I re-wrote an article from the Evening Standard a few weeks ago:
Thousands of London mortgage salesmen will get a chance to lend money to London's higher earning social tenants to buy their homes under a major extension of the Right-to-Lend in tomorrow’s Budget, the Evening Standard reveals today.
George Osborne will raise to £100,000 the maximum incentive to persuade tenants in London to swap a secure tenancy at a low rent for five years of debt slavery during the lock-in period, after which they will be able to sub-let the home for a huge guaranteed profit or to sell it to an aspiring homeowner or BTL landlord who will have to take out an even larger mortgage...
Bob E has now spotted these opening paragraphs in an article in The Guardian:
There were, of course, many myths propagated by the [the Home-Owner-Ists]. One of the most pernicious was that, by allowing council tenants to buy their own homes [they] somehow provided a gateway for working-class people to a land of milk and honey. Thus, huge quantities of solid council stock disappeared into the private sector and have never adequately been replaced.
Barely more than a generation later, Britain is paying a heavy price for [their] atavistic desire to wipe out any trace of working-class culture, or "society"... All over London, former council homes are changing hands for hundreds of thousands of pounds simply because they are in a neighbourhood now deemed chichi by London's cultural elite.
The failure to replace social housing stock, and the greed of mortgage lenders, has left millions looking for affordable social housing. For, as we now know, the only real beneficiaries of... council house revolution were financial institutions that have never since stopped thanking [the UK government] for handing them a multitude of new customers on whom to prey. One global credit crisis, two banking bailouts and one double-dip recession is [Home-Owner-Ism's] real and dismal economic legacy...
I've had to edit the second excerpt a bit because in typical Guardian fashion, they blamed it all on Thatcher and glossed over the role of Labour councils and the Blair-Brown government in all of this. The point about Right to Buy mainly benefitting bankers still stands though.
Victimhood by Proxy
9 minutes ago
22 comments:
However we know it was gordons fault for the world recession.
Mrs T correctly preferred to fight inflation.
Gordo needed credit inflation to disguise the damage to comparative advantage caused by his taxation.
Whether the houses where subsidised by extortion to people who didn't look after them or sold to people who generally did, it doesn't matter.
The real problem was that not enough planning permission for house building was created.
SB, simple observation tells us that allowing more houses to be built tends to increase overall rental values.
And simple observation also tells us that council housing IS NOT subsidised by the taxpayer.
You're living in a dream world if you think either of those are remotely right.
SB,
a) there are lots and lots of buildings close together in large cities and land rental values are very high. There are very few buildings in remote farming areas and rental values are very low. Facts.
b) people waffle on about "subsidies for social housing" but there simply aren't any. If there were, I'd say so.
If you can see a big mistake in my workings, then please advise. If you can't identify any errors, then please desist from peddling this Home-Owner-Ist nonsense.
c) For sure, social rents don't include a payment for the location rental value to any large extent, but homeowners don't pay for those either, do they?
It's quite typical of a leftie to blame Thatcher. She is their Satan, when evil, for want of a better world, is more complicated than that.
What about the people who voted overwhelmingly for demutualisation, which led to greater risk taking in financial services? What about Blair and Brown who did nothing about the Barker report when it was suggesting building on the Hallowed Greenbelt, and who built even less houses per year than under Thatcher, and promoted ever greater spending on London, subsidising the financial services industry? What about Brown, who created the disastrous FSA? Or Brown, who bailed out the banks, rather than taking a golden opportunity to recreate the industry?
Housing was about get-rich-quick. Don't use your talents to make the world richer, just rent seek and make money from it.
The Stigler
Just to muddy the waters, a bit .. here is one Barnaby Mitchel writing on the subject of Housing: haves and have-nots on Wednesday, 17 April 2013 on the Revolutionary Communist Group website : http://www.revolutionarycommunist.org/index.php/fight-the-cuts/2963-hh170413 - the emphasis is mine
"By the late 1970s, close to seven million households lived in local authority council housing. Successive governments then started to cut investment in housing. Margaret Thatcher led the charge: her government stopped councils from subsidising new house building, introduced ‘right to buy’ and cut housing repair budgets. ‘Right to buy’ was initially proposed by Labour in its manifesto for the 1959 general election.
Between 1980 and 1996, 2.2 million homes were bought by tenants. When councils sold properties housing law prevented them from investing the money in replacements. ‘Right to buy’ continued under Labour after 1997. The total value of council homes sold since 1980 amounts to £85.9bn. This makes it by far the largest privatisation in the UK.
Bob,
blindingly good spot: http://www.labour-party.org.uk/manifestos/1959/1959-labour-manifesto.shtml
"Every tenant, however, will have a chance first to buy from the Council the house he lives in; and all Council tenants in future will enjoy the same security of tenure as rent-restricted tenants."
This is nothing new. British Land did it 100 years ago as a way to startup another property pyramid. Nothing changes. Why go round and round in circles pretending you have discovered something new?
Any Googling of the words Latvian Property bubble and Michael Hudson will show that selling off democratically-owned housing in the UK was small potatoes, compared with what happened in the ex-Communist Latvia. Latvia went from Communism to free-market collapse followed by mega-austerity + emigration of workforce in a couple of decades .Having been gifted a lot of housing free by the retreat of Communism ,they managed to pump up the mother of all property bubbles from recently government owned housing stock leading to the wipe-out of the economy. It is a tribute to the simpleton politics of UKIP that they blame the glaring results of property market failure (Latvians coming over here)while passing up the chance to understand the basis of the problem which was presented to them by MW when he was a member.
