Saturday, 11 October 2014

A Bit of Crowd Sourcing...

I am about to attend an 'Annual Property Seminar' hosted by a local Surveyor, and representatives from firms of local lawyers and accountants.

Every year we get the usual 'planning is the problem' (the 'only' problem), rents are too low, business rates are too high, we are not building ennough houses etc. etc. arguments.

This year I have decided - if the opportunity arises - that I am going to start an argument...

Now, as we know, although planning is an issue, there are other factors that are driving up house / land prices, so here follows the arguments that I think apply.  Your analysis, disputations, useful links and comments would be appreciated.  As my maiden aunt used to say - 'Fortune favours the well prepared'.

1. We don't have a house supply crisis. We have a tax, rent and subsidy crisis.

i) House completions have been running at about 167,000 per annum for ten years which has roughy kept pace with population growth. (Evidence?)
ii) Immigrants are taking all the social housing. No they aren't  (Data?)
iii) Foreign buyers are pushing up prices.  Yes, but only in London (Answer - Land value tax would sort that).
iv) There are plenty of houses for sale, but subsidies to Buy to Let landlords price out FTB's by:-
   a) Handing them an effective approximately 20% discount by their ability to claim all sorts of costs against tax which private buyers (quite rightly) cannot do.
   b) Lenders using less onerous criteria on lending to BtL than they do for private buyers.
   c) The application of Council Tax rather than Business Rates to BTL property.
   d) £18Bn housing benefit subsidy.
   e)  Anything else?
v) Tax policy destroys take home pay. (Tax reform. LVT?)
vi) The 'distance from place fo work' / Travel cost / Travel Time price issue. That is that all the 'profit' or 'savings' end up in  land prices.  (LVT fixes that).
vii) Help to Buy for FTB's just forces up land prices. (The article I linked to the other day proves that)
viii) Mis-regulation of the mortgage market on an industrial scale.  (I know a lot about that!!).
ix) NIMBYism.  Speaks for itself, and enabled by the....
x)...the 19xx Town and Country Planning Act.
xi) Massive Land Banking by house builders. (Quick references to evidence please)
xii)  Anything else I need to remember?

2) Business rates are not an issue.  They are levied on the wrong people! (All the usual LVT arguments...)

Thanks.

13 comments:

Rich Tee said...

I would only add that it is older people who benefit the most from rising house prices (because they have paid off their mortgages and probably will be trading down if they are selling at all). Older people are also more likely to vote, and due to demograohic changes there are increasing numbers of them. So the politicians keep house prices up to get those votes.

I recently noticed that there is a company called Inland Homes plc whose investment objective is described as "To achieve long term value for its shareholders by maximising the value of the land bank with a number of alternative strategies."

http://tools.morningstar.co.uk/uk/cefreport/default.aspx?SecurityToken=F00000PY4S]2]0]FCGBR$$ALL

Bayard said...

"We don't have a house supply crisis"

We're building enough houses, but, as you say, too many are being bought by BtLers (pronounced "butlers?), so any restriction in housebuilding caused by NIMBYs is irrelevant. I know NIMBYs are horrid, selfish and, usually, hypocritical, but their activities mainly impact on the developers, rather than the housebuying public.
Which leads me on to another point you could make, which is house prices are not affected by supply and demand, but by the price of credit (Spain, Ireland and the housebuilding boom of the 60s and 70s in the UK, all of which saw massive supply together with massive price rises are evidence of this)

Mark Wadsworth said...

Start by pointing out what we did differently from 1940s to 1980s (mortgage restrictions, rent caps, domestic rates, more social housing).

Good list, here's my version.

i) Private house completions have been running at 150,000 - 200,000 per annum the end of WW2, Until the 1970s, they built as much again in social housing. Private house builders shouldn't be whining about 'restrictive planning' because that didn't used to be a problem, did it?

ii) Those 1.7 million homes over the last ten years = enough for 3 or 4 million people, which is total UK population growth, including immigrants.

iii) Foreign buyers are pushing up prices. Yes, but only in central London

iv) Agreed to all of that. From the banks' point of view a BTL is a better credit risk etc.

v) Tax policy destroys take home pay and encourages house price speculation (heavily subsidised, lightly taxed)

vi) The 'distance from place fo work' yes, estate agents in London do calculations on how many £s the rent or price increases for each minute or mile travelled.

vii) Agreed.

viii) Mis-regulation of the mortgage market on an industrial scale. Yes.

ix) NIMBYism. Yes.

x) Not sure of relevance of the 1946 Town and Country Planning Act.

xi) Massive Land Banking by house builders. The best evidence is in their own financial statements! RT has linked to one, see also

http://markwadsworth.blogspot.co.uk/2014/08/oh-no-were-not-land-banking-or-anything.html

http://markwadsworth.blogspot.co.uk/2013/10/land-banking.html

Maybe add to the list…

"One million empty homes and second homes", which sounds a lot even though it's only 3% or 4% of total housing stock.

