired his ability to calmly get to the heart of the issue even when faced with the most emotional and misinformed of opponents. His FT letter proves his ability to cut to the chase once again.
A pity Henry did n't call LVT a repayment which I suggested years ago in Georgist circles to the usual storm of apathy.(My only appearance on the Co-operative Individualism list of recognised Land taxers records my suggesting this sometime when the world was young)
BTW a rare sighting of Roger Sandilands who is a real giant of Land Tax theory but stuck in Glasgow .He has an actual hand- carved professorial chair which is covered in Land Tax slogans.Every home should have one.
D, Henry runs his own series on "Killer arguments" on his blog and no doubt he can rebut this nonsense in his sleep by now - the tricky bit is a) getting it printed and b) making the Homey's accept it.
DBC, aha "repayment" but then they say: "It's moi laarnd and oi've paid for it. Why should I pay anything to greedy grabbing politicians? What have they ever done for me?" (etc. cont. page 94).
You haven't answered the basic question. Ownership of EVERYTHING is guaranteed by the existence of the State, not just land. Assets and machinery can be rented out just like land can. Money is 'rented' out too, when its borrowed. The ability to say 'That is my car, my bank account, my house' is equally guaranteed by the State. Now how the values of differing assets change over time vary, as does what you can charge in 'rent'. But the principle is the same. The State guarantees ownership of ALL assets not just land.
Without the State you could not have any money, other than that which you can physically defend yourself. So why is money not to be taxed (and money is a zero sum game, certainly in the short term) but land is?
And housing is no more zero sum than anything else. The fact I own a house does not stop you owning a house. Not the exact one I own of course, but another one similar. Ditto a car, whether its a Ford Mondeo or a Rolls Royce. Its all come down to price in the end.
And if we were allowed to build houses wherever we liked, and not where the State tells us, we could all have the houses we wanted, within reason, at sensible prices.
S: "You haven't answered the basic question"
To be pedantic about this, you did not ask me a question. But I asked you two simple questions which you simply refuse to answer.
You know I am right and that you will never convince me with your Faux-Libertarian/Home-Owner-Ist mantras, and I know perfectly well that I will never convince you.
And if you won't listen to Ricardo, Smith, Locke, JS Mill, Henry George, Winston Churchill, Albert Einstein and Milton Friedman, then it's not like you're going to listen to me, is it?
"The fact I own a house does not stop you owning a house."
Nonsense. The NIMBYs go out of their way to ensure that one person owning a house very much precludes others owning a house and you know it.
And even if there were no NIMBYs, it is quite clear that there are desirable and not so desirable areas.
So let me ask you another question: who generated those differences?
Even your basic claim "The state guarantees title to everything" is quite clearly untrue.
I give you yet more simple examples to illustrate the difference:
Your car is stolen. Police do not recover car.
You are stabbed to death. The NHS cannot bring you back to life.
Squatters move into to an empty house for which you are registered as owner. Police evict squatters.
Can you spot the odd one out?
And if your basic claim were true, then the State would have the right to charge you for ownership of anything it liked as a kind of insurance.
Since you have granted me that sweeping power, I shall waive it in respect of everything except land.
@Sobers
Your car etc does not increase in value when people build roads,multi-storey car parks and what have you.It depreciates and the second hand value depreciates markedly .(After the war when there were n't many new cars,second hand cars ,which pre the MOT were often deathtraps, kept there value very well .Watch Minder for a later scale of 2nd hand values: still high).
But land goes up in value through no effort of your own in ways which have led to property bubbles in Japan ,USA,Ireland ,Spain and the UK amounting to an old-fashioned crisis of capitalism.Are you saying that the State should n't tax and so restrain unearned increases in land value which are by definition inflationary and socially divisive and harmful?
Sobers, the state has to tax something, unless you are saying that all taxation is theft. So it boils down to which is the best thing to tax. As you suggest, the state could tax all assets, not just land, however, such a tax is difficult to assess (apart from the land element, which can be neither hidden, nor stashed offshore). Income tax has the benefit that the state can remove the money from the taxpayer before the taxpayer gets their mitts on it, but the problem that the amount of money to remove is not always easy to assess. Yes, LVT has the problem that the state can end up demanding money from someone who has no means of paying it, other by selling his land, however it can end up in this situation with income tax, too with non-PAYE taxpayers and the taxpayer may then have absolutely no assets to their name.
