They own land, give them (easy) money!

Spotted by TBH in The Daily Mail:

Homeowners who run into financial trouble will be able to make reduced mortgage payments under a deal brokered by Chancellor Jeremy Hunt at a summit with bank bosses yesterday.

The Treasury said last night bank chiefs had agreed a series of measures to help struggling customers. Those who run into difficulty with payments will be offered targeted help, which could include a ‘short-term reduction in monthly payments’, a temporary switch to interest-only payments or extension of the mortgage term to reduce monthly costs.

Banks also agreed that households coming to the end of their fixed rates should be offered a new deal without another affordability test, provided they have kept up with payments.

This is how they will keep the credit/land price bubble going for another two or three years before the inevitable big financial crisis/house price crash in 2025. Apparently, a recent Welfare Reform Bill had similar measures for people claiming Universal Credit.

They own land! Give them money!

The Lib Dems step up to the Home-Owner-Ist plate. From the BBC:

Homeowners struggling to pay their mortgages amid rising interest rates should be able to apply for a £300-a-month grant, the Lib Dems have said.

Under plans, the grant would open to people whose mortgage payments had risen by more than 10% of their income. It could be paid for by reversing tax cuts for banks, the party has said...

Can you imagine the form filling involved in proving that your payments have increased by more than 10% of your income? What compared to what? It would be far easier just to cap mortgage interest rates. Just declare that all interest rates to be fixed at whatever people rate were paying when they took out the mortgage.

Any price cap on a quasi-monopoly like a bank has much the same effect as a tax on their monopoly profits/rental income and saves a lot of churn. To level the playing field (morgage-borrowers vs tenants), they could do normal rent controls. This is quite different to price caps in the truly competitive private sector, which usually make matters worse.

Home-Owner-Ist understands economics - shock

From The Evening Standard:

But while home buyers may welcome a potential stamp duty cut, it could also lead to them paying bigger monthly mortgage bills, a finance expert has warned.

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said potential cuts to stamp duty may risk “doing more harm than good”. She said stimulating housing market demand could push house prices up further, at a time when the supply of available homes is already tight. Borrowers could then find themselves paying higher monthly mortgage costs if the price they have had to pay for their home has increased.

Correct. Reducing taxation on land and buildings mainly benefits the vendor, not the purchaser. I'm just surprised to see this reported in that bastion of Home-Owner-Ism - a huge chunk of their income is from property porn adverts, so they have to toe the line.

UPDATE: LF makes a good point in the comments. For movers who are buying and selling, SDLT is a bit of a slap in the face. Nonetheless, the overall effect is to depress headline house prices.

First Rule of Home-Owner-Ist Club

House prices may not fall, whatever the cost (to the taxpayer). From The Torygraph:

Government failure to provide support for struggling homeowners will trigger a “tsunami of repossessions” which will damage house prices, experts have warned.

And who are these experts, pray tell?

Andrew Wishart, of Capital Economics, a research firm, said: "We now forecast that the unemployment rate will rise from 3.8pc to over 5pc, which will push up repossessions, though they should remain well below the levels reached in the house price crashes of the early 1990s and 2008." Capital Economics has forecast a 7pc house price drop over the next two years...

The article does not say on whose behalf they did this research, he who pays the piper calls the tune. And there are another three years to go before it all collapses again, they should know that by now.

A Government spokesman said: “We recognise people are struggling with rising prices which is why we are protecting the eight million most vulnerable families with at least £1,200 of direct payments this year, with a £150 top-up payment for disabled people.”

Why would banks lend shed loads of money to the "eight million most vulnerable families", knowing that any rate rises would tip them over the edge? Because they know the government will bail them out? It works out far cheaper (i.e. saves the taxpayer money and makes a reliable small surplus year on year) just building council housing for them.

And it's another reason for simply nationalising all lending to home buyers. Why let commercial banks make hay while the sun shines and bail them out when it starts raining? That way the taxpayer gets the profits in the good times, as well the losses in bad times. Without house price/credit bubbles and reckless lending, banks would be far more resilient and there'd be no need for taxpayer-backed bail outs.

Home-Owner-Ism and rent seeking taken to its logical conclusion

Excellent article about a specific case from the BBC with lots of gory details.

Worth reading in full, there's no point me summarising.

Home-Owner-Ism - Guardian and NewsThump on top form

Firstly, from the Guardian.

A good summary of the overall catastrophic outcomes, the interesting bit is this:

Boris Johnson’s latest proposal to expand home ownership by asking housing associations to sell off homes to their tenants at a discount, and allowing people to put benefit payments towards a mortgage, is just the latest in a long line of bad ideas that purport to expand these benefits to more people...

