Tuesday, 13 January 2015

"Why can't the UK build 240,000 houses a year?"

Asks the BBC.

It's the wrong question, actually, but the article debunks most of the standard assumptions. The only one which stands up to closer scrutiny is:

The state no longer builds

Between the late 1940s and late 1950s councils built more homes than the private sector. Right up to the late 1970s local authorities were building 100,000 homes a year. But with the election of Margaret Thatcher in 1979 house building by local authorities fell...

Kate Henderson, of the Town and Country Planning Association, agrees. The current failure to build anything like the numbers from the 1950s and 1960s - when councils were building as many homes as the total house building figure today - shows the private sector is incapable [the rest of the article explains that the private sector is not incapable but unwilling] of delivering on its own, she says.

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The article does not mention the fact that the population of England (53 or 54 million) is less than the total number of bedrooms, which is at least 56 million, according to the English Housing Survey.

"Ah yes," cry the Homeys, "But you overlook that there are so many single-person households nowadays!". By implication, we have an too many large homes and not enough small ones (and too few overall).

No I don't, and it's not even true/relevant.

In very round figures, from the English Housing Survey and here we get the following:

Housing stock
Three or more bedrooms - 14 million
Two bedrooms - 6 million
One bedroom - 2.5 million

Households
Three or more individuals - 9 million
Two adults - 5.5 million
Single adult - 8 million

So broadly speaking, if single-person households all lived in one- or two-bedroom homes (mainly flats), there would be nearly enough three-bedroom homes (mainly houses) for each household with two or more individuals.

So if we all right-sized, just about everybody could have their own bedroom, especially as couples usually share a bedroom. So most households would still have a spare bedroom, which is a nice thing to have.

There might not be enough five-plus bedroom houses for families with three-plus kids, but that's a) their decision, b) this situation only lasts for a few years and c) they can always squeeze an extra bedroom or two out of a loft conversion.
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The question they are really asking is "Why are house prices and rents so high?" because they think that building more homes would get prices and rents down. As we well know, if you simply build more homes in the right places, then overall average prices and rents go up slightly in the medium and long term rather than down.

(Please note - the BBC does not mention the myth that 'high house prices are all down to immigration' so does not debunk it either. The fact that we have let some of the wrong sort of people in to this country is a separate topic. We've also failed to let a lot of the right people in, if you ask me).

And whatever the question is, the answer is, as it is to most economic 'problems', to reduce taxes on output, earnings and profits and collect government revenues from the rental value of land instead.

22 comments:

L fairfax said...

I am not sure if immigration causes high house prices on its own.
However all the BTLs I have met, told me that they it was a good idea because of immigration and so therefore immigration helps the sentiment that prices will go up, even if it has no other effect on house prices.

Lola said...

I'll have to take in some immigrants or gnomes then. Mind you I reckon that every October the local rat population looks at its collective calendars and says 'OK chaps. Winter draws on. Back to Mr Lola's for the next 6 months'. Does hosting dozens of rats in my domain help at all?

Ben Jamin' said...

How can anyone possibly know where or if we need to build any new homes, given the huge distortionary effects of capitalsed land rent on the property market?

That's the only question I'd be asking regarding housing supply.

Mark Wadsworth said...

LF, you mean it's a self-fulfilling prophecy? It's not really true on its own.

L, but are their decent English foxes or them rabid European immigrant foxes?

BJ, correct, I was alluding to that in my last paragraph.

Bayard said...

"As we well know, if you simply build more homes in the right places, then overall average prices and rents go up slightly in the medium and long term rather than down."

I think the BBC were correct to point out, though, that if you build lots of houses in the same place and put them all on the market at once, then supply will outstrip demand and you will either have lots of empty houses (the preferred option for most housebuilders) or reduced prices.

Random said...

Also widespread NIMBYism. The Homies start really young these days (although I agree with him on HS2):
http://www.theguardian.com/politics/2015/jan/12/john-crace-sketch-alex-rukin-young-foe-hs2-committee

Sackerson said...

http://theylaughedatnoah.blogspot.co.uk/2011/09/what-housing-shortage.html

Mark Wadsworth said...

B, from the "home builders" point of view, there are indeed price drops in the very short term, It soon cancels itself out again.

