Reader's Letter Of The Week

It was in this week's City AM, but those have already gone to recycling so I can't give credit to the original author.

The gist of it was that there's no point squealing (The Guardian and The Daily Mailexpressgraph making common cause for once) that the UK government has decided to allow a foreign-owned business to print UK passports instead of British business De La Rue.

De La Rue don't just print UK bank notes  and passports. As the self same Guardian points out:

De La Rue also prints money for Qatar, Kuwait, the Bahamas and the Seychelles, among others...

As well as UK passports, the company manufactures identity documents and e-passports for countries as far apart as Trinidad and Tobago, Qatar and Afghanistan. On occasion it also uses its printing presses to make special-edition bank notes. A Star Wars note issued in support of the Together For Short Lives charity raised more than £185,000 in an eBay auction in November.

If all those countries followed the preferences of their own Guardian/Daily Mailexpressgraph protectionist tendencies, then De La Rue would be in real trouble.

Killer Arguments Against LVT, Not (437)

Patrick Hutton left this comment half way down a thread on Peter Thiel balking at the high rents in Silicon Valley:

An important apologerap* is the response to "won't a LVT exacerbate the high rent problem?" I know there'll be face palms of frustration at this question. But it's one we need to be able to answer off the cuff.

* That was a typo, PH explains what he meant in the comments.

I never replied to that comment because I haven't come up with anything pithy yet, despite having mulled it over for the past week.

Agreed, we are pretty certain that in absolute £-s-d terms, rental values will be much higher under an LVT-only system. Any reduction in taxes on output and earnings grows the economy (= higher rents) and rents will increase to soak up the tax saving.

Two counter-arguments why people in the productive sector will be better off are:

1. Instead of average earners in high wage areas paying 40% of their gross income in tax and then 40% of their net income in rent, leaving them with 36% of gross income as disposable, they will be paying 60% of their new, higher gross income in rent/LVT, leaving them with 40% of their higher gross income as disposable.

2. At present, landlords (and banks/depositors) collect rent (and mortgage interest) and spend it on themselves without actually producing anything, meaning a huge net cost to the productive sector. LVT is just the government collecting rent, of course, but most of it (assuming a reasonably efficient and honest government) will be recycled back to 'everybody' and most of 'everybody' are in the productive sector. Collectively, we will all be owner-occupiers.

So even though people in the very high wage areas might be paying 60% rent/LVT instead of 40% taxes on earnings, they'll be getting a lot of that extra 20% back in one way or another.

Neither of which is very pithy or off the cuff, I'm afraid. I'm sure some of you can do far better.

Trump v Amazon: War of the Rentseekers?

An interesting take from axios.com:

Trump’s deep-seated antipathy toward Amazon surfaces when discussing tax policy and antitrust cases. The president would love to clip CEO Jeff Bezos’ wings. But he doesn’t have a plan to make that happen.

Behind the president's thinking: Trump's wealthy friends tell him Amazon is destroying their businesses. His real estate buddies tell him — and he agrees — that Amazon is killing shopping malls and brick-and-mortar retailers.

And hopefully Dubai Intl Airport will decline into insignificance like Gander Intl Airport did.

From Traveller.com:

The first non-stop commercial flight between Australia and the UK has touched down in London. QF9 arrived at 5.02am local time on Sunday morning after a 17-hour long-haul from Perth.

A bit of aviation history:

Construction of the airport began in 1936 and it was opened in 1938, with its first landing on January 11 of that year, by Captain Douglas Fraser flying a Fox Moth of Imperial Airways. Within a few years it had four runways and was the largest airport in the world. Its official name until 1949 was Newfoundland Airport...

Gander is near the great circle route between cities of the U.S. East Coast and London. Starting in the 1940s it was a refueling stop for transatlantic flights to Scotland, Ireland and beyond, and continued in this role through the early 1960s and in some cases into the 1990s...

With the advent of jets with longer range in the 1960s, most flights no longer needed to refuel. Gander has decreased in importance, but it remains the home of Gander Control, one of the two air traffic controls (the other being Shanwick Oceanic Control in western Ireland) which direct the high-level airways of the North Atlantic.

Dubai is the modern equivalent of Gander. Flights have to stop there to refuel and most passengers never leave the airport.

What will happen to the rental value of land in Dubai? It declines - that rental value now accrues to airports at end destinations and their hinterlands as they will be more easily accessible.

Ricketty - Again!

Came across this post from Piketty. As it happens I am interested in Tobin and have signed up to Robin Hood. So I am not against using fiscal means (transaction tax) to try to control the banks. If that is what he means. Rather, it is this concluding paragraph that fills me with despair. He says:

'The political strategy which consists in transforming the wealth tax into a property tax (impôt sur la fortune immobilière), to avoid a complete suppression of the wealth tax, quite frankly leaves me speechless. There is no logical reason to levy a higher tax on a person who invests their fortune in a house or a property rather than in a financial portfolio, a yacht or any other type of good. We can only hope that elected members remember that they were not elected to be part of this kind of farce.'

My god - Mr Ricketty. Logical reason? How about Land and Rents are not merely 'Capital' for starters!

Another car hits house story

From the BBC:

Two members of a family suffered broken bones when a car ploughed into their home as they sat watching television.