ISTR this being said before, but if you are a householder and have no income, you will have to sell your house anyway, unless you are one of the few that don't have a mortgage. Currently, it is possible to protect oneself against such an outcome by taking out insurance. Who's to say that under LVT, the same product will not be offered to non-mortgagees? Alternatively the state could simply say that if you can prove you have no income, it won't collect the tax.
Look the fact that historically land values have risen is irrelevant to the basic premise - the State provides a legal system, part civil part criminal, that allows people to own ANYTHING and enforce those rights. And the reasons for land increasing in value are not related to the 'monopoly' basis of land ownership but a combination of a) increased control of what can be built where, and b) State devaluation of the currency via money printing.
The only reason people have wanted to buy property is because its one of the few things the State cannot devalue. If £1 bought the same as it did 50 years ago, far few people would want to buy property - it has considerable expenses attached to it for one thing. Owning property would just be a matter of personal preference, not financial return.
S, this is all red herrings.
Whether or not you accept that 'the state' (which is all of us, by the way, not just the government) is the only entity which can guarantee title to land; or whether you claim (incorrectly) that 'the state' guarantees title to everything you appear to refuse flatly to answer my simple questions.
So I'll ask you another one:
"Who or what creates urban land values, which tend to increase over time?" Choose from:
a) society in general, the growing economy, artificial scarcity of building land, the taxpayers' money that the government spends; local employers, the railway station, the roads, the fact that the government prevents people from spoiling the view etc.
or
b) The heroic efforts of the registered owner of the plot of land, who might well have never set foot on it.
Answer a) or b).
Just for a giggle, you try answering MY questions first, then I'll allow you to ask me a question.
Sobers .Exactly/ the thing to do is to stop land and property inflating in value: the land taxer's argument in its entirety.House prices in Germany are the same as(in fact slightly lower than)in 1970.And the benefits are obvious.Land tax is the best way to stop house prices going up with an abundance of cheap credit (which we need to cover increased production.) One version of LVT would n't take money off property holders: they would be warned that any land price increases IN THE FUTURE would be taxed .They would place investment funds elsewhere than in houses (as they do in Germany).This version ,actually the original(in English) JS Mill version ,would be most successful when it did n't raise any revenue.The benefit would come from fixed-ish land prices while wealth from earned incomes rose all around the land values.
You cannot logically object to this version which in its modern form would be accompanied by huge increases in the money supply (which because of the tax barrier could n't inflate land values .)
"The only reason people have wanted to buy property is because its one of the few things the State cannot devalue".
It can't? What do you think will happen to property prices when "the State" puts up interest rates?
"If £1 bought the same as it did 50 years ago, far few people would want to buy property - it has considerable expenses attached to it for one thing. Owning property would just be a matter of personal preference, not financial return."
And you think that's a bad thing? (well obviously you do, you are in the business of selling property dearly which you bought cheaply, but you think that's a bad thing for the nation as a whole?)
Who creates urban land values: neither of your answers. As I pointed out its a combination of a) debased currency and b) supply restrictions.
As I have repeatedly pointed out, if one could build a house where one liked there would be no house price inflation above that of the cost of bricks and mortar. As you often point out this country is 90% (or whatever) undeveloped. If all planning restrictions were lifted tomorrow, there would be a massive building boom for a decade as all the pent up demand in the system was provided for. A side effect of which would be the reduction of existing house prices to that of 'cost of bricks'n'mortar plus a bit for the plot'. IE system that existed prior to 1947 and the Town and Country Planning Act.
If the State stopped debasing the currency as well, house price inflation would be dead. There would be no need to 'buy a house, its a good investment' or 'Buy a house for your pension', because cash would be as good.
I see no reason why I should be taxed on value that is virtually entirely created by the malign effects of the State.
@Bayard: quite the opposite - I have zero interest in house price inflation. I am all in favour of sound money. If the money one makes from hard work holds its value the same as property has in the past, then that would be A Good Thing.
Its also not going to happen, because inflation is the method by which the State steals from the hard working and gives to feckless. And as we all know, there's votes in giving the feckless more of other peoples money.
Yet again, Mr W, you are confusing ownership with possession.
