Wednesday, 16 November 2016

Is Home-Owner-Ism reaching the high tide mark?

Spotted by DBC Reed in The Sun, "which regrettably these days is more on the ball than this blog which is too often down with the Beleavers on the beach worshipping the Brexit Cargo Cult.":

Back in the early 1990s, low and middle-income workers needed to save five per cent of their wages for three years, on average, to build up a deposit for a first-time property. Today, they need 24 years of such ­savings. That’s why home ownership has dropped sharply, particularly among youngsters.

As house prices spiral way ahead of wages, driven not only by a growing supply- demand chasm but also ultra-loose monetary policy, more and more youngsters from relatively affluent families are being priced out. The emergence of “generation rent” means the political geometry is shifting.

“If prices keep rising, home ownership will fall further and for the Conservative Party, with its base in home ownership, that’s disastrous,” says Alex Morton, who was Cameron’s housing expert in the Downing Street policy unit, “Tories want a society where if you work hard and do the right thing you can own your own home and get on, and that’s becoming ­increasingly difficult.”

More than half of first-time buyers in 2015 had assistance from “the bank of Mum and Dad”, rising to two-thirds in London and the South East. Such realities lay bare an uncomfort- able truth — the growing gulf between “property haves” and “property have-nots”.

There then follows a load of gibberish saying that high prices are due to lack of supply, it can be explained far more simply than that. Moving on...

Sajid Javid, the Communities Secretary (who grew up above a shop in Rochdale in a two-bedroom flat with his four brothers), has come out fighting. Last month he used his speech at the Conservative conference to accuse the UK’s large house-builders of ­deliberately restricting supply to boost prices, and therefore profits.

The “big developers” have “a stranglehold on ­supply”, said Javid, and are “sitting on land banks”, while “delaying build-out”.

The idea of “land-banking” — with the biggest house-builders remaining on go-slow to up their profit on each unit — used to be dismissed as a conspiracy theory. In recent months, that has changed. A quarter of all new homes in the UK are built by the biggest three providers and more than half are ­provided by the top eight.

There’s increasing evidence, though, that while the ­planning system remains cumbersome, more and more permissions are being given. Yet the homes are not being made. Internal government figures show that in the past three years, while there was a 46,600 rise in building units granted permission, there was a 94,300 rise in such units remaining unbuilt — with the entire increase in planning permission being absorbed by increased “land-banking”...

Fired by such evidence, the Government is set to publish a white paper on housing next month, with fines on building delays being touted and developers possibly being charged council tax on unbuilt units after a certain period. “There will be carrots and sticks,” says Javid.

It's not exactly LVT, but it's a start.


mombers said...

It defies belief that council tax isn't payable until something is built and sold. Why should the police and fire department respond to calls, and should the roads and other infrastructure only be built the day after the sale?

Lola said...

M. I agree. It's bizarre.

Mark Wadsworth said...

M, correct. Council Tax is a feeble kind of LVT but the best we've got on residential land.

Graeme said...

There was a fierce debate on this subject on Tim W's blog a few months ago where I argued the very point being made by Javid, with the same statistics together with direct quotes from the annual reports of various house-building companies which stated clearly what their business plan was, and got ridiculed by various parties for flying in the face of some kind of "economics". I asked them to give another explanation for the suspiciously consistent numbers of new homes coming on the market every year and received even more abuse. I wonder whether Javid will get the same treatment.

Mark Wadsworth said...

G, it is a shame when people refuse to accept hard facts.

The "economics" is easy, the land bankers want max profit for minimum effort, same as everybody else. They do this by establishing a cartel/local monopolies and restricting supply to maximise prices/minimise costs. Why would even the Homeys and Faux Libs find this hard to understand?

DBC Reed said...

