Tuesday, 9 January 2018

Economic Myths: Unaffordable Housing

Hardly a day goes by without some journalist or politician mention that housing has become "unaffordable". However, a few moments' thought is all it needs to realise that if a house is unaffordable then it must mean that no-one who would consider buying that house can afford to buy it. Such houses would then be sitting on an estate agent's books, probably empty.

That doesn't match up with what the RICS are saying,:
The Royal Institution of Chartered Surveyors (RICS) said the number of properties sitting on estate agents’ books fell to just 43 per branch in March, the lowest figure since the body started collecting the data in 1978.

Of course, what "unaffordable" really means is "I, a middle class, middle income person can no longer afford to live where I would like to live and where I could afford to live twenty years ago", but that's somewhat more long-winded than a single snappy word.

33 comments:

Mark Wadsworth said...

"I, a middle class, middle income person can no longer afford to live where I would like to live and where I could afford to live twenty years ago"

That is a bit bloody condescending. In many areas, most people wouldn't even be able to afford their own houses if they had to start again.

DBC Reed said...

A case in point is "The Two Income Trap" by Senator Warren and daughter Amelia Warren Tyagi,a book which shows in exhaustive actuarial detail why middle-class parents go broke. Both parents now have to work to pay for houses that were formerly financed out of one income: should one parent get laid off there is no slack and the whole domestic set-up goes bust. The authors specifically blame house price inflation. Senator Warren was pondering a run for the American presidency.

Mark Wadsworth said...

DBC, good one, but in the good days of single earners, what if he or she loses their job?

ontheotherhand said...

People who are trading up a property can recycle their deposit, and presumably are more senior in their career and can borrow more, even to cover the increasing wedge the government takes in stamp duty. To keep the pyramid scheme going therefore, it is all about helping those on the bottom rung to sell to the next generation. Will the youngest buyers ever really be capable of paying off their mortgage in their working life though? I know that there are some restrictions on lenders in this regard like maximum 50% interest only, but that 50% has to be paid off somehow out of taxed income.

DBC Reed said...

@MW
Elizabeth Warren cites her own experience: her father had a heart attack when she was 12; her mother kept the family afloat ,( although they lost the car), by working at Sears; as a girl, Warren waited tables.
From the advertising material for Two-Income Trap: " Today's two-income family earn 75% more than its single-income counterpart of a generation ago ---they (authors) point to the ferocious bidding war for housing and education that has quietly engulfed American suburbs."
It is of course the Thatcherite attempt to get everybody to enter a bidding war for their own housing, children's education etc which has pushed people to the limits and led them to the nihilist recklessness
of Tory Brexit.

Shiney said...

@MW
Agreed about the two income thing. But... people make choices - my wife left work on the birth of our first-born and has only worked part time since (and then only once #2 went to school 10 years later). If sh'd gone back full time we could've bought a bigger place/had more stuff/holidays but we decided to do things differently.

@DBCR
FFS get the blinkers off dude - - Why just @Thatcherite? What about Blairite/Brownite huh? Oh and er, Cameroon-ite (??) and Osbourner-ite (??). The current lot aren't yet '-ites' but are just as 'sh-ite'.

You are obsessed by Mrs T - she left office at the end of 1990 and we have had at least 20 years of 'third way' policies since '97 (Nu-Lab and Blu-Lab) to really f**k things up.

"nihilist recklessness of Tory Brexit" - and you STILL haven't answered my invitation to explain why, as a left winger, you are so in favour of the corporatist-fascist EU. I'm sure @MW would afford you a full post on the blog so we can all comment.

DBC Reed said...

@Shiney
I havelaready answered at some length.
More to the point: why are you using Tony Benn's description of the EU from circa 1975?
Thatcher is key because she volunteered to carry on Keith Joseph's mission to stop helping the lower classes and to build a middle class with capital from housing (by letting land price inflation get out of control).Keith Joseph scuppered his bid to usurp Ted Heath by a leadership-oriented speech at Edgbaston 1974 when he said that demand management as then practised doomed civilisation" Our human stock is threatened".This prompted Tory grandees to terminate his campaign but loyal Thatcher escaped the crackdown.

Shiney said...

@DBCR
"I havelaready answered at some length" - no you haven't. You usually just rail against 'Thatcher' and 'Tory plans'. Give us a list of positive reasons why we should stay in.

"why are you using Tony Benn's description of the EU from circa 1975" - because he was right and its only got worse since then.

See... Thatcher again - ancient history and of no relevance. You are obsessed old boy.