Robert Beattie, his wife Mel and 15-year-old daughter Tash were sitting in their living room when the car smashed into the house. The woman and girl are recovering in hospital following Friday's crash.

A 26-year-old man from Worcester has been arrested on suspicion of causing serious injury by dangerous driving and released under investigation.

The road is easy enough to find on Google Maps, the house appears to be the one on the right as you turn in from Battenhall Road. So exactly the location most likely to be hit by a car.

Today I have been mostly...

... turning three old pallets into this. There's plenty more firewood in piles at the back (from a small tree we chopped down) but I can't be bothered schlepping it all over:

"Kerching!" shouted the Scottish Association of Smoke Alarm Installers

From the BBC:

Housing Minister Kevin Stewart said :

"Fires and fatalities from fires are decreasing but even one death is one too many*. Scotland already has rigorous standards for smoke and fire alarms developed over time, with the highest standard currently applied to new-build and private rented housing.

"The tragic events at Grenfell Tower last year emphasised how important building and fire safety is, which is why we brought forward our consultation on this issue. Now everyone will benefit from the same level of protection, whether you own your home, or rent from a social or private landlord."

In practical terms, the law will require private homes to;

* have at least one smoke alarm installed in the room most frequently used
* have at least one smoke alarm in spaces such as hallways and landings
* have at least one heat alarm in every kitchen
* have a carbon monoxide detector

In addition, there will be a 10-year age limit for alarms and all alarms will have to be ceiling-mounted, and should be interlinked.

* While an individual death is a tragedy and burning to death or dying of smoke inhalation is a pretty horrid way to go, there has to be some commonsense here. Last year, 36 people died in fires in their homes in Scotland.

Guesswork: Maybe all the extra alarms will halve the number of deaths, call it 18 lives saved a year. Multiply two million owner-occupied dwellings by £100 for installation = £200 million and amortise over ten years = £20 million a year. Average cost per life saved, over £1 million.

I once read that the UK government has its own arbitrary figure for the value of one life saved, and it was a lot less than £1 million, in other words, if some safety measure saves one life a year and costs £1 million, they wouldn't make it mandatory.

"Peter Thiel gripes about San Francisco rents"

The man is brutal, but brutally honest:

Outspoken venture capitalist Peter Thiel has trouble finding many people who agree with him in the Bay Area these days, but at a speech Thursday at the Economic Club of New York, Thiel may finally have found common ground with the average San Franciscan by railing against skyrocketing rents.

When asked about the future of the tech industry, Thiel speculated that the lure of Silicon Valley may no longer be enough to overcome the pain of punishing housing costs.

“At what point is this a feature and what point is this a bug?” asked Thiel, admitting that “it’s a feature if [...] everyone has to be where everyone is, where all the ideas are, where the capital is” and thus creating an enormous network.

Thiel also asked, “At some point does it just get so expensive that it doesn’t quite work, that you have to very quickly make money just to pay the rents?”

The venture capitalist complained that most of the money he invests in new companies these days goes not into product development but instead “to landlords, to commercial real estate.” He even referred to Silicon Valley landlords as “urban slumlords.”

Correct, that's called "agglomeration effects" which is what drives rental values.

His options are:

1. Relocate somewhere cheaper. Rents will be lower in the middle of nowhere, but he will find it more difficult to do business there. Over time, the economy and population in his chosen middle of nowhere should grow and mature, making it easier to do business but the rents will go up to match. So that doesn't solve his problem.

2. If you can't beat 'em, join 'em. If he first buys up the land on which to build Peter Thiel City, he wins on both sides of the equation.

3. Fight the system and campaign to shift taxes from output, employment and profits (and in his case, capital gains) onto land values.
--------------------
In reply to Lola's comment/question, see here Peter Thiel on Henry George, I think he has mentioned Henry George favourably on a few occasions, but usually as an aside or when prompted.

Lex Luthor bought the houses on the other side of the road...

... but he couldn't get sign off for nuclear weapons from Health and Safety, so engineered a few high tides instead.

"Brexit boost for consumers short-lived says IFS"

From the BBC:

Consumers could see prices fall by up to 1.2% if Britain were to abolish all tariffs once it has left the European Union, a report says.

But the study by the Institute for Fiscal Studies warns that any gains would be small and were based on "optimistic" assumptions. It also said that consumers had already seen prices rise by 2% since the referendum due to the weaker pound.

Costs linked to new EU trade barriers could also hit consumers, it said.
Those increased costs would "offset" any "rather limited" gains from becoming tariff free in the future, the report from the think tank says.

Agreed. EU tariffs (in £ or % terms) are not particularly high, ergo benefit from removing them not that great either. But that's only one aspect and not the only benefit in leaving the Customs Union.

What is relevant is that

1. The IFS has grudgingly admitted that there might be some benefits.

2. The IFS also now accepts that fall in GBP only led to a 2% increase in prices (it's probably less than that if truth be told). Observation tells us that a 10% change in GBP only leads to a 1% change in domestic prices so all the Brexit could result in high inflation and low growth, warns Mark Carney headlines were just Project Fear.

3. If removing tariffs only leads to a small fall in consumer prices, then why all the horror stories about the UK being forced to impose WTO tariffs and the impact on prices? There's no such thing as WTO tariffs - the WTO stipulates only maximum tariffs, so the UK could trade under WTO rules with zero tariffs - as the IFS now also admits. Even if the UK imposed higher tariffs, the upwards impact on prices would be just as small as the estimated downward impact of being free of EU import tariffs.