In fact, one minister’s estimate that the scheme could help just a few thousand is probably on the optimistic side: housing associations are independent bodies, which the government would have to bribe rather than force to sell off their stock, and people with modest levels of savings are disqualified from benefits, which begs the question of how many could afford a deposit

This is a bizarre gimmick of a policy, but I'm sure the Tories ran it past their focus groups. Short term, it might keep the bubble going another three years (bubble due to pop in 2025). But long term, the main winners are the banks, who now have a steady stream of rising future income each time the homes are sold to the next mortgaged borrower, as NewsThump explains.

This comparison is slightly misleading:

The monthly cost of the average mortgage is cheaper than rent for the equivalent home; private renters spend 36% of their income on housing, compared with 12% for mortgage owners.

For FTBs on Day One, there isn't much difference. Over the long term, your mortgage payment stay the same or go down and general price and wage inflation exaggerates this effect.

But there is some truth in it, as NewsThump illustrates:

As Boris Johnson began operation ‘Save Boris’ with a pledge to let plebs own bricks, many have said letting benefits count towards the affordability of a mortgage is a good start, but that the amount you are currently successfully paying in rent is probably a better indicator of what you can afford for a house.

Simon Williams, a renter from Wokingham told us, “My wife and I pay just over a thousand pounds a month to rent our modest two-bed house. To buy one on the same street would require a mortgage of about £700 a month, but apparently we can’t afford that."

Backbench Tory MP Derek Despenser-Matthew told us, “Helping people like Simon and his wife is all well and good, but cannibalising the buy-to-let market it doesn’t make as good a headline as appearing to help people on benefits.

"Plus a lot of our donors are buy-to-let landlords, and it would not make good political sense to suddenly start decimating their core customer base. No, it’s much better to get a headline grabbing policy that will unlikely make it into law before the next election cycle and give Boris a few days of breathing space.”

This is what you wanted.

From The Daily Express:

Pensioners may still be paying off mortgages as soaring property prices cripple Britons

The demand for longer mortgage terms of 35 years instead of the traditional 25 years has jumped 75 per cent as cash strapped owners want to keep their monthly payments as low as possible. Coupled with the average age of a first-time buyer (FTB) rising, an increasing number of people could be paying their home loans out of their pensions in retirement....

And the standard of living among retirees could decline significantly as they struggle to pay a mortgage out of a fixed pension, experts warn... Worryingly, the trend could be exacerbated by the current cost of living crisis which is likely to see the age of first-time buyers continue to increase.

Yes, Home-Owner-Ism leads to terrible outcomes, I keep saying that. So why doesn't the Daily Mailexpressgraph just say it?

Home-Owner-Ism is the British national religion.

Headline from The Daily Telegraph:

Why British house prices will suffer side effects from Russia's invasion of Ukraine

The British property market is already grappling with rapidly rising inflation, successive interest rate rises and the cost of living crisis. There could also be further pressure on British house prices thanks to the conflict in Ukraine and the resulting economic fallout.

Do these people have no sense of perspective? Even if house prices were to fall by 20%, that's only wiped out the last two or three years' worth of gains. Meanwhile, a few thousand miles away, people are being bombed and killed in a pointless invasion by a mad dictatorship.

They own land! Give them money!

Spotted by Lola in Money Age:

Payment deferrals keep mortgage arrears at historic low levels

... Commenting on the data, PRIMIS Mortgage Network proposition director, Vikki Jefferies, said: “Today’s continued low levels of arrears reflects the fact that the industry has managed to protect those customers who have been most affected by the pandemic. There is no doubt that government schemes such as furlough and the Coronavirus Business Interruption Loan Scheme (CBILS), combined with payment deferrals from lenders, have supported customers and the market during this difficult time.

“As these support schemes come to an end, however, it will be vital to provide proactive and sustained support for brokers. The housing market has been a driving force behind the UK’s economic recovery from the coronavirus crisis, but it’s important to note that the long-term impact of the pandemic may not yet be visible and there remain a number of borrowers who faced financial difficulty pre-pandemic who have continued to build up arrears through the crisis.”

"supported customers and the market" means "kept house prices high and rising", of course. I'm not sure why "brokers are worthy of support, if they chucked all these subsidies in the bin, there'd still be enough for them to do.