TS, BE, DBC, stop obsessing with who was worse, Thatcher or Blair-Brown. Of course an article in the G is going to blame her and ignore the role of Labour in all this. That was simply not the point, so I've edited out all reference to her.
RS, no it is nothing new. It's just that people don't say it very often, so I just thought "great minds think alike" so I posted it.
@MW I was n't blaming Thatcher or Blair or Brown, just trying to draw attention to the Baltic States' short lived freedom from Red Oppression.
DBC, oops, maybe I shouldn't have addressed that at you.
And yes, the tragic thing is that Cuba is making tentative moves in this direction (Home-Owner-Ism) as well. All they need to do is lift state controls on private enterprise and collect and redistribute the rents they collect on state-owned housing, but no, they are going for HOism instead.
And I have made the point about immigration not really being responsible for house price bubbles, as there were house price bubbles in emigration countries as well as in immigration countries.
And yes, the tragic thing is that Cuba is making tentative moves in this direction (Home-Owner-Ism) as well. All they need to do is lift state controls on private enterprise and collect and redistribute the rents they collect on state-owned housing, but no, they are going for HOism instead.
They have an interesting way of taxing small private enterprises in Cuba as well. They just assume an imputed income dependending on type of business, and charge it to the license holder. Sort of destructive, but also has a grain of genius in it (they know they won't get proper reporting anyway).
And I have made the point about immigration not really being responsible for house price bubbles, as there were house price bubbles in emigration countries as well as in immigration countries.
Gaza strip being an example in point. Net emigration, large house-price increases, although they also have rather high birthrates and high net growth even after emigration. Do you know of some examples of countries with low net growth and house price bubbles?
Kj, I didn't know that about Cuba.
If so, that's only one step away from LVT, i.e. instead of charging a restaurant an flat tax on its estimated profits, you charge it an estimated tax on its additional profits made by trading from that particular location, i.e. just charge it normal market rent.
The point is, if the government owns the land and buildings, there is no difference between LVT and rent.
As to immigration, emigration and house prices, I did some examples here.
MW: Good point, it's sort of LVT-like, decoupling and renting out planning permissions (higher use of land) at a fixed price.
But unfortunately as you point out, they are also dabbling in selling off land so that people can "get a stake" as well.
As far as I can see most, if not all, of the former
Baltic and Central European countries once groaning under the communist yoke were zonked by house price bubbles as soon as they became independent. The Romanian property bubble has its own Wikipedia entry. Figures given are Vilnius 47%; Riga 44%; Tallinn 52%; Ljubljana 30%; Prague 37%; Warsaw 44% (same as Riga Latvia).There is a paper on the Net by Luca Cocconcelli and Francesca Medda (both UCL) called The Estonian Speculative Real Estate Market that concludes "that a more rigorous implementation of the Estonian land tax could have diminished the effects of the boom and bust" but the famous Estonian Land Tax could not have had any moderating influence surely since Tallinn's figure is the highest?
Kj, yes, very unfortunately. Cuba will probably become a failed ex-Comunist state like all the others.
DBC: from that paper...
The results of the estimation show (Tables 5 and 6) that if the land is evaluated each year, the tax is capitalized with a higher rate than in the case of the single evaluation model.
Indeed from Model 1 we can observe a higher parameter for Land Tax while the parameter is less significant in Model 2. In other words, in Estonia, given its implementation, the land tax was less capitalized in the house price and its impact was not so relevant in reducing the effect of house price increases.
The paper doesn't seem to say how high the tax was. It's a question of degree.
The bubble in UK commercial land prices (subject to Business Rates, subject to 5 yearly revaluations) was much smaller than for residential and was over much more quickly.
So that'll do me as evidence.
I believe the Estonian rate is around 2%. Maybe it shaves off something around a fifth or a quarter or land rents. Estonia is also the richer countries of the lot. These things are predictable enough, and I would be surprised if Estonia wouldn't have even predictably higher land price bubble without LVT. Hong-Kong still experience land price bubbles while taking in a relatively large share of land rents (30-40% maybe).
It may be heresy round here but a percentage land tax may not have been the obvious answer for the Baltic States (Estonia's is 1.0% for residential; Russia's [they do have one]0.01%.Fred Harrison spent 10 years trying to convince the Russians of the merits of land tax citing Tolstoy who saw Henry George as the answer; all to no ,or little ,avail).Surely the Baltic States & Russia should have retained land nationalisation, allowed people to own the bricks and mortar only, then charged full ground rent? Or carried on with the communist tyranny of charging next to nothing for publicly owned housing instead of initiating a privately owned tyranny where people spend the rest of their lives paying off an inflated mortgage? They could have "liberalised" the land market and, after a short interval for market values to form, slap on the full JS Mill LVT scalping all rises. There is more than one way to skin the Cat.
Kj, 2% of what?
DBC, 1% of what?
"Or carried on with the communist tyranny of charging next to nothing for publicly owned housing"
Indeed, that is the most obvious solution, isn't it? Maybe get a bit of private sector efficiency by auctioning off the right to manage certain estates or blocks of flats in exchange for a commission of 10% of the rent collected or something.
MW: capital value.
DBC: sounds familiar.
"but no, they are going for HOism instead"
That's because, politically, HOism works. It gets the wealth of the country from the hands of the people who don't matter into the hands of the people who matter whilst leaving the people who don't matter think they are better off. Economically, it doesn't work, but who gives a shit about economics once they are safely in power?
Post a Comment