4. And so on.

"Totally wild! Bears return to woods 1,000 years on"

This is going to go horribly wrong. From yesterday's Metro:

‘We are literally making history,’ said Nigel Simpson, from the project. ‘We will transport people back in time to when the woodland was inhabited by bears and take people through time showing the effects of woodland loss on our native animals. Bear Wood is about conservation of woodland.’

Five European grey wolves, already at Wild Place Project conservation park in south Gloucestershire, will be moved to the woodland near Cribbs Causeway. It covers seven-and-a-half acres and the wolves will share the fenced-off space with European brown bears.

Bristol Zoological Society, which runs the project, has already received donations from benefactors and sponsors. Christoph Schwitzer, director of conservation at the society, said: ‘We are hoping that people will be really excited and want to support us. For the first time in generations people will be able to see brown bears in their natural habitat.’

1. Seven and a half acres? The average bear or wolf on its own needs a much larger territory than that, cramming them in any tighter means they will have to be fed i.e. domesticated. So it's a glorified zoo rather than natural habitat.

2. Bears are large, strong and resourceful animals (and wolves are no slouches). A fence strong enough to hold in bears is going to be pretty much like a wall, unless they electrify it - and an electric current strong enough to dissuade a bear from having a go is going to be pretty lethal to anything else that touches it (including wolves). Which sorts out the feeding problem, I suppose. The bears and wolves can just traipse along the fence and scavenge what's there. And people can stand on platforms watching them.

3. Heck knows what Health & Safety will have to say, or what their insurance premiums will be. Once one bear has escaped (and sooner or later, it will), that will be pretty much game over.

"Don't worry about insecure tenancies...

... because there's no job security either."

From City AM:

All this has led to a quantum shift in the attitude of young occupiers; faced with the prospect of funding large deposits and huge mortgages at interest rates likely to rise from their current historically low levels, they are resigned to renting for much longer than their predecessors. But are these shallower property roots part of a wider transition?

As an employer, I see a trend among our brightest young talent that, while they are willing and able to put their all into their profession from week to week, it is still their career for the time being and not necessarily what they want to do for the rest of their lives.

Similarly, to “make partner” or become a director of the company can no longer be the assumed ambition, and employers have to be ready to give short-term reward rather than rely on the long-term prospect of promotion for loyalty.

Renting for a year or less fits with the shorter-term and wider view taken by my children’s generation of their working lives, and the political and economic uncertainty in the years ahead means there’s no reason why we should see a reversal of this trend any time soon.

US taxpayer funded health spending vs NHS

I stumbled across this somewhere or other recently, and it is quite chucklesome.

US taxpayer funded healthcare spending per capita $5,078 (about £3,600).

UK taxpayer funded spending (i.e. NHS), about £2,000 per capita.

Talk about shit value for money!

Round the M25 on a Sunday afternoon.

Two years after having bought myself my 50th birthday present(s), I finally got round to doing the M25 (clockwise) this afternoon to see what it's like.

It was very pleasant all in, ignoring a few arsehole BMW drivers who were weaving through traffic in a thoroughly dangerous fashion, two of them clearly racing.

There was a 60/50/40 mph variable limit out west somewhere, so I hooked in behind a Rover driver who'd set their speed limiter and coasted along behind them for ten or fifteen minutes, with somebody in a white Japanese MPV doing the same behind me (thanks both!), after that, we went our separate ways again. The poor buggers going anti-clockwise were stuck in a jam.

Sub two-hour time no problem.

Faux Libertarianism in a nut shell

The core false assumption underpinning Faux Libertarianism is the assumption that 'land ownership' and 'governments' are two completely separate and unrelated concepts, or even that 'land ownership' is an older concept that pre-existed 'governments'.

It is quite clear to anybody with a vague grasp of history that land ownership in any meaningful sense is impossible outside:
(1) an organised society,
(2) which is at peace within its own borders (has a dispute resolution system with popular support or at least grudging acceptance that it enforces), and
(3) which is at peace with neighbouring societies/states (whether by mutual agreement or because it is capable of defending its external borders).

Historically, the whole point of 'governments' was to enable 'land ownership', alternatively 'government' was something that people invented once they realised that food cultivation was better than hunting and collecting/nomadic lifestyles i.e. that staying in one place and 'land ownership' were something worth protecting. Either way, the two things are synonymous and symbiotic.

Take away any of (1) to (3) and land ownership is impossible. The starting position is of course that the land is just there, and was there long before humankind evolved. Nobody 'owned' it. Land ownership only happened once items (1) to (3) were in place, and where we are right now, we would call something that exhibits all three characteristics a 'government'.

The Faux Libs will come up with all sorts of supposed counter examples which superficially might not fit the pattern, but they refuse to address the underlying prerequisites.

One Faux Lib tactic is to sub-divide each of (1) to (3) into ever smaller slices, pointing out (for example) that you can't compare governments in modern developed countries with a few thousand Vikings settling on Iceland. You have to judge them by the standards of the time.

Here endeth.

One has no need for slug pellets...

For a while now I've considered Price Charles the ultimate homeownerist.  Not content with vigorously opposing anyone building anything in London tall enough to peer into one of his many back gardens, or simply objecting to tall buildings in general, he actually heads a homeownerist front organisation with the raison d'être of reverting other people's farms back into worthless medieval swamps.  