Throwing good taxpayers' money after bad

From Inside Housing:

The mayor’s ‘Right to Buy back’ initiative will provide money to enable local authorities and housing companies they own to acquire ex-council homes on the open market. Properties bought under the scheme, which must meet the Decent Homes Standard, would then be returned to social rent or used as temporary accommodation for homeless families...

The [Right to Buy] policy – which was reinvigorated in 2012 by David Cameron, with significant increases to the discounts offered to tenants – was intended to further homeownership. But research by Inside Housing has shown the extent to which that vision has been distorted, with as many as 40% of homes falling into the hands of private landlords.

How stupid and corrupt are these people? Having committed the crime of selling it off at undervalue, they are now doubling up. Two wrongs don't make a right, they make it even wronger.

There is still plenty of publicly owned land in London on which they can build new council housing for a fraction of the cost of buying back ex-council housing. And who says it has to be in London? In the hey day of council house building, they used to build large estates aka 'new towns' a bit further out where the land is cheaper. Extend the rail network* to hook it up and Bob's your uncle.

Buying back ex-council housing doesn't even increase the amount of available housing, it just shuffles it between categories.

* Something they miserably failed to do for Thamesmead, that was an epic fail. The excuse is that it's difficult terrain. But they've built railways underneath the English Channel, above/along rivers and through mountains, for crying out loud, it can't be impossible.

They own land! Give them money!

Spotted by TBH in the Epoch Times:

California authorities announced Monday the state plans to pay off 100 percent of unpaid rent accumulated during the pandemic, with the money to come from some $5.2 billion in federal COVID-19 relief funds.

California Gov. Gavin Newsom wrote in a tweet Monday that, “California is planning rent forgiveness on a scale never seen before in the United States,” attributing the post to a report by the New York Times, which noted that state lawmakers were putting the final touches on the program.

While eligibility criteria for the newly proposed program are still unclear, reports indicate that the measure would both give renters in arrears a clean slate and make landlords whole.

Possibly one of the worst abuses of "COVID-19 relief funds" in recent history. Are they mental? Let's imagine that a developed country send a struggling country £1 billion in aid payments to help them get over Covid-19... and they just hand it all over to landowners.

Newsthump explains Ricardo's Law of Rent

From Newsthump:

The nurses and paramedics that have just spent a gruelling year in the frontline of the war against COVID have finally seen their sacrifices rewarded by a 1% pay rise and the warm knowledge that the person who takes half their salary in rent is going to get richer...

Here we go again...

From the BBC:

A mortgage guarantee scheme to help people with small deposits get on the property ladder is set to be announced at next week's Budget. The government will offer incentives to lenders, bringing back 95% mortgages which have "virtually disappeared" during the pandemic, the Treasury says.

An extension to the Stamp Duty Land Tax "holiday" is also on the cards.
-------------------------------
From The Daily Mail:

Biden bombs Syria border crossing and 'kills 22' Iran-backed militia fighters in retaliation to rocket attacks that injured American troops and killed a contractor in Iraq.

The poor sods will be looking back fondly at the Trump years.
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And for a bit of light relief, a "global warming causes cooling" story from The Guardian:

Rahmstorf said: “We risk triggering [a tipping point] in this century, and the [Gulf Stream] would spin down within the next century. It is extremely unlikely that we have already triggered it, but if we do not stop global warming, it is increasingly likely that we will trigger it.”

Research in 2018 also showed a weakening of the AMOC, but the paper in Nature Geoscience says this was unprecedented over the last millennium, a clear indication that human actions are to blame. Scientists have previously said a weakening of the Gulf Stream could cause freezing winters in western Europe and unprecedented changes across the Atlantic.

Killer Arguments Against LVT, Not (487)

As we come up to the big part 500 anniversary episode, here is an article which TBH spotted in The Daily Mail.

It is an absolute classic of the Home-Owner-Ist genre and highly recommended reading. See how many lies, contradictions, self-delusions and diagonal comparisons you can spot.

It would take me days to debunk them all, but this diagonal comparison is worth a mention:

Older people who bought houses years ago, and who are living on a small income, could struggle to pay their tax bill and be forced to sell a cherished family home.

And not every owner-occupier in the South has benefited from huge windfall gains. Young people with huge mortgages on recently purchased tiny flats in the capital would be hammered too, with a chilling effect on their aspirations.

Poor Widows in Mansions (low income, massive unearned gain, no mortgage) and recent purchasers (high income, no unearned gain yet, large mortgage) are at absolute opposite ends of the spectrum! If one deserves sympathy, then the other doesn't. Even if you ignore the extremes, how does that translate to sympathy for the vast majority in the middle (medium income, modest unearned gain, small/cheap mortgage)??