Ownership is the right to use an item of property as you wish (subject to such limitations as are imposed by law). That right is guaranteed by the State for both land and other property through an imperfect mechanism involving the police, the criminal courts and the civil law. That the mechanism does not always result in a stolen item being returned to its owner does not mean the owner does not retain the right to possess it.
Whatever sound bases there might be for LVT a false distinction between land and other property based on confusing two separate concepts is not one of them.
Sobers, there's thousands of things you can invest your hard-earned cash in apart from property, as you well know. No-one is forced to leave it sitting in the bank to be nibbled away at by inflation. Anyway, even without the price inflation we have seen over the past twenty years, property would still have been a good investment, and would continue to be whether there was LVT or not. People have got to live somewhere, so there will always be money in providing them with somewhere to live. Not the windfall profits we have seen over the last two decades, but still a reasonable rate of return.
@Bayard: yes there are lots of things one can invest in, but a house is the one thing that satisfies 2 criteria - its useful (you live in it) and its a store of value that will (according to popular thought) appreciate in value. As everybody needs to live somewhere its a powerful argument for putting all your spare cash into property, and not stock or shares (for example).
That second idea that has pervaded public thought for the last 40 years is a new phenomenon. Prior to 1970 say, people didn't consider buying a house as an investment. Indeed in the 50s houses were often bulldozed because no-one wanted them, and they were considered money pits (This happened to a lot of houses in my village in 50s - these cottages would be worth hundred of thousands now).
So what has changed from 1950 to date? Two things - the restriction of supply (1947 T&CP Act) and massive debasement of the currency, mostly post 1970.
Remove those two things and houses return to their historical norm - somewhere to live, not a money making machine.
Sobers,Actually the feckless do not benefit from inflation.Being,most likely, tenants they are not rewarded/bribed with constant unearned capital gains in house price inflation provided by all political parties in Government (Presenting such a unified front,they may as well be called the State).They cannot move anywhere there's work because house prices are too high (see Andrew Oswald's Non technical paper "Housing and Europe's Unemployment" on Net.He proved in 1999 that high rates of homeownership cause unemployment).
The feckless are actually the over-mortgaged masses who speculated too much money on housing inflation continuing,caused an international economic crisis and are being being patted on the head with State -imposed low interest rates.Please explain the justice of a situation where the State represented by the hysteric Osborne imposes all kinds of austerity measures in order to keep foreign investors buying Gov debt/bonds when the same "confidence" could be engendered by raing interest rates.
The Homeownerist politicians are putting the whole country through the wringer to protect the feckless mortgage holders who given discounts on their mortgages worth hundreds of pounds a month (of free money!) still won't spend any in the shops.It would be much better to give this money as a dividend to the old and unemployed who will spend every penny of it.
"Who or what creates urban land values, which tend to increase over time?"
In answer to that I offer you the following stats:
UK GDP in 1970 was $124Bn and in 2009 was $2175Bn, that's a 17 fold increase. Average house price in 1970 was c.£5K. Therefore the increase due to society increasing its wealth would be 17*5 = £85K.
All increase above that is caused by lack of supply, creating relative shortage, and a change in societal views based on the inflationary economic conditions of the 1970s and 80s (particularly), both of which are products of the State, not society as a whole.
There's something wrong with comments - my posts keep disappearing (unless I'm being censored for being too anti-LVT!)
TFB, fair point. I rephrase:
a) Land ownership and 'the state' are synonymous.
b) The state can only guarantee possession of land and only makes token efforts to ensure security of possession of anything else.
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S, you're flailing out and dragging in all sorts of vaguely relevant facts which go nowhere near proving that it is better to tax incomes than land values.
While 'unsound money' is part of it, it is only a small part and that is not relevant to the central point that is is better all round to tax land values rather than incomes. Without land price bubbles there wouldn't be any 'unsound money' sloshing around.
a) Again lack of supply is a factor, it is not the only factor. Even without supply restrictions (which I am against, all things considered) and even with 'sound money' (which I am a big fan of) there would still be massive differences in land values around the country.
b) Even if you are correct and lifting supply restrictions would bring average house prices down to £85,000, it is still better to tax land values than incomes.
c) There is a tendency for land prices to rise faster than GDP growth, i.e. the more developed the economy, the higher the house-price-to-income ratio (this is easily observable if you look at high wage and low wage areas in the UK).
d) So to ensure that the productive economy (without which there would be no land values except in a few scenic tourist areas) gets to keep as much of the value it produces as possible and for land speculators to make as little money as possible, it would still be a good idea to tax land values rather than incomes.
