Monday, 22 July 2013

"How the cost of labour and materials are pushing up UK house prices"

From City AM:

BRITAIN'S housing market is broken: inane supply chain rules mean that not enough new homes are being built.

Growing demand (in part bolstered by the coalition's much welcomed funding for lending and help to sell policies) combined with a supply that is growing only feebly is pushing up prices in and around London and risks turning home-ownership into an expensive luxury. That, at least, was my thesis on Friday, and it triggered a good deal of reaction from readers, for which I'm very grateful. I want to elaborate on two points.

It's not just the cost of bricks and timber that is reducing the supply of homes and increasing their cost but also hidden charges in cash and kind that are imposed by bricklayers and carpenters on new building projects. These drastically reduce gains that land owners can make – and in some cases are now even levied on private individuals building extensions. This is making some projects unviable, pushing up the price of others and reducing the supply of homes...

... The National Minimum Wage (NMW) is merely the latest; there have long been mechanisms to enable local workers to grab chunks of the planning gain -euphemistically referred to as 'wages' - and schemes to force developers to pay for the cost of materials used as part and parcel of private housing projects.

This may sound like a good idea, but in fact it's a bizarre and opaque system with large but hidden costs.

Instead of openly and democratically raising money through the regular tax system, and then forcing unemployed bricklayers to work for free on pain of losing their benefits, and subsidising the cost of construction materials in an opaque and unaccountable manner, construction workers and suppliers of building materials are benefitting from a brazen, on-balance sheet and entirely transparent system of helping themselves to community-generated land values which rightly belong to land owners.


Bob E said...

The Heath solution "and raise any funds needed to pay for any new social housing through the normal tax system".

Well he does refer to "the coalition’s silly funding for lending and help to buy policies" and if they were abandoned tomorrow there probably would be enough funding "generated by the normal tax system to finance a massive social building programme, but in the absence of that happening hardly surprising that some LA's go for "levies for local government to grab chunks of the planning gain and schemes to get developers to pay for social housing, schools and new roads as part of getting the green light for private housing projects".