R, sensible people oppose HS2 because it is a waste of taxpayers' money, not because of NIMBYism. Two separate topics.

S, indeed, I am not saying anything new here, it just seemed a good moment to repeat it.

I also note that the Homey fuckwit Sebastain Weetabix commented on your article at the time.

Bayard said...

"R, sensible people oppose HS2 because it is a waste of taxpayers' money, not because of NIMBYism."

Also because it's a scam to make Brummie landowners rich at the public expense.

Lola said...

Re HS2. Broadly, say to a railway developer, here's the land for you for free (although we will tax you on it), now will you finance, build and operate a fast railway between London and Brum without subsidy? No? OK. Let's forget it then.
Or. Oi, you Brum landowners, bearing in mind that building HS2 will lead to a serious uplift in your land values, if you want it built will you therefore finance it? No? OK forget it then.
There, that wasn't hard was it?

L fairfax said...

Mark
A) I think immigration does help sentiment which causes prices to rise.
B) I can think of people who only were able to pay their mortgage because they rented out rooms to immigrants and with the money they got bought a bigger house. Without that money my friend would never have traded up his flat to a house. Of course he thinks (rightly IMHO) that without immigration pushing up the price of housing he wouldn't have needed lodgers!

L fairfax said...

PS Of course I don't think immigration on its own causes a housing shortage - you need NIMBIES + population growth to get a shortage of housing.
As the Spanish have shown if you build enough houses you can have lots of immigrants and cheap housing.

Mark Wadsworth said...

LF, but the point is, we don't have a shortage of housing (not in terms of number of bedrooms).

House prices have been going up all over the world, in immigration countries and in emigration countries.

L fairfax said...

@"House prices have been going up all over the world, in immigration countries and in emigration countries."
Well I think Spain shows that not to be true.
How does the ratio of people to bedrooms compare to 1997?

Bayard said...

"As the Spanish have shown if you build enough houses you can have lots of immigrants and cheap housing."

Do you actually have net migration figures for Spain? Spanish emigration is pretty high, too.

Spanish house prices are cheap because the economy is in dire straits as a result of EU "austerity". There was a huge oversupply of houses before the economy went tits up and prices were as high as ever.

paulc156 said...

The 'oversupply' of homes in Spain pre crash is a clear example of the role cheap credit plays in blowing bubbles. Credit extended by local banks but ultimately funded by flows of Euros from Northern Europe due to the mis-pricing of debt by the markets which assumed no greater risk from speculating on Spain's future [or Greece's for that matter] than on say, Germany's. As soon as that myth got busted the housing bubble was burst. Nothing to do with population growth, immigration. Even now prices should be much lower but banks simply won't write all these debts down and many properties still remain empty and aren't even for sale. The lenders can't afford to realise the full losses.

Lola said...

P156. Indeed. But to be fair to 'markets' they were being given all sorts of duff signals and prices by the various Sovereign Central Banks in the Eurozone (and elsewhere) plus that very same Eurozone was massively reducing the quality and quantity of capital banks had to hold and saying that that capital could include said Sovereign debt.
Talk about a money merry go round...

Ben Jamin' said...

@ MW

re "Homey fuckwit Sebastain Weetabix "

from that blog link, SW says " I think of Fred Goodwin. He's worth millions yet he lives in a relatively modest house in Morningside. Taxing the bastard's income is the only way to collect a fair slice of his cash."

but then,

"And when I hear LVTers moaning that property owners just want to maintain exclusive use of their land and deny it to others, I think 2 things:
1. Amen to that, property rights being a cornerstone of liberty"

Odd how people think earned income is not private property, but natural resources are the "cornerstone" of property rights.

Bayard said...

BJ, in the homeyverse, cash is not property, but land is wealth (and capital). So confiscation of income does not infringe property rights, but any attempt to tax land is an attack on wealth.

Lola said...
This comment has been removed by the author.
Lola said...

B 'Homeyverse'. Love it.
We need a Riddick....or not maybe.

Mark Wadsworth said...

LF: "How does the ratio of people to bedrooms compare to 1997?"

It is not materially different.

BJ and B, sadly yes. Your earnings or your business assets are not really your personal property; only state-granted privileges really count.