There's a nice article in this morning's City AM on the topic, I've scanned in the accompanying map (click to enlarge):
The correlation is basically this: cutting 45 minutes from your commute time adds £75,000 to the price. If you estimate capital+interest repayments at 5% of the mortgage, knock off the £3,000 saving on your annual travel-card and divide that by the 350 hours not spent on the train, that all suggests that people value their own time at a paltry £2 per hour. Other estimates suggest more than, but let's work with the information we're given.
I'm So Glad I Never Clapped For Them...
39 minutes ago
31 comments:
Yes but no but.
There is no factoring for the opportunity cost of not being within striking distance of most of Zone 1/2/3.
You don't just live to work, do you?
Write that into it, and you're looking at pennies.
There should be no social housing in Zones 1 & 2. Period.
Mark,
is this not based on the (shaky) assumption that everyone within those areas works in central London and commutes?
The further out you go, though, the lower the proportion of people commuting into central London.
I think we did this before, but there's also a correlation between salary and actual commute time. It's not worth commuting an hour each way for a minimum wage job.
20R, agree on social housing, separate topic. Not sure if I get the rest. Some people love 'the buzz of city life' and/or are insane workaholics. Most people, like me, like it out in the leafy suburbs. Each to his own.
VFTA, yes it based on that assumption, but it's generally accepted among estate agents that there's a fairly fixed relationship between rent and [minutes walk from nearest Tube or train station] or between house price and [minutes train time from C London]. And the fact is, enormous amounts of people do use the Tube or train in Greater London.
C, yes true, which might explain the £2. If only half of people in those areas commute in, then actually it's £4. And yes, minimum wage cleaners would rather clean within walking distance for f- all per hour once they've lost benefits, but amazingly enough, there are plenty of cleaners and other low paid people working in C London.
That's not really the right comparison. Plenty of people who have long commutes couldn't afford to live closer at all. The thought process amongst those of my acquaintance who commute to London ran something like "I earn x quid a year. The bank will lend me y,000 quid. What can I buy for that?"
And then they all go on to make the decision that they want a 3-bed house in Middle Nowhere rather than a flat in London, or they want the 4-bed house with the large garden.
Yes, in most cases they'd like to move their large house closer to London, but they can't borrow an extra hundred grand or so to do so. Then, once they've settled there, they're less keen to move.
Good post, for a change, seeing as all the "new" green jobs will have something to do with wind turbines and other types of green energy generating contraptions, the valuation of houses in the leafy suburbs are gonna hit the heavens whereas, according to you, big city dwellings are gonna hit the skids big time.
Somehow you need to build in representation of the incentive to live further out - e.g. in Ely rather than Cambridge - so that you get a seat on the morning train rather than standing all the way.
First Anon, fair enough but that comes to the same sort of thing; obviously, my calculation is only a fair comparison between two people who could afford to live in either location.
Second Anon, I don't get it.
D, yes, you get a seat on the train in the morning if you live further out (hooray!) but that doesn't help you on the way home, does it? You're still standing until shortly before your stop.
The map appears to put Swindon in the middle of Hampshire! It's actually off the map and at an even lower average house price.
Clearly wages are a factor, if say people can earn an extra 25% for their given job working in central London. Above average earners will be more likely to opt for a bigger commute and this is surely the case.
And they've put Oxford in Northants: looks like where Northampton is,in fact.
"that doesn't help you on the way home, does it? You're still standing until shortly before your stop": not if you work long hours. But even the short-houred might feel that they're damn well not going to stand all the way twice a day. And they might win the seat lottery on the return trip.
I've often thought to myself that many commuters sell themselves short by wasting their time and money on commuting. However if everyone suddenly realised how nice it was to have a 15 minute door-to-door I wouldn't be able to afford to live where I live so thank you suckers!
So what is the sigificance of this observation with regards to your version of LVT. You want to tax the houses in outer less than the inner - thus making more money available for train fares. Which will rise upwards re-establishing the balance to where it was with the train fares making up the difference.
QP, they just stuck Swindon in the outer value/travel time band, I think.
While we can argue that people are more willing to commute for a longer distance if this enables them to earn more money, this is more or less the opposite of what Anon 22.58 says: "Plenty of people who have long commutes couldn't afford to live closer at all" which is equally true.
DBC, they puts towns in bands, it not supposed to represent actual miles distance but minutes travelling distance.
D, I live in Zone 5 and usually get a seat in the morning - it's nicer sitting for 40 minutes than standing for 30, I always say.
BE, it all evens out somehow.
Den, that's sort of the point. If they improved commute times from e.g. Swindon, with a 30-minute bullet train with an annual ticket price of £500, what would happen to Swindon house prices/rents? They go up, the landowner/homeowner wins.
Or we do it your way and cut Council Tax in Swindon (or apply lower LVT than in Surrey, whatever), so house prices/rents will go up, the landowner/homeowner wins yet again.
Whatever the government does which improves things (and the government also does a lot of things which make things worse) tends to primarily benefit landowners/homeowners. And if they do stuff which hurts house prices in an area, then they have to pay massive compensation.
Mark. You expectt an LVT to stop house prices rising over time. This would remove one incentive to buy. Whatt effect on the ratio of renteers to buyers would you expesct
Den, all things being equal, most people (and that includes me) prefer owning to renting. The big advantage of being a mortgage slave, not a wage slave, is that you can decorate and improve your house and garden to suit your own taste and if you do it properly, you get your money back when you sell.