As it happens, these problems melt away on closer inspection:

1. Fairer Share said that clearly there would be a 'defer and pay on death' option for the former.

2. For the latter in a "tiny flat in the capital" which cost them (say) £500,000, this tax would be like a small % increase in mortgage interest rates. Instead of paying 0.2% Council Tax each year (£1,000), they'd be paying 0.48% Proportional Property Tax each year (£2,400), which is only £117 a month more (hardly 'hammered') and no worse than a 0.28% increase in mortgage rates, which purchasers should have budgeted for. The government can ease the strain by just dropping interest rates, although the chances are that interest rates have fallen by 0.28% since they took on a mortgage, so they are no worse off than they originally expected.

If they are in a "tiny flat" then no doubt they 'aspire' to 'move up the property ladder' some time in the next ten years, at which stage they will save at least £15,000 SDLT (we don't need to worry about whether SDLT is borne by buyer or seller - when you trade up you are both). So when they achieve their 'aspiration', they will get all their money back and it will make 'moving up the property ladder' a lot cheaper and easier.

Inevitable

The fightback has begun. Landlords have spotted that empty offices will soon mean a glut of office space which will mean a fall in rents, so who better to turn to than their mates in government to force people back into those same offices, whether they want to or not? Sod this working from home lark, that's not going to fund their third house in the Bahamas, time to put all those contributions to the Conservative Party to good use and call in some favours.

We own land, give us money!

Emailed in by Lola, from The Telegraph:

Landlords, shops and restaurants have joined forces to ask the Government to step in and pay commercial rents to help them survive the coronavirus pandemic.

Trade bodies have been in talks with ministers about proposals that would see the Government fund up to 50pc of rent and services charges owed by businesses in the retail, hospitality and leisure sectors. These “Property Bounce Back” grants would be targeted at businesses worst affected by lockdown.

It is estimated that about £3bn of rent owed to commercial property landlords for the six months to September will not have been paid, laying bare the acute pressures faced by landlords and tenants.

His comment was "Aaarrghh!" Not much I can add to that.
-----------------------------------------------
Spotted by Mombers at HPC, a question at Property118:

Reluctant landlord (wot?): I note that the LHA rates have been increased from 1st April 2020 – March 2021. A couple of questions…

2. Are any landlords now upping their rents in light of this LHA increase going forward?

PT: If like me, you have tenants on LHA rates, which previously was on average 20-30% below private rental rates, then I see no harm in increasing the rents where the increase will be picked up by the benefit system... It also brings the rents inline with what the property should rent for.

WP: Just thought of another question - if a rent increase will not effect the tenant at all in regard to any top ups (they currently do not pay anyway) - can I notify HB/DWP myself direct? If it is not for the benefit of my tenants, asking them to contact the department about the rent increase will fall on deaf ears....

TBH adds "If you ever needed reassurance that we are on the right side, this thread is ideal." Again, there's not much I can add to that.

World's tiniest violin

From The Telegraph:

"Coronavirus means I'm losing £4,100 per month" (1): how landlords' businesses are under threat

Coronavirus means some tenants are breaking contracts (2), cutting landlords' cash flow and leaving them with empty properties they can't fill

For Jamie Moodie, a landlord in south-west London, the fallout from corona virus has hit hard.

His monthly income from his portfolio of 23 properties (3) has dropped by £4,100 since lock down began.(1)

Some of Moodie's European tenants left the country before lock down (4), leaving two properties empty (5). He has little hope of getting back the lost rent, as currently he “can’t fill those properties, I can’t show them to anyone”. Some of his tenants have also lost their jobs and are no longer paying rent. (6)

He is one of many landlords feeling new pressure. The outbreak is set to cause lasting damage to the sector that could mean disastrous problems for renters further down the line (7).

1) Not clear, is he actually making a loss of £4,100 a month, or has his income fallen by £4,100?

2) The landlord is no longer providing what was agreed, i.e. a home close to well-paying jobs, a nice local park, a good local school. So the contract has no substance.

3) He expects sympathy?

4) Sensible thing to do, you can't fault them for that.

5) If he doesn't like owning empty homes, he can just sell them. It's a free world.

6) But who cares about somebody losing their job? Pfft! The landlord is not collecting rent, that's the tragedy here!

7) Our old friend, the Missing Homes Conundrum makes a late appearance.

And landlords aren't businesses, they just own too many homes. The homes are not "under threat", whatever happens, they will still be there when this is all over.

Surely the Bank of England is not that stupid?