Finally, you have chatted gaily about why land prices INCREASE but as ever, you refuse to answer the simple question WHY THEY ARE THERE IN THE FIRST PLACE.
S, if people don't log in properly using a google account then some comments go to spam.
I don't delete comments, and if I did delete yours it would be for 'time wasting' rather than being 'anti-LVT' as such.
"S, you're flailing out and dragging in all sorts of vaguely relevant facts which go nowhere near proving that it is better to tax incomes than land values."
How about this: Consider that if you tax incomes, in general (lesser with lower rates of course) people will seek to "on paper" reduce those taxable incomes in order to pay less tax on their "real" incomes.
If you calculate the tax based on total revenues required divided by the value of land in any given area, once this calculation is done & the tax bill issued, that tax is then a fixed amount of tax. Now if by extension we also have ZERO income taxes, we flip avoidance on its head & people will seek to increase their "real" incomes by as much as possible and their "paper" incomes become irrelevant. Once the tax bill is covered, you keep 100% of what you earn. This behavioural shift which is damn near 100% certain to occur is a positive economic force.
SW, exactly.
That is what they did in Denmark when they introduced a fairly modest LVT - they told people that their income tax bill was fixed at whatever they'd paid the year before and everybody responded as you'd expect them to.
"If you calculate the tax based on total revenues required divided by the value of land in any given area, once this calculation is done & the tax bill issued, that tax is then a fixed amount of tax."
Also correct. A 'killer argument' which I have never bothered with is 'But land values fluctuate so receipts would fluctuate' and you just answered it.
Sure, relative land values change (i.e. one are goes up, another goes down) and so tax rates would have to be readjusted every year, but you can raise as much or as little as you want* and it is a known figure (like Council Tax).
* The upper limit is only where the tax exceeds the location rent plus the cost of maintaining and insuring the buildings, in which case land and buildings would be abandoned, but no LVTer ever suggested ever taxing at such high rates.
In any event, there are enough derelict and vacant buildings to prove that the current system is even worse.
' Land ownership and 'the state' are synonymous.'
So is your income. Without a developed society of millions, none of us could earn anything like as much income as we do, benefiting from the fact there is a market for our skills, which would not exist in a smaller, less developed society.
What is the income of a computer programmer in London vs one in Africa? His income is entirely dependent on the society around him to generate his wealth, as are 99% of us in Western countries.
Ergo income is as dependent on society as land values are, and can 'fairly' be the subject of taxation.
A businessman who runs a profitable business is a dependent on the society around him to provide his customers, as the home owner is for the value of his house. Why is one taxed and the other not?
S, yes, it is quite clear that a stable 'state' enables people to earn much more money than in a hunter-gatherer lifestyle.
But I take it as a given that most people prefer living in a stable 'state' (I certainly do).
You appear to accept that a 'state' has to raise money (i.e. tax) to pay for those things that most sane people take for granted (defence, law and order, fire brigade, old age pensions, maybe even merit goods like universal healthcare or education).
Firstly, you haven't addressed the point that the bulk of the gains from having a more productive economy (the source of all wealth) accrues disproportionately to land 'owners' (which we appear to be agreed on).
Secondly, you state: "Ergo income is as dependent on society as land values are, and can 'fairly' be the subject of taxation."
Agreed. So it's a question of choosing the one which hampers the productive economy least, and that's LVT.
You ask: "Why is one taxed and the other not?"
I might ask why you think it better to tax the productive economy and untax land 'owners'? In any event, the most productive people (i.e. young people who move to cities) are paying tax twice over:
1. They pay more income tax on their earnings (as they earn more).
2. They pay additional rent (compared to where they were living before).
Once the dust has settled, we note that the marginal gain to that young person from having moved is but a tiny fraction of the increase in their gross earnings
You quite artificially say that the first one is 'tax' and the second one isn't. Wrong - they are both a kind of tax on incomes - the first one collected by the government and the second one collected privately.
If you want to reduce tax to a bare minimum and avoid double taxation, you would scrap the first one (income tax) and just make sure that the second one (ground rents) is collected by the government.
