From The Metro:
Average private sector rents in some parts of London have reached 56 per cent of pay, leaving even less for other essentials such as food and fuel.
Rents now make up a third of people’s earnings across England but there is a wide disparity across the country. In the capital, rent makes up 41 per cent of pay. The boroughs of Brent, Camden and Westminster have the highest rent to earnings ratio in the country at 56 per cent. London boroughs make up 21 of the 25 highest ratios. In Westminster rents average £1,931 compared to earnings of £3,786 while in Lancaster the average rent is £325 compared to earnings of £2,166.
Brighton, Oxford, South Buckinghamshire and Three Rivers district in Hertfordshire are the only places outside of the capital that make it into the top 25. The lowest ratio is Lancaster where rent makes up 15 per cent of earnings. In Derby it is 20 per cent, Liverpool 24 per cent, Gateshead 25 per cent and Birmingham 26 per cent.
The rent-to-wage ratio is the wrong way of looking at it. You have to think about local wages and basic living costs (excluding rent). Local wages vary a lot around the country, but basic living costs don't, so in areas with higher local wages, there is more of a surplus after paying for basic living costs (i.e. "essentials such as food and fuel"). And who gets that surplus? The landlord.
So in Westminster, average wages are £1,620 a month higher than in Lancaster and average rents are also £1.606 higher, wiping out the apparent benefit of moving from a low wage area to a high wage area. It's also worth noting that if the economy develops so that wages go up or basic living costs go down, an ever greater share of those gains will go into higher rents.
I'm So Glad I Never Clapped For Them...
2 hours ago
13 comments:
So, remind me? What is it that we can do to stop the major benefits of rising prosperity caused by wealth creating private business from reverting to landlords..?
L, having explained how things work, Ricardo also devised a simple solution, it's something to do with tweaking the tax system.
MW. I seem to have read some bits and pieces about that. I must look them up again...
Wouldn't happen immediately - take at least a generation.
But if rents take up 33% of people's income and if 75% of housing costs are government parasitism then we could all get 25% of official income - indeed 37% of the current after rent income - just by allowing the free market to operate in housing.
Of course extra income released has a multiplier effect across the economy so perhaps you could double that.
D, I've removed the spam.
NC, no, it doesn't take a generation, it takes a few months or maybe a year, for example, after North Sea oil got going, it only took about a year for Aberdeen rents and house prices to rise to London levels.
And most of the government parasitism is done for and on behalf of the NIMBYs and assorted Home-Owner-Ists, and it is they who reap the rewards.
Tax Research doesn't believe in Ricardo. Says the world is different now but cannot explain this difference.
Phys, this killer argument against LVT i.e. that "things are different now" is particularly nauseating.
It flows in nicely to the traditional Faux Libertarian bleating about "land not being important because we are no longer an agricultural economy, you are obsessed with something that doesn't matter" and the equal and opposite Home-Owner-Ist argument that "land values are very important to the economy and to banks, so we can't tax them because that would reduce their value".
Fact is, land (the physical thing) is as important as it ever was and (capital) land values are very important - but only in a negative sense, in the same way as the North Korean nuclear threat is very important to the South Koreans.
Not arguing with the general point, but-
So in Westminster, average wages are £1,620 a month higher than in Lancaster and average rents are also £1.606 higher, wiping out the apparent benefit of moving from a low wage area to a high wage area
you do have the benefit of living in Westminster rather than Lancaster which, if you like being in the capital city with the bright lights and pretty girls and theatres and restaurants and crap, is value in itself.
Except you can't afford them, of course. Still, I dunno about Lancaster, but having effectively been forced out of the capital myself by property prices and now living in runty little Northampton, boy do I miss the bright lights of the big city.
Ian B
Well, there you go: but you can't afford them. The benefits are there, all right: there's just a toll-booth of private property ownership charging you access to them, and thereby internalizing the benefit.
IanB, local wages is the most important influence on rents (let's say 2/3), but of course there are areas which are other factors which make a place inherently nicer or not so nice to live (that's the other 1/3 of the price).
So on the south coast prices or in central London where there are other attractions, prices are higher than explained by local wages alone, and in East Midlands or East Anglia, prices are much lower than local wages would suggest because they count as boring.
FT: "a toll-booth of private property ownership charging you for access"
Brilliant I must remember that, thanks.
Here is a long comment. Delete if inappropriate and I'll blog a link.
Don't forget that Ricardo told us that past a certain point applying work and enterprise to land produces a diminishing return contrary to observed fact! But he did correct Smith by saying that rent increases as the margin moves out.
Smith was paid by an aristocrat so would only go as far as to propose taxing rent on the "second home". He also got the nature of rent and the true cause of it wrong. But hey, he was the first to officially try scientifically.
Both Smith and Ricardo disgracefully and absurdly told us that wages were paid by pre existing capital. That is, that capitalists "create jobs" in the same way government and monopoly capital today makes the same claim. Worse still that "natural wages" were the wages of the slave or the margin of welfare.
Can you see the influence of the good Reverend Malthus here still dominant today. They failed to see how EVERYTHING that increases the power of labour to produce wealth, increases rents, even more, not just population growth. This is why perfecting finance, better government and abolishing capitalism are futile and ineffective remedies.
John Stuart Mill also missed simple observation by saying a large population can never be provided for as well as a small one along Malthusian lines.
Herbert Spencer was a hard core single taxer till he got bought out by the fake charities and philanthropists of the time. "The Perplexed Philosopher". The most disgraceful cop out ever in the history of economics.
Land values are *even* more important today as values concentrate. Its exactly this observed fact that the Tax Injustice Network, the Faux's deny. Both left and right on the same side as the slave owners.
This is quite amusing:
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9203332/Tesco-to-scale-back-hypermarkets-to-concentrate-on-the-internet.html
Post a Comment