So this morning over coffee I read the serialisation of Tom Bower's hatchet job in the Mail Online.  I don't know if they are true.  But if they are, I think these two quote sum up the wasteful, economic madness of homeownerism nicely:

"With a personal income of millions from the Duchy of Cornwall (£16.3 million in 2007 alone) he could afford to indulge his slightest whim — yet even that didn’t satisfy him."

"He was also unusually particular about his gardens at Highgrove. Because he refused to use pesticides, he employed four gardeners who would lie, nose-down, on a trailer pulled by a slow-moving Land Rover to pluck out weeds.  In addition, retired Indian servicemen were deployed to prowl through the undergrowth at night with torches and handpick slugs from the leaves of plants."

How can we rid ourselves of these people?

Spring (well, in rural Suffolk anyway)

"The Three Stooges Outside Ebbing, Missouri"

From Wiki and Wiki:

In the town of Ebbing, Missouri, Mildred Hayes is grieving the rape and murder of her teenage daughter, Angela, seven months earlier.

Angry over the lack of progress in the investigation, Mildred hires three slapstick comedians, called: "MOE", "HOWARD", and "LARRY". The veteran comics upset the townspeople, including Chief Bill Willoughby and Officer Jason Dixon, the latter being a racist and a violent alcoholic with no sense of humour.

The open secret that Willoughby suffers from terminal pancreatic cancer adds to everyone's disapproval. Moe, Howard and Larry are harassed and threatened, but to her son's chagrin, she stays firm about keeping the physical farce going.

I'd ask the sign writer to try again

Two spelling mistakes, one punctuation mistake, and three style inconsistencies. Either capitalise the second word or don't; either write "and" or "&" and either use plural or singular (they sell "soft drink"?) - don't mix and match:

"How to Talk to a Climate Skeptic: Responses to the most common skeptical arguments on global warming"

I have stumbled across the Warmenists' equivalent of the the KLN blog.

I read a few just for fun, and the rebuttals of the rebuttals appear as unconvincing and self-referential as ever. I haven't found the catch all diatribe thrown at me on Facebook a couple of days ago, but it's probably in there somewhere for the Warmenists to cut and paste:

I recommend that you give up basing your opinions on this topic from a perusal of propaganda website funded by fossil fuels interests, which assumes the physical chemistry of the global carbon cycle is a hoax and then engages in complex subterfuge to keep scientifically illiterate suckers conned and supportive of the carbon profits agenda, and pick up a climate physics textbook or take a physics MOOC instead.

Repeating those memes like those of the Wattsupwiththat black propaganda site generates embarassment in the eyes of your friends, and harms their perception of your capacity for astute judgement."

That saves them the bother of addressing my actual point, I suppose.

"Help to Buy 'timebomb' as five-year anniversary looms"

Emailed in by Lola a week ago, from FT Adviser:

Thousands of those who used the government's Help to Buy mortgage scheme could be hit with expensive fees on their loans, as they come to the end of their five-year interest free period in the next few months.

The equity loan scheme, which is just about to reach its five-year anniversary, allowed buyers to make use of a five-year interest-free loan from the government of up to 20 per cent of the value of a property [or 40 per cent in London] so that they could get on the housing ladder.

Now as these loans mature, customers will need to start paying rising fees on these equity loans or come up with another plan. After five years is up, borrowers must pay a fee of 1.75 per cent of the value of their loan, increasing each year by RPI plus 1 per cent, unless they can pay the loan off, usually by remortgaging.

Just for clarity, they refer to interest as "fees" for some reason. So the interest starts off at 1.75%, very low even by today's standard. If inflation next year is 3%, then next year's interest is 1.75 x 1.03 = 1.8% and so on. Even if inflation is 3% for twenty years in a row, the interest rate will only tick up to 3.2%. Given the internal logic of Help To Sell, that actually sort of makes sense. Also, it's not "Thousands of" it's "All the" but never mind.

And how bad will the "time bomb" be? Give us the gory details!

Think tank the Resolution Foundation said the loans were “a ticking time bomb”.

The group calculated those who used Help to Buy back in 2013 will pay an average of £652 this year on their loan if they live outside London or £927 if they live in the capital.

That's not going to kill anybody, is it? And what's the alternative for our hard-pressed home buyers?

... there are some signs of movement, with Ipswich Building Society introducing a new ex-Help to Buy remortgage offering late last month.

The society said that all of its products will be available to Help to Buy applicants, at up to 95 per cent LTV, and its standard mortgage assessment and affordability calculation, through its manual underwriting process, will apply.

“We are pleased that we can help borrowers moving away from a Help to Buy mortgage and through our expert manual underwriting we’ll continue to specialise in real mortgages for real people, who have unusual or complex occupations and find themselves categorised as ‘mortgage misfits’, otherwise ignored by other high-street lenders,” Richard Norrington, CEO, Ipswich Building Society, said.

I know that this was the government's plan all along, pump up house prices and then panic people into remortgaging, which is all gravy for banks and building societies (as long as house prices keep ticking up) but which bank or building society would be daft enough to offer 95% mortgages for 1.75% or less?

If and when house prices fall a bit, the government will no doubt introduce "Help To Remortgage Your Help To Buy Loan" and so on and so forth.