Without a developed society of millions, none of us could earn anything like as much income as we do, benefiting from the fact there is a market for our skills, which would not exist in a smaller, less developed society.
Indeed, there is an economic benefit to being where society is developed, hence a tendency to migrate to those areas. Note that the economic benefits are attached to locations and that you must still actually work to claim these benefits if you are not a landowner.
Ergo income is as dependent on society as land values are
Not really, society can act as a multiplier, but you still have to actually do the work. You can also always improve your own wages by doing more work (even if those wages are non-monetary). If there is no society, you can always get some wages by doing work, but you can't get land-rents.
A businessman who runs a profitable business is a dependent on the society around him to provide his customers, as the home owner is for the value of his house. Why is one taxed and the other not?
You misunderstand how it works. A businessman *is* taxed for the value of having his business located where there are customers to use it. Both wages *and* capital are opposed by rent.
What is the income of a computer programmer in London vs one in Africa?
Computer programming is quickly going the way of call centres...
F, ta for back up as ever, this point is excellent:
"There is an economic benefit to being where society is developed, hence a tendency to migrate to those areas. Note that the economic benefits are attached to locations and that you must still actually work to claim these benefits if you are not a landowner."
I would add "and pay an existing landowner for the privilege of working in a high-wage area"!
As to Sobers, I suspect he knows perfectly well that LVT is the least bad tax, he just argues here for sport; I only reply to him for sport and for the benefit of the people who are open-minded about it and want to see the argument develop.
"So what has changed from 1950 to date? Two things - the restriction of supply (1947 T&CP Act) and massive debasement of the currency, mostly post 1970."
Yeah, and there were no nuclear weapons before women got the vote. Coincidence is not causality. You fail to mention something else that has changed: interest rates. Now we have very cheap money. It has been shown fairly conclusively that there is an inverse relationship between the price of borrowing money and the price of property.
Also, I have it on good authority that all those village houses that were bulldozed in the 50's were bulldozed because they had been declared unfit for human habitation (mainly because the had no inside sanitary facilities) and once their inhabitants had been moved to council houses, they were pulled down. Not so much a case of no-one wanting them, but no-one being allowed to live in them.
@Bayard: interest rates were just as low in the 50s and 60s and there weren't house price booms then. And there were house price booms in the 1970s and 80s when rates were much higher than today. What drives a boom is not so much rates (though low ones help of course) but liberalisation of finance markets. Each boom can be traced to a freeing up of some aspect of banking regulation, and the refusal of the authorities to rein in irresponsible lending when things get out of hand.
As for houses bulldozed in the 50s, they may well have been declared unfit for human habitation. The point being that if a house in the same location was in a similar condition now it would still be worth a lot of money, just for the plot alone if nothing else. In the 50s it had no value and was therefore destroyed (to avoid domestic rates possibly, I don't know).
S: "interest rates were just as low in the 50s and 60s and there weren't house price booms then..."
Correct, and the reasons for this are well-known, each of the following being a necessary but not sufficient condition:
1. Domestic Rates and Schedule A tax (similar to LVT)
2. Strict mortgage rationing. If you can only borrow twice your gross salary, then that sets the upper limit whether you're paying 1% or 10% interest.
3. They were building many more houses in the 50s and 60s as against a slightly smaller population.
Seeing as the boom cycles started in the early 1970s, when only condition 1 had been changed (Schedule A scrapped) it is safe to say that that had something to do with it.
Reckless lending and restrictions on new supply didn't come in until the 1980s. Scrapping Domestic Rates in 1989 gave the 80s bubble a little extra push.
"The point being that if a house in the same location was in a similar condition now it would still be worth a lot of money, just for the plot alone if nothing else."
I wasn't around in the fifties, but in the villages round where I grew up, the missing old cottages had mostly been replaced by new housing.
"In the 50s it had no value and was therefore destroyed"
In the 50's far more people rented, the condemned houses were often owned by landlords, who saw no point in rebuilding, since their tenants had become council tenants and the evicted owner occupiers couldn't afford to rebuild. You can't really compare the 50's with now because since then, the great 80's housing bubble has turned almost the entire nation into property speculators (which is why the "solution" of building more houses wouldn't bring down prices - you'd just end up with lots of empty houses and high prices, like Ireland).
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