Shiney said...

@MW

Apologies for the thread hijack.

Mark Wadsworth said...

Sh, no worries.

DBC, stop blaming the Blair-Brown house price bubble on Thatcher, please? Yes, she was a shallow opportunist who bought a few votes by flogging off council houses, so what? She was not a hardcore Homey completely in the pockets of the bankers and landowners like all of them from Blair onwards.

Major even allowed house prices to fall to affordable levels (in the real meaning of the term) and let Barings go bankrupt, which largely exonerates Thatcher (on this narrow issue).

Bayard said...

"That is a bit bloody condescending. In many areas, most people wouldn't even be able to afford their own houses if they had to start again."

Why is that condescending? The second part of your comment is agreeing with me, that "unaffordability" is entirely personal, rather than universal, as is inferred.

DBCR, I am surprised at you. As a denizen of this blog, you must be au fait with the dictum that land prices rise to match what people can afford to pay. Thus, if both halves of a couple are working, they have more money to spend and prices will rise to match this increase in buying power. Bad luck to the couple where only one of them works. When it comes to land, there's always a Stakhanovite.

An anecdote of something similar from the construction industry: when power tools became relatively cheap, those chippies who invested in them were able to earn good money, but soon the rates fell to accommodate the extra speed that the power tools gave over hand tools and so, if you wanted to make a living, you had to buy power tools.

Mark Wadsworth said...

B, it's condescending because it's not just "middle class, middle income" people who are being shafted. It's everybody born after 1980 or so, rich or poor.

Bayard said...


"B, it's condescending because it's not just "middle class, middle income" people who are being shafted."

but it is mainly "middle class, middle income" people who are using the word in this way and, if you look, you will see that that is what I was referring to.

Nearly all economic myths are propagated by a small minority, notwithstanding that the effects they refer to affect a much larger number of people.

George Carty said...

"Give us a list of positive reasons why we should stay in."

Not sure it counts as a "positive reason" but as I see it the main reason is to avoid an employer exodus from the UK.

Modern industry is so productive that most multinationals pretty only need three factories in the entire world – one in the Americas, one in Europe and the third in the Far East. Given that, why would any executive in his right mind locate the European factory in a country which is outside the Single Market (especially since we could never undercut Polish or Romanian wages, or Irish or Luxembourgish tax rates)?

Mark Wadsworth said...

GC, that is a valid argument for staying in. But it's validity relies on EU behaving like shits towards UK made goods, and ignores advantage of floating exchange rate GBP to EUR

Ben Jamin' said...

Seeing as its the high value of land that leads to high rents and selling prices, then housing cannot possibly be "unaffordable" in aggregate because it is supplied for free by nature/god.

Building more houses or LVT only changes distribution not aggregated affordability.

DBC Reed said...

MW wrote in 2012 that he was leaving UKIP because he thought Homeownerism was causing "far, far" more damage to the UK than EU membership and that UKIP was becoming a refuge for Tories. These remain my priorities.
If you really can't think how being part of the a gigantic Free Trade
Bloc can be of any advantage , try "What has the European Union ever done for me?" from Independent (on Net).

George Carty said...

"But it's validity relies on EU behaving like shits towards UK made goods"

No, the problem is that many multinationals now source components from across Europe, meaning the time cost of customs checks at the Channel would render a British operation uncompetitive. The only way such checks could be avoided would be if the UK stayed in both the single market and customs union (Norway is in the single market, but it still needs a customs border with Sweden to ensure that Norway cannot become a conduit for tariff-evading third-country imports), and surely if you're going to do that the why not go the whole hog and stay in the EU itself?

"...and ignores advantage of floating exchange rate GBP to EUR"

I voted Remain, but if we ended up leaving the EU on an EEA/EFTA basis I'd be torn on whether or not to support rejoining, for this very reason. (I think the Euro was a mistake, because of the inherent instability of monetary union without fiscal union.)

Mark Wadsworth said...

GC, if the UK were sensible, it would not bother with all this bloody checking at customs and scrap tolls, unless there's good reason to assume people are smuggling weapons, drugs or immigrants - like they do with people getting off ferries or in a private vehicle.

If we erect trade barriers ourselves, then it serves us right if manufacturers leave.

Mark Wadsworth said...

DBC, without looking it up, the actual reasons I left UKIP were Home-Owner-Ism and increasing levels of racism, in roughly equal measure.

On the issue of Leave I was with them all the way.

Bayard said...