Royal Mail's Guaranteed Next Day Taking The Piss Service

Yet again, I have fallen victim to this scam, which will no doubt befall thousands of other people today.

It was a low value item (rear Mazda badge for a fiver) which I need sharpish, and as I have to take today off work anyway, I paid the £7.45 for "Guaranteed next day delivery" i.e. today.

It is a small parcel, so it would have fitted through the letter box, and just in case it doesn't, there's a big sign at the side of our front porch that is not visible from the pavement saying "Please leave parcels here", which other delivery services take literally.

Not the fucking Royal Mail, oh no, they wait until your back is turned for two seconds, sprint up to the front door and instead of knocking or ringing, shove a card through saying "Sorry we missed you, hope you don't mind taking another hour off tomorrow morning to drive to the sorting office and pick it up yourself!"

Apparently they wanted me to sign for it. So this is the Trade Misdescription from Hell. I didn't pay extra to be messed about like this, I paid extra for "next day delivery", which in the ordinary meaning of the words means, er, today.

If you compare the Royal Mail's shitty behaviour with the competing private delivery companies who apply common sense, you can only assume this arrogance is a hangover from the days when there was a state monopoly on parcel delivery and they could pretty much do what they wanted.

They did this to our neighbours recently. Even more bizarrely, their postcard said that the parcel was at house number 99. There is no house number 99 on our road.

Daily Mail on top form

Everything you need to know right there in the headline.

Putin enemy living in John Terry's old £5million mansion 'was poisoned just weeks before Russian double agent Sergei Skripal and his daughter were attacked'

How to double the life of your windscreen wipers.

I like a clean windscreen, so my wipers wear out very quickly, after a year or a few thousand miles.

I accept that a new pair of wipers costs less than £20, and apparently Halfords do replacement rubber strips for £9, but it's still a waste of raw materials and you have the faff of going to the shop and then fitting them.

It finally dawned on me that it is the outside end of the passenger side wiper that wears out first... and why.

It is pretty obvious once you think about it. The outside end of a wiper travels a lot further than the inside end and the passenger side wiper travels nearly twice as far as the driver's side wiper, image from here:


Solution: once they start to fade a bit, remove the rubber strips from each wiper and swap them over so that the outside passenger wiper end is now the inside driver wiper end and vice versa. If your wipers are different lengths, then just turn them 'inside out' on each side.

I tried it this weekend and it works a treat. How come nobody tells me these things?

Town planning - why long, narrow residential plots make sense.

When you are in a back garden and look around, the proportions seem 'about right', but what is  striking when you look at maps is how narrow and long most residential plots of land actually are.

The terraced house we lived in in London Zone 3 was on a plot about 6 yards wide x 30 yards deep. We're now out in the wilds of Zone 5 and our house is on a plot 9 yards x 40-45 yards deep (not really sure). The semi in which I grew up (fairly nice commuter suburb of Leeds) was somewhere in between. This is a ratio of about 5:1 depth to width, which I think is actually about normal for urban and suburban areas (terraced and semi-detached houses).

(Interestingly, our new house would sell for a bit more than the previous one, but if we adjust for the extra cost of the larger building, the net land value is about the same. So land values per square yard are about half as much for being twice as far from 'the centre' = Von Thünen's Law of Rent).

Using the brute force of Excel, and assuming
- an average residential plot is one-tenth of an acre,
- a residential road is about 8 yards wide,
we can work out the total amount of land you need to build X houses in a 'row' (with roads along the front and down the side of each end house), with a net plot size per home of Y (X and Y are your variables).

The spreadsheet works out the optimum width/depth of the plot to minimise the total average amount of land used (plots plus roads) per house, which is *the optimum* for the purposes of this post.

Utility connections usually run along the front, the narrower the plot, intuitively, the cheaper it is to service all those houses with water, electricity, gas, broadband/telephone etc, although I didn't adjust for that as requires too many assumptions. This means that the economically optimal answer is probably slightly narrower plots widths than the spreadsheet says.

A few things stand out (when you are changing X number of homes in a row and Y net plot size per home):

1. The more homes you have in one row, the less land you need overall. This should be pretty obvious - however many houses there are in a row, the amount of side road is fixed purely by the depth of the plots.

2. If you increase plot size, most of the increase is in depth not width. Again, fairly obvious. If you start with square plots, adding one unit of depth at the back increases the total length of side roads by two units. If you add one unit of width, that increases the total length of the front road by one units x number of homes in a row.

3. The more homes you have in one row, the narrower the optimum plot width (and the deeper the plots). So if you want to build homes in rows of ten, the optimum plot width is 10 yards (48 yards deep). If you want to build homes in rows of 20, the optimum is 7 yards wide (and 69 deep). This is because an extra house in the block means more front road but does not add to the amount of side road.

NB: I assume that most people don't value back gardens beyond a certain size. The first 50 square yards are essential, just enough for the bare essentials of a patio, a washing line and a sand pit/paddling pool for the kids. Get past 200 square yards or so and it's wasted and more bother than it's worth. Also, the further the land is from the house the less it is 'worth' to the occupants. I didn't adjust for that as it involves too many assumption - clearly a back garden 6 yards wide and 60 yards long is just daft. So I suppose there is a natural cap on the depth and/or the depth:width ratio, which appears to be about 5:1.

