Thursday, 16 January 2014

Sandbanks Beach Huts

From the BBC

A council has made more than £5,500 from a beach hut waiting list within a few hours of it opening.

Borough of Poole said 223 people paid £25 to join the waiting list for huts on Dorset's exclusive Sandbanks beach, which reopened on Tuesday. 
The council said the non-refundable fee was to make sure that people joining the list genuinely wanted a beach hut…

The waiting list, which has been closed for seven years, reopened online at 12:00 GMT but crashed moments later. 
By 09:30 GMT on Wednesday, there had been 8,540 views of the booking web page and 355 phone calls to the inquiry line.

A council spokeswoman confirmed that the booking system had "keeled over" and added: "Everybody wanted to register straight away so they can be top of the list."

There are about 150 beach huts in Sandbanks and, before registration reopened, there were already about 80 people remaining on the waiting list…

There are more than 1,000 huts along Poole's coastline, most of which are leased annually, and around 80 more are due to be built. Borough of Poole council said it had reopened the list because it had "reduced significantly" to 193 applicants across all its seven locations.

Waiting lists for huts in Shore Road, Flaghead, Canford Cliffs, Branksome Chine, Branksome Dene and Hamworthy are due to open in the next six weeks.


Great. Poole Council has made £5K from some booking fees. That'll cover the cost of hundreds of meals on wheels.

But you know,when you've got 8540 people trying to hit your page within minutes of it opening to rent a beachhut on Sandbanks where the cost of houses hit the millions, it might give you a clue that maybe you've underpriced the rent.

I'm pretty sure that if the same thing happened with a Keycamp holiday camp (rather than taking months to sell out), that they would consider pushing the prices up the following year.

Seriously, does anyone actually need to do this any longer? Stick the beach hut rentals on eBay and let people bid on them. You'll quickly discover the market price that people want to pay and they've got the sort of infrastructure that can handle it.

It's what we did with the 3G and 4G auctions. You've got something in limited supply that was created by god/gaia/billions of years of evolution of the universe and is maintained and defended with the help of state spending, so you extract as much money out of people who'd like it and spend it on the people.

A plan to reduce the waiting lists by limiting leases to five and 10 years was dropped in 2012 after objections from existing tenants.

Which is another sign that the rental value is too low. If they were priced correctly, people might grumble a little but they'd hardly be that bothered. They'd go and find somewhere else to go instead. These people are rent-seekers, sponging off the state to enjoy things at below the market price.

One of the Troubleshooter programmes had Sir John Harvey Jones visiting Morgan where he asked why they didn't raise the price of their cars, as all it did was to give money to scalpers who took places in the queue, bought the cars and immediately sold them for a profit. And I'd bet all the land values of Sandbanks that some of those people with long leases aren't staying in the huts but making money on the side sub-letting them.

When you start thinking about 1,000 huts, a gain of £5500 is pissing in the sea compared to what they could be making.

18 comments:

Mark Wadsworth said...

"Stick the beach hut rentals on eBay and let people bid on them… It's what we did with the 3G and 4G auctions."

Wot? They did the 3G auction on eBay?

Yes, if you want to maximise income from the rents, that is what you would do. See also: allotments.

But would it be possible to underprice them slightly and more than make up the shortfall by charging people to be on the waiting list?

Or by having a lottery with beach huts as the prize?

Bayard said...

Now they've got their five grand, they could, if they were sneaky, whack up the rents on new leases to market value (easily discovered as this is what the sub-tenants are paying) and they would have the penny and the bun.

The Stigler said...

Mark,

Not sure if they could have done them on eBay, but someone sold a Gulfstream jet for $5m on there once.

But if you charge people to be on the waiting list, how do you set the price to be on it? And isn't that more complicated than just setting a rental period of say 1-2 years and auctioning them?

A lottery would probably work just as well.

B,
I think you have to be careful with underhand tricks as whatever you make in the short term you can lose in the long term as people don't trust you in future.

Kj said...

If we take allotments, that´s an example where local govt usually underprices, for egalitarian reasons, which is fair enough. I don´t know about the status of beach huts, but it might be political reasons why councils don´t maximise income from them?
MW: good idea about charging for being on waiting lists. It might be quite a small amount that takes away a significant first portion of the queue.

Mark Wadsworth said...

Kj, there are long waiting lists for allotments in most places in the UK, i.e. they ought to bump up the price a bit OR increase the supply of allotments OR both.