"If you really can't think how being part of the a gigantic Free Trade
Bloc can be of any advantage , try "What has the European Union ever done for me?" from Independent (on Net)."

Touting the benefits of being in the EU as if Leavers don't understand/are not aware of them is a bit bloody condescending, to quote MW. Of course we know that the Single Market is a great benefit, it's the other stuff that goes with it, that you Remainers, by and large, keep quiet about that is why we want to leave.

DBC Reed said...

MW's habit of commenting authoritatively on things he boasts of not having read is amusing in small doses, but he is now giving misleading accounts of things he wrote himself.He states quite clearly in his 2012 I have left UKIP piece that this anti EU outfit was concentrating too much on Europe when the significant damage to the UK was being done by Homeownerism. There are no adverse comments about racism at all as such.'
@B My apologies for quoting the Independent piece.It must appear condescending but Shiney demanded a list of the EU's advantages so often so that I thought I would comply as simply as possible.He did give the appearance of not being very familiar with the well-known list.

George Carty said...

"If we erect trade barriers ourselves, then it serves us right if manufacturers leave."

Assuming that the UK had a free trade agreement with the EU without being part of the customs union, then the EU would still erect customs controls at the Channel (and on the Irish border!) to prevent the UK serving as a conduit through which third-country goods could enter the EU without being charged the appropriate external tariff (or through which goods not compliant with EU regulations could enter, if we also left the single market).

Shiney said...

@DBCR
"It must appear condescending but Shiney demanded a list of the EU's advantages so often so that I thought I would comply"

That is not what I said - I asked why left-wingers seem in favour of a corporatist supra-national body. Most of the so called advantages could be passed by a UK govt independently (environmental, employment protections etc etc) and unilateral Free Trade fixes most of the rest. So YOU have not answered my question.

The EU is not a 'Free Trade Bloc' as you put it (or in the same way as the US is a free trade area).... it is a customs union which attempts to keep goods from outside the 'bloc' out by imposing tariffs and other measures.

Internally, most countries still have their own regs and 'customs' with which you have to comply - witness TUV approval on car parts in Germany. And try getting on the tender list with a French Supermarket if you don't have a 'legal presence' in France.

And I love the use of the term 'bloc' when talking about the EU... where have I heard that before?

Shiney said...

@GC

"then the EU would still erect customs controls at the Channel" - which is their problem not ours.

George Carty said...

It would be our problem when UK-based manufacturers flee to the Continent so as not to have to deal with those EU customs controls.

The EU market will always be worth a lot more than the UK market simply due to population size!

Shiney said...

@GC

"The EU market will always be worth a lot more than the UK market simply due to population size!"

Erm..... worth more to whom? I don't know but I'd guess the UK market is worth more to most UK manufacturers (i.e. the smaller ones).

From here https://www.uktradeinfo.com/Statistics/OverseasTradeStatistics/Pages/EU_and_Non-EU_Data.aspx - "The proportion of total exports to the EU was 50 per cent in November 2017. Over the past 18 months, this has ranged from 39 per cent to 52 per cent" so roughly half of goods exports go to EU.

Would a manufacturer who supplies 50/50 home export (i.e. 25% EU) move? I dunno...... some might/some might not.

Mark Wadsworth said...

Sh, ta for responding.

In fairness to GC though, he is looking at it from the point of view of e.g. a Japanese car maker thinking of setting up a new factory somewhere in Europe. There are clear advantages to having it in an EU country because of the EU taking a dim view on imports (as well as clear disadvantages, which remainers always ignore).

George Carty said...

"In fairness to GC though, he is looking at it from the point of view of e.g. a Japanese car maker thinking of setting up a new factory somewhere in Europe. "

Exactly – of course the real problem is that we are too dependent on foreign megacorps to provide us with jobs, because our native industrial base has been eviscerated by over 30 years of Home-Owner-Ism.

DBC Reed said...

@Shiney
I suppose it would be condescending to point out that if the EU is a customs unions that slaps tariffs on outsiders it might be as well to stay in.

Shiney said...

@DBCR

Just noticed your last comment and my only response is - WTF?

DBC Reed said...

@Shiney,
Obviously condescension doesn't work either if you can't understand the bleedin' obvious : putting yourself wrong side of tariff walls not clever.

Mark Wadsworth said...

DBC, so your argument for Remain is "if we leave the EU they'll be really nasty to us"?

That's not an argument.

By the way, I think most people here are aware that the EU imposes relatively high tariffs on some goods and services from some countries.