4. The optimum width is narrower in 'urban' areas (more homes in a row, smaller plots) and wider in 'suburban' areas (fewer homes in a row, larger plots), and with sensible inputs, plots are 5 yards wide for the former and 10 yards wide for the latter. This sort of makes sense. 5 yards is wide enough for a narrow terraced house and 10 yards is wide enough for a semi-detached house with a drive/car porch at the side. In either case, the depth: width ratio is about 5:1.

Which all leads to lots of other interesting musings, such as having council set maximum or minimum densities or plot sizes is pretty futile, these things will happen of their own accord if developers want to maximise profits/minimise amount of land used. Or that land valuations could be carried out by simply measuring frontage and assuming that most plots are the optimum depth anyway.

Good article on UBI

In City AM, a couple of days ago.

My comment:

Excellent summary

Couple of minor niggles - for a start, no serious worked through calculation ever said £10,000 a year, a better starting figure is £4,000 or so, which could be 'funded' by abolishing most working age, non-disability and non-housing related welfare and the tax-free personal allowance. That would not require tax increases and surprisingly few people would see a noticeable difference in their weekly income (after paying tax and receiving UBI). But it has all the merits of simplicity and getting the government off people's backs.

And mathematically, you are wrong about negative income tax, it is in fact the same as UBI.

Sensible suggestions v government blah blah waffle

From the BBC:

Brexit should not overshadow plans to boost growth, a business lobby group conference will be told on Thursday. The biggest challenges facing businesses in the UK are to do with "fundamentals" rather than Brexit, the British Chambers of Commerce says.

"Government can do more than one thing at once," Adam Marshall, the director general of the British Chambers of Commerce (BCC) told BBC 5 live's Wake Up To Money...

Go on, and what sort of stuff does he say that businesses would like to see?

"The best possible Brexit deal will not matter to the UK's competitiveness if the roads remain potholed and congested, if you can't get mobile phone coverage around the UK, if business broadband is poor and companies can't get the people they need because the training system isn't working to deliver for them."

The BCC will call on the government to fund repairs on local roads, improve the capacity of railways and airports, build more houses, get rid of of mobile phone "not-spots", make the apprenticeship system stable and come up with a clear and easy-to-use immigration system.

Those all seem like eminently fair and sensible things that will benefit everybody, not just 'businesses'. And you can quantify them all to some extent, achieved/not achieved.

How does the government respond?

A Department for Business, Energy and Industry Strategy spokesperson said: "The government's commitment to boosting the productivity and earning power of people and places across the UK remains steadfast. Through our industrial strategy, we are building a Britain fit for the future, with a plan to help businesses create better, higher-paying jobs in every part of the UK."

It said its £1.7bn Transforming Cities Fund will "address weaknesses in city transport systems while improving connectivity, reducing congestion and introducing new mobility services and technology". The spokesperson added that the government had committed to raising research and development investment to 2.4% of GDP by 2027 "ensuring our world-class research and innovation base continues to thrive".

WTF does any of that mean? How will we be able to judge afterwards whether the government achieved these things or not?

Brexit is the property sector’s chance to spur real investment ask for some tax breaks

The 'chief executive of First Property Group' in yesterday's City AM presents the usual Homey shopping list:

If I were chancellor, I would aim to make Britain a more attractive place to invest than the EU. That must be basic common sense. So here are some ideas for Philip Hammond.

First, roll back the punitive levels of stamp duty ratcheted up by successive chancellors, particularly George Osborne. Stamp duty means fewer transactions and higher property prices. What we need is a vibrant housing market with smooth transactions.

This applies equally to commercial property. Stamp duty of five per cent is vast considering the yield available on commercial property. In central London, yields are as low as three per cent per annum, requiring a hold period of nearly two years just to recover the cost of stamp duty.

Second, lower business rates across the board to lessen occupational costs for businesses. Business rates have been far too high for too long. In particular, we need to eliminate business rates on vacant buildings – it is wrong to tax a landlord on a building which yields no income.

Third, reverse the chancellor’s short-sighted decision to abolish capital gains tax relief for foreign investors. Our market relies on foreign investment, so why attack the geese that bring their golden eggs to Britain?

Fourth, once out of the EU, abolish the requirement to adhere to Solvency II. Under Solvency II, insurance companies do not need a capital buffer for investing in Greek government bonds, for example, but must hold one of at least 25 per cent when investing in property. This is misconceived regulation, and we would be better off without it.

Our banks must be enabled to lend without the hindrance of punitive regulations. In Poland, you can raise cheaper debt on better terms for commercial property investments when compared to the UK. That makes no sense given the comparative sizes of our respective economies and markets.

Another one of the those "Key to a long life is..." stories

From The Daily Mail:

* Matilda Curcia credits reaching her 100th birthday to her habit of having a beer and three potato chips every night
* She and friend Mickey celebrated their 100th birthdays together on Saturday
* The neighbors and best friends s are active walkers and ride bikes sometimes
* They have lived four doors from each other for nearly 50 years

Yet again, the key appears to be doing on particular thing every day, it is unimportant what that thing is (any kind of food or any kind of activity), as long as you do it every day.

California's Love of Cars Is Fueling Its Housing Crisis - allegedly.