While LVT might act as a disincentive to own (but this will be evened out with lower prices), it will act as a far bigger disincentive to be a landlord (no capital gains); to leave a house vacant; or to wildly over-occupy (in terms of space or value or second home ownership).
All the evidence shows that LVT (and it close cousins, Domestic Rates, Schedule A tax, call it what you will) tends to increase the levels of owner-occupation, which I think we are broadly agreed is A Good Thing, and not to reduce it.
" ( but this will be evened out by lower prices ) "
Not so . With LVT the cost of accomodation is increased by 2 1/2 times in relation to everytjing else. Thats a relative increase not lowered. Peoples choices are based on the price of things relative to each other at the same moment in time .
"While we can argue that people are more willing to commute for a longer distance if this enables them to earn more money, this is more or less the opposite of what Anon 22.58 says: "Plenty of people who have long commutes couldn't afford to live closer at all" which is equally true."
We can also observe that there are still low-paid (e.g. cleaners) living in London with relatively short commutes. So it appears that there is an element of choice and that people "couldn't afford to live the way they would like closer at all"
Den, where do you get 2 1/2 from? It's a tax, that's all, if your income tax, VAT, council tax, whatever is cut by £5,000 and your LVT is £5,000, what's the big difference? It's like scrapping the road fund licence and putting 1p on a litre of petrol.
And evidence is evidence, feel free to ignore it if you wish.
I think people are very bad at ammortirisaton. In fact I would guess 99% of people are unaware of it. A £3000 season ticket ammortised into a mortgage interest payment would mean £60000 more to spend on a house.
Actually come to think of it, if you are spending 3000 on travelling then attempt to work locally instead a buy a 60 000 bigger/better house in your current local.
QP, yup, it's all very circular, there are centrigual and centripetal forces, but they appear to balance out at a certain status quo.
Den, you'll find that people are incredibly good at amortising. We all know the rule of thumb that lower interest rates -> higher house prices and vice versa.
The same applies to tax: when I bought a house in '98 it was relatively cheap because it was in a Labour council area (Tories skewed central funding towards Tory councils, so high council tax).
Ten years later, I sold for relatively expensive because it was in a Labour council area (which by that time, thanks to the Labour government skewing the funding back in the other direction, was in a low council tax area).
It is your figures. I think you based it on 5% mortgage costs as now plus 8% LVT. That is a increase of 2 1/2 times.
"whats the big differnce" People choices after LVT would based on the relative cost of things then, not compared to now. If you choose to buy a toaster or a grill you compare the relative costs. The fact that both have come down compared to 20 year ago, or before you were born is not a factor.
Den, OK, under full-on, no holds barred, LVT to replace all other taxes, it would be 2 1/2.
But people's gross incomes would double (no PAYE deducted and add on the Citizen's Income), and other stuff would be a lot cheaper (no VAT) so the amount they have left over to spend on housing is also 2 1/2 times higher as well.
So you would still be comparing 'nice house' with 'not so nice house', or 'short commute' with 'long commute' and the relative value (i.e. what people are willing and able to pay) of 'nice house' or 'short commute' would increase. It would all find a balance within a short space of time.
typo local-localtity.
If you tax people who live in cities higher, over time that represents a chronic reduction in the money available for commerce in the a city. The knock on effect as one supplier is another persons customer multiplies the effect .
Den, may I paraphrase:
"If you tax people's incomes, those who live in cities and earn more pay a lot more, and the balance is soaked up by landlords, who are not contributing back, or by homeowners who sell up and take the money elsewhere, over time that represents a chronic reduction in the money available for commerce in that city.
The knock on effect as one supplier is another's customer multiplies the effect."
MW,
sorry if I was not direct enough, but I think you get my drift. It's worth a great deal to know that you can reach a destination at a certain time with confidence.
We pay a premium to have three Tube lines, a mainline and proximity to LHR, and it's leafy here. It would be less expensive to live in the sticks, but we'd have more furrows on our brows, so the savings would go on Botox :-)
The social housing reference was because people in lower-paid jobs generally have more rigid working hours. It seems unfair that they're priced out by those who have none.
Twenty, ta, I see what you mean, the stress factor counts as well, if you can choose between Tube, bus or mainline, then it's unlikely that all three will be buggered on the same day.
I do of course agree on social housing, I am after all a land value taxer and what's sauce for the goose etc.
Den, how much would you pay for a liability yielding -8% each year? It doesn't seem you get that LVT would depress capital values, which means less interest payments, and you wouldn't pay 2 1/2 times more, just 3% more on the portion you don't longer pay interest on (with no other taxes removed as opposed to MWs example of all other taxes abolished). If you are doubtful that people would be able to calculate the amortisation, be sure that the banks would.
Anon, good maths, that's another way of looking at it, what it boils down to is that total rent+interest+taxes you have to pay minus benefits received always adds up to much the same thing. It's just a question of whether that is scooped up by landowners+banks or whether it goes into the general pot and gets dished out again to all and sundry.
Remember to add the cost of the station car park season ticket. Whilst this used to be free, and goes up massively every year, it is outside long term inflation studies of rail travel. There must be an unearned gain for homeowners within walking distance of a commuting train station when parking fees go up faster than inflation. So £1,000 parking fee = £15,000 more on a house in walking distance?
OTOH, yes, it's like the old models of the universe, it's wheels within wheels. An extra £1 a day on parking at the stations reduces house prices further from the station and increases them nearer the station.
Post a Comment