DBC Reed said...

@L Go for it! You have the full weight of the LVT RPM QEP movement behind you!
Serisly: I have found a useful bit of bullshit-stopping evidence ,suitable for a business audience, in the CBI report accessible via Google as "UK housing shortage is costing consumers £4bn each year- CBI report"
This very recent report was greeted with the response from the usual troublemakers "Crikey the CBI is sounding like Henry George : we must be in real trouble".
You should be able to lob that it into the general complacency.

paulc156 said...

"Private house builders shouldn't be whining about 'restrictive planning' because that didn't used to be a problem, did it?"

Wouldn't they claim that space in sought after areas is now at a premium [especially around London]so they need to build on green belt?

paulc156 said...

"ii) Immigrants are taking all the social housing. No they aren't (Data?)"

Quick check has the Torygraph allocating 1 in 8 of all social housing to immigrants,[1 in 5 in London] but they're not too fussy how they manipulate stats imo. And it seems they claim ONS as a source for their figures but only indirectly since they state the Daily Fail has seen an ONS report. This was all in 2013.

Looking further a much more respectable outfit is the migration observatory at Oxford Univ.
The recent report dated 2nd October 2014:Migrants and Housing in the UK:Experiences and Impacts has some good takeaways on the link.

eg;"The foreign-born population is almost three times as likely to be in the private rental sector (38% were in this sector in 2013), compared to the UK-born (14%)."

"Recent migrants (i.e. those who have been in the UK for five years or less) are more than twice as likely to be renters (80% were in the private rental sector in 2013), compared to other migrants. Those migrants who have been in the UK longer tend to have accommodation similar to that of the UK-born."

...and here's a good one:
"Recent evidence suggests that immigration decreases house prices in England and Wales. This impact is likely to be the result of UK-born residents moving out of the areas with a large migrant concentration."

DBC Reed said...

@L
Another good source of quotes is Jim Claydon of RTP1 who got fed up with planners getting blamed for shortage of land. See The Independent 17th Feb 2007 Headline: Planners accuse homebuilders of hoarding land to keep prices high
He said "All landowners including homebuilders maintain land values
by managing supply.It is not in their interests to release large quantities of land because this deflates its value."
If you need heavyweight Free Trade support for this explanation of profits from undersupplying demand, you've got Adam Smith himself from Book One of The Wealth of Nations "The monopolists ,by keeping the market constantly understocked , by never fully supplying the effective demand, sell their commodities much above the natural price and raise their emoluments, whether they consist in wages or profit ,greatly above their natural rate"

Ben Jamin' said...

http://www.conservativehome.com/thecolumnists/2012/12/andrew-lilico-the-2011-census-data-confirm-once-and-for-all-that-the-notion-of-a-housing-shortage-in.html

Rather than get bogged down with fruitless arguments regarding housing supply, why not just agree that it is the sum total of all State regulation, planning included that give location it's value.

Then ask a few questions.

1) What happens to planning/NIMBYISM if freeholders pay the full market rate for the value they get from this State regulation?

2) What happens to affordability issues if this State created value is not longer privatised.

http://markwadsworth.blogspot.co.uk/2014/01/housing-affordability-lvt-will-sort-it.html

3) What are the causes of urban sprawl, vacancy and under occupation?
If we treat those causes, do we need a Greenbelt, and would we even need to build masses on new homes on it?

Bayard said...

Another point to make: planning regulations keep land prices down, not put them up. If planning regulations were abolished tomorrow, all that would happen is that Farmer Giles would sell his field near the big city for its current value with planning permission, whether it was to Farmer George, who wanted to continue farming it, or Megahomes Plc who wanted to build houses on it. What Megahomes is prepared to pay is the true value. Currently planning restrictions keep that down to a few thousand an acre by restricting its use to agricultural. Similar examples abound: a building that has to be used as a pub or a shop can be bought cheaper than the same one without those restrictions, ditto holiday let, tied cottage etc.

Lola said...

Thank you, gentlemen (and ladies?). I shall do my homework...and if you think of anything else, please add here,

DBC Reed said...

BTW Jim Claydon, who then headed up the Royal Town Planning Institute, has a big list of
figures for hoarded land which he compiled,(as MW suggests now) from published company reports in which developers boasted of the extent and profitable potential of their land banks.These figures are only a bit old and they do give an indication of the magnitude of the problem .It is quite clear that the developers* see their business as land value appreciation ,not building
affordable homes.
*Another word which conceals its real meaning in practice.

Mark Wadsworth said...

DBC, I did the same exercise last year, click this link.

DBC Reed said...

@MW
Glad to be reminded of these figures which are more recent and even more telling than Claydon's.
The quote from Taylor Woodrow is a classic own goal: you couldn't make it up; I couldn't make it up; Jim Claydon couldn't make it up viz "Our landbank is an investment portfolio which is critical to our success and underpins the future performance of our business." Not just bare earth to build on then, making money from putting up houses!