Emailed in by Mombers from Bloomberg:

In Los Angeles, it’s perfectly legal to build a new apartment without a refrigerator, a balcony, or air conditioning. But you can’t build one without plenty of parking. In most cases, in fact, you have to build at least two spaces per unit -- and no fudging with tandem or compact spaces. That makes housing much more expensive. Removing parking requirements would be one of the simplest ways to ease California’s housing crisis...

Shoup gives the real-life example of a standard-size L.A. parcel whose zoning allows eight apartments, with required parking of 2.25 spaces each, or 18 total. The lot is only big enough to accommodate 16 spaces on one level of underground parking. Going from seven to eight apartments thus means digging down another level, which is prohibitively expensive. So the builder settles for seven units. The parking requirement costs one more family a home...

Scott Wiener, a San Francisco Democrat, has introduced a bill whose provisions include exempting new residential buildings from parking requirements if they’re within half mile of a major transit station or a quarter mile from a frequent bus stop. The bill would certainly ease California’s housing shortage. But, especially in the era of ride-sharing, there’s no need to tie parking deregulation to transit -- or to wait for the state government to act.

Mombers adds: Question is whether this has any impact on rents – someone without a car will ceteris paribus pay more than someone with one – public transport and/or Uber much cheaper, leaving more income for the landlord/ bank to tuck into. And of course Manhattan has much fewer parking spaces per dwelling and much higher rents...

Ho hum.

1. As we know, construction costs add nothing to the selling price of homes (for a given 'quality') -  that is limited by what people can afford. Higher construction costs just depress residual land values.

2. As we know, any sort of planning regulation (like making each unit have two parking spaces - or indeed not allowing a new block of flats to have parking spaces to encourage people to use public transport) must depress the value of the land. The developer works out what is 'best' by looking at what's sold for how much in the surrounding area and works backwards from that. If the regulations stipulate something different, then the value must be depressed, by definition. You wouldn't need regulations to encourage developers to make the best use of a site.

For example, It might be the case that people like having one parking space but aren't bothered about the second, in which case the second parking space adds nothing to the value or the selling price. Or it might be that they do value the second space, in which the developer would provide it anyway (unless the planning rules limited the number of spaces per unit etc).

3. Using more land for parking reduces the amount available for housing. By and large, denser populations lead to higher prices and hence disproportionately higher land values - see Mombers' Manhattan example. San Francisco has the highest prices and land values in California because it has the highest densities, being squeezed into a small geographically restricted area (like Manhattan). Assuming always that there's more public transport to take up the strain.

4. There is no housing shortage in California and prices are not particularly high, it's only expensive on the coast because continental USA has so little coastline, and even less nice coastline that the coastal premium is gigantic. By definition, there will never be 'enough' homes in the best areas (i.e. near the coast) if you define 'enough' as 'one for every household which would like one'.

So I am not convinced.

Indian Bicycle Marketing

Those who stand above the fray know that in many respects, Labour and the Tories nick policies off each other and sometimes it's difficult to remember who proposed it first.

Let's take the proposal to give land bankers a kick up the pants by some combination of imposing a tax on undeveloped sites, cancelling unused planning permissions, compulsory purchase orders on land with unused planning permission etc.

@traderpaulfx on Twitter found a superb example of Indian Bicycle Marketing - compare and contrast these two Daily Mail articles.

27 April 2015:

* Red Ed [Labour Leader Ed Miliband] wants councils to encourage building by hiking tax on unused land
* Sites still left idle could be compulsorily purchased by another developer
* Property analysts say it would take UK back to 'dark days of the Seventies'
* Tory candidate said it's 'sort of policy you might expect from Soviet Russia'

5 March 2018:

* [Tory leader] Theresa May has launched a major push to restore the dream of home ownership
* The PM wants to encourage new houses and more storeys on existing buildings
* Threatened crackdown on developers who 'bank' land and wait for value to rise

Admittedly, today's Tory proposals are a little vaguer than Labour's, but the actual details aren't be that much different.

Rural basic income ‘maximizes impact’ for society

Article by a YPP member on the BIEN website.

... From this we can see that, not only is a rural basic income an affordable way to conveniently pay benefits to those who choose to move to the countryside, but it will also indirectly increase wages, employment and job satisfaction in the city along with lowering rents. A rural basic income could thus affordably improve the lives of everyone.

I debated this with him. I'm not entirely convinced but it's a worthy thought experiment. Would it push up rents in the countryside or pull them down in urban areas? Not sure.

David Willetts stumbling vaguely in the right direction

From The Independent:

Baby boomers must pay to fund the spiralling costs of health and social care or risk inflicting crippling tax hikes on their children and grandchildren, Lord Willetts will warn in a major speech on Monday.

“The time has come when we boomers are going to have to reach into our own pockets,” the Tory peer and chair of the Resolution Foundation will say, "The alternative could be an extra 15p on the basic rate of tax, paid largely by our kids. “Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren? This is the moment when the chickens come home to roost for all of us, but the baby boomers in particular..."

To tackle the problem, Lord Willetts will propose “long overdue” reform of council tax and inheritance tax, both of which are effectively levies on wealth. A 1 per cent tax on property values over £100,000 would bring in £9bn and a lower rate of inheritance tax on a larger number of estates would be fairer for all, Lord Willetts will say.

That would begin to tap the £2.3 trillion transfer of largely unearned property wealth estimated to have been accrued by baby boomers during their lifetimes.