@G I have been roughed up regularly on Tim W's blog for pro-LVT arguments, strange because Tim W himself is a committed land taxer, probably as part of his debt to Adam Smith. He only occasionally comes out of his shell to utter standard Land Tax heresy which he does with unmatched eloquence:the right-wing third raters who make up his regulars apparently choose to ignore this as an acceptable eccentricity amidst all his Brexit fantasy and funny ideas about where new money comes from (gooseberry bushes).
BTW although an elaborate bit of syntax, the sentence of mine which you misquote above does by, its use of hyphens, indicate that it is Liam Halligan's blog that is more reliable at the moment: not the Sun FFS . (As well as his Despatches spectacular on the telly ,Halligan has carpet bombed the media with much the same story : Telegraph 7th Nov "Sayid Javid warns homebuilders" ;Spectator 5th Nov "Radical reform is only solution" + The Sun story 4th Nov which he quotes on his own blog. Not much else he can do, apart from make one of his appearances on Keiser , in which case he should be accompanied by Mark W as a minder and to widen out the debate.)
NB There is a Labour commissioned report on housing by Redfern. That seems to have escaped our attention too in all the beach frolics with Brexit.

Bayard said...

"NB There is a Labour commissioned report on housing by Redfern."

In preparation or published? If the latter, is there a link?

Derek said...

Here you go, Bayard.

The Redfern Review

Haven't read it myself yet. One of the housing charities doesn't think it goes far enough but I see one of the mortgage lenders has already stuck the boot in, so it can't be all bad.

Bayard said...

Derek, thanks for that. I am, of course, immediately struck by the fact that Pete Redfern is Chief Executive of Taylor Wimpey, so no bias there then. FFS, couldn't they find someone "neutral" to write the damn thing?

Bayard said...

Oh, and also this quote "The nation faces a housing crisis, at the heart of which is the falling rate of homeownership".

The so called "housing crisis" is nothing but a shortage of cheap houses in expensive places and as such, is akin to the "motoring crisis" which is the shortage of affordable new Rolls-Royces, Lamborghinis and Ferraris. After, that, like Mark, I can't really be bothered to read it.

Mark Wadsworth said...

B: "The so called "housing crisis" is nothing but a shortage of cheap houses in expensive places"

Well no, it's not just London (which is an extreme case), owner-occupation rates are falling dramatically all over the UK, even where houses are apparently cheaper*, Ricardo's Law says they are equally unaffordable everywhere.

It's Boomers f-ing over the next generation wherever you look, or Boomers being bribed into allowing the One Per Cent to f- over the next generation with lovely free money.

* And also where they are extremely expensive compared to wages in particular the south west.

Bayard said...

Yes, but it's not a "housing" crisis, which implies that levels of homelessness are rising to unacceptable levels, but a "home ownership" crisis.

Both you and I know that much of the demand for home-ownership is for the unearned capital gains to be had from being a landowner.

As an aside, I was chatting to a friend just now, whose landlord is becoming horrified because he is discovering that being a landlord isn't just sitting there and having the rent money come rolling in, but that every so often he has to spend some of that money on his property, like shelling out a few grand for a new boiler when the old one dies.

Mark Wadsworth said...

B, I agree there is no physical housing shortage and that it is not a "crisis", which would imply a short term state off affairs that suddenly happened due to events beyond our control. There is plenty of housing and the situation arises as a result of deliberate govt policy over the past few decades.

Nonetheless, you are a tad hash on people who would rather own than rent. It's not just about the lovely windfall paper capital gains. It's about being able to stay as long as you like and decorate how you like etc.

Bayard said...

"It's about being able to stay as long as you like and decorate how you like etc."

All that is would be perfectly possible if you owned a house on the old system of "ground rent", where you owned the bricks and mortar, but rented the land. The problem is that this sort of tenure is no longer on offer, it's either freehold or a six-monthly tenancy, a tenancy which is quite clearly designed for temporary occupation. There's no demand for any other form of tenure because renting is seen as temporary, something you only do until you can buy somewhere and "get on the housing ladder".

We shall just have to see how popular "getting on the housing ladder" remains once interest rates finally start to rise again and hence land prices start to fall.