The price is currently usually very low and on most allotment sites there are a couple of unused ones, so increasing the price slightly get them back into use (the next occupant is paying more money so will not just let it go to waste) and it will still be "egalitarian" as the price will still be low, just not quite as low as at present.

Re: charges to be on waiting lists. That was just me thinking out loud. Might be a waste of time.

mombers said...

I think a lottery is an ideal way of keeping these sorts of things 'egalitarian'. The price of a ticket can be low enough not to exclude too many people, but the council can raise much more money by getting everyone to put a small 'bet' in. Now a REALLY interesting question is could this sort of thing be used for planning permission? The disadvantage is it's a one off extraction of the rent as opposed to a sustainable stream of revenue coming from LVT, but an interesting idea nonetheless? Many details would need to be worked out like how much does the current owner get - maybe 20% over a thorough survey.

Kj said...

MW: sure. But maybe the price has to be bumped up quite high for this to happen. We have an example of extreme waiting lists in Oslo. The council regulates something called "colony gardens", which is large allotments with small cabins within the city limits. Their price is capped at 27K GBP, with an annual rent of a few hundred quid. Waiting lists are up to 20 years for some of the areas. they also charge a small fee to be on the waiting list and throw out people who don´t maintain their gardens. Obviously the waiting list signifies a high difference between market value and actual rents/prices, but it´s been politically difficult to do anything about it.

Mombers: yes, lotteries seem to be a better bet to avoid waiting lists. But then you still need some hard to monitor rules if the idea is to avoid he "scalping"-tendencies for some goods (which may also include beach huts for all I know).

Mark Wadsworth said...

Momb, no, the answer with planning permission is to give it to individuals as of right at a certain age (or when they get married or whatever) instead of giving it to landowners.

Kj, interesting. Twenty years is mad, so they have to start putting up the rents sooner or later, even if this is only by 10% a year or something.

You can make it egalitarian by collecting the full market rent and then distributing the cash received equally to all citizens. That's easy :-)

One question: who gets the £27K?

Kj said...

MW: the previous holder.

Mark Wadsworth said...

Kj, well that's all right then.

You can increase the ground rent each year, and to soften the blow for Poor Widows In Colony Gardens who are cruelly forced to downsize, they could increase the price they get to £30K.

Once the ground rent is high enough (£1,000 a year? £2,000 a year?) then there is no longer a need to set a maximum on the price payable to the previous owner as this will be precisely £zero.

A bit like LVT.

Bayard said...

"you can lose in the long term as people don't trust you in future."

Well, it's news to me that anyone trusts still trusts politicians at all, whether they be local or national. The only thing I trust them to do is look out for themselves and their friends. Sometimes that trust is misplaced, but not often, especially not with the rotten lot in charge at County Hall down here.

Kj said...

MW: reasonable plan. But the market rent for these is probably double that. They did uncap and freehold some of the island ones, and they went up to 2-300K in value
http://radionova.no/moss/fab0b760-a44c-0130-e617-5254007f5914-medium.jpg

Mark Wadsworth said...

Kj, in that case, keep increasing the rents by £1,000 each year until re-sale value falls to a small amount for the value of the wooden hut.

The Stigler said...

MW,

You can make it egalitarian by collecting the full market rent and then distributing the cash received equally to all citizens. That's easy :-)

Exactly.

Picking people at random, rich or poor doesn't necessarily make it more egalitarian. You might just end up handing it to a poor person who is in it for the sub-letting.

Derek said...

You could use my anti-scalping theatre ticket system here.

1. Announce a 365 day application period.
2. Applications received on Day 1 get to lease for a year @ £36,500 per annum
3. Applications received on each day thereafter get to lease for £100 less than the day before.

That way every one gets a lease at the price they want until the supply is exhausted and scalping is uneconomic because of the falling price of a lease.

Bayard said...

Derek, isn't that a kind of Dutch auction?

Derek said...

Similar, yes. However according to Wikipedia a Dutch Auction sells a single item whereas this sells multiple items because it doesn't stop the auction after the first successful bid. So it's not quite the same.

It's also slightly different to the "second item" auction discussed in the Dutch Auction article on Wikipedia since in that type of auction everyone pays the price of the highest bid that doesn't exhaust the supply.

Under my system you are basically bidding for a particular position in the queue.

Kj said...

Interesting idea Derek.