I'm not sure how you work out that a 1% tax on the value of homes in excess of £100,000 would raise £9bn. The total value of UK housing is, ballpark £7 trillion, knock off £2.8 trillion for bricks and mortar (28 million x £100,000) = £4.2 trillion; £4.2 trillion x 1% = £42 billion. Enough to replace Council tax and Inheritance tax with £10 billion-odd left over.

Mucking about with Inheritance Tax is not worth the bother. As far as I can see, they only have IHT a) as a fig leaf to show some vague commitment to wealth redistribution and b) to generate work for lawyers, accountants, trustees and bank managers. The total income generated by all these avoidance schemes is probably not much less than the IHT actually collected. Scrap it and collect a bit more land value tax instead.

Well that didn't last long.

When Trump said that the USA would introduce tariffs on steel and aluminium*, applying the usual protectionist-mercantilist-socialist-populist logic, right thinking people everywhere were up in arms.

* Given the tortuous nature of US lawmaking, it is as yet unknown whether it will actually happen and when. Interestingly, it appears that the idea is not too popular with the majority Republican congressmen and -women, but has widespread support among the minority Democrats, go figure.

Give it a couple of days and how does Juncker, claiming to speak on behalf of the EU (again, whether he has the authority to impose this or not is another question), respond?

By threatening that 'the EU' would engage in tit-for-tat protectionist-etc nonsense, at which, Trump merely upped the ante.

Free trade my left foot, remind me, how would the UK benefit by remaining an EU Member State and being dragged into all this? What happened to that much vaunted EU-US free trade deal that we were going to miss out on if we left?

AFAIC, the USA's loss is every other net steel-importing countries' gain, such as, for example, the UK. All things being equal, world steel prices will fall slightly as will world prices for "Levi's jeans**, bourbon and Harley-Davidsons". That looks likes a win-win for any country that is neither the USA, a member state of the EU nor a net steel exporter.

** My Levi's denim jacket was made in Vietnam IIRC (I can't check because I cut off the label).

In a Universe Far, Far Away

The problems for MP, Jabber the Watson continue to mount as he desperately hangs onto his Labour, Deputy Leader role. Photos have now emerged that show that Watson had in fact met the then young and dashing, Mosley, after his first Formula Two race in 1968.

Witnesses, at this post race meeting, claim that the very heated debate, here caught on camera, was about Mosley’s new contract with Fra-nk Willi-ams, the designer of his next race car. Mosely was unhappy that the car, code named, The Falcon, would keep braking down just as he needed ‘top end’ acceleration in a race. They claim that Watson advised Mosley to say in court that he had never seen the contract and ignore it.

Maplin's landlords - cutting off their noses to spite their faces.

From The Evening Standard:

Landlords to collapsed retailers Toys R Us and Maplin could be left with empty stores totalling more than two Shard skyscrapers and lose tens of millions of pounds in rent, property experts predicted on Thursday.

Agent Colliers International has calculated that the failed chains use more than 4 million sq ft of space in the UK. That comprises around 300 shops... Industry sources estimate that collectively landlords were getting an income of around £73.8 million a year from the failed tenants...

If no rescue deals are agreed, a long list of landlords could be left with vacant space, including LandSec, British Land, Hammerson and Intu. 

Ho hum, let's take one of my favourite shops, Maplin.

Their 2017 accounts show a net loss of £3.9 million after paying £21.7 million in rent. Maplin also own some long leaseholds, but most of their shops were rented.

Sane landlords would just reduce the rent by a quarter, leaving Maplin at least marginally profitable. But instead of accepting £16 million a year easy money*, they decided to push Maplin into insolvency. As a result, they can whistle for the last quarters' rent and will be stuck with long void periods until they finally decide to accept lower rents.

* The average paid by both businesses was £18.45/square foot. The actual costs to the landlord is south of £10/square foot, so a one-quarter reduction would still have left them with some unearned location rents.

I hope that the landlords can't wangle themselves any Business Rates discounts beyond the normal three months for empty premises (which is three months too long, if you ask me). If local councils waive the rates, this just enables the landlords to hold all these units out of use for longer, with a corresponding depressing effect on other shops on the same High Street or in the same shopping centre or 'retail park'.

The Scottish Land Revenue Group's submisson to the Scottish Land Commission..

... is available here, with a generous name check for yours truly.

Those who read this blog regularly will be able to guess exactly what it's going to say before they read it. It does look nice in print though.

Evening Standard channels its inner Daily Mail

From The Evening Standard:

A marketing executive left a football fan “paralysed in fear” when he subjected her to an hour-long torrent of abuse on the train back from a match...

A passenger alerted the police, who arrested MacTavish in London. He was convicted of a public order offence at Westminster magistrates’ court, where he was served a football banning order, barring him from matches in England and Wales for three years. He was fined £570 and ordered to do 80 hours of community service and a 10-day sexual and alcohol rehabilitation course...

At his £750,000 family home in Teddington, he told the Standard: “I apologised at the police station and I apologised in court. I have been as remorseful as I can. I just want to put this all behind me.”

I'd love to be a crime reporter on a local newpaper, I'd doorstep wrongdoers and scream "What's your house worth?" as soon as they show their faces, "You have the right to remain silent, but it may harm your resale value if you don't give me an answer, and I'll just use any old figure from Zoopla!"