Emailed in by Lola from FT Adviser, subject line 'FFS'.

The Bank of England would expect to loosen its mortgage affordability rules if the UK experienced strong house price growth, it has said.

In a working paper titled Modelling the Distribution of Mortgage Debt, out this week (July 3), the central bank tested the regulation of affordability in two different scenarios — a ‘business as usual’ one and one it named the ‘upside scenario’.

So they not think about what they have just written?

You could just as well turn that first part round and state:

If the Bank of England loosens its mortgage affordability rules, the UK will experience strong house price growth.

To all intents and purposes, credit availability and house prices (aka 'The Housing Crisis') are the same thing.

Classic Telegraph lies and propaganda

The Telegraph runs with the wildly misleading headline "New council income tax is best way to plug multi-billion pound gap in social care, says IFS". The Telegraph's motto is, of course, anything but Land Value Tax or reforming Council Tax. The linked IFS page says nothing of the sort, it just mentions it as a possibility.

Digging a bit further, IFS' own press release on the topic, from March this year, pokes gentle fun at their own report:

But implementation would mean overcoming some important challenges

A local income tax would raise significantly more in some areas than others. We estimate that revenues per person from a flat-rate tax across all tax bands would be more than six times higher in many richer parts of west London than in areas like Hull and Leicester.

A system to redistribute revenues between councils would be required in order to avoid this translating into huge disparities in funding for local services.

To sum up, it would end up as a 1% increase in the national rate of income tax. So not a 'local income tax'.

Income tax rates that varied across areas would be more complex for employers, taxpayers, and HMRC to deal with. Up-to-date records on where taxpayers live – which, at present, employers and HMRC don’t always have – would be needed.

Anything but a national tax hike would be administratively unworkable, in other words. Whatever the merits of a tax (and this has none), it has to be at least administratively workable. If it isn't, then that's usually a clue that it's a fundamentally terrible idea in the first place.

Other options for tax devolution come with more significant drawbacks though

Local corporation and value added or sales taxes would be much more difficult to administer and comply with. Moreover, differences in tax rates across councils would be more likely to distort taxpayers’ behaviour than they would for income tax.

Stamp duty land tax is much more unequally distributed – varying by a factor of more than twenty between richer parts of West London and places like Hartlepool and Blackpool. It is also a bad tax that should be abolished rather than entrenched via devolution.

Agreed to all that.

Substantial new powers over council tax, such as the ability to carry out local revaluations, could pose problems for the system of redistributing funding between councils...

Agreed. Drum-roll please...

It would be better to revalue and reform council tax at a national level – something which is overdue.

Agreed.
-------------------------------
In other words, The Telegraph is claiming the IFS said pretty much the diametric opposite of what the IFS actually said.

Killer Arguments Against LVT, Not (459)

Sobers unleashes a torrent of primo Homey bleating under the previous post:

Your calculations will work as long as you assume that everyone lives in a house their current income can afford the 80% mortgage on. Then income will be largely in proportion to house value and the amount they lose in LVT will be offset by the amount gained from tax cuts.

I made no such assumption, I used a middle-of-the-road case as an example to show they are - as you'd expect - modest winners if we had LVT instead of Employer's NIC, Council Tax, SDLT, IHT and the TV licence fee, and stated quite clearly that it's easy to think up categories of winners and losers.

However many people live in houses that they couldn't afford to buy on their current income, and not just the widows in mansions you always decry as a straw man.

I am perfectly aware of this; it is irrelevant. Many people couldn't afford to buy their current homes - I wouldn't get a mortgage any more (now over 50) - but most of the people in this category could afford to rent their current home - as I did for six years before the LL and I both got bored and he sold it to me. And LVT is actually based on rental values. I just use % of current selling price as an approximation.

I can think of several people in my own social circle and family who are not that wealthy, certainly not in income terms, well below the average income, and live in houses that they could not afford to buy today.

Anecdotal and repetition.

Mainly because they have either received small inheritances they have put into property...

Not hard work then? And that's incorrect and lazy use of the word 'property'.

... they bought houses cheaply many years ago when house prices in that area were relatively lower, or they bought their council house at a considerable discount...

Exactly, the Baby Boomers helped themselves while it was still government policy to keep rents and prices down, and then pulled up the ladder.

... or have paid off their mortgage and downsized their jobs to match their outgoings. So they are not 'rich' by any stretch of the imagination, yet they would be clobbered by an LVT.

Sobers' Boomers are pleading poverty, which is entirely self-inflicted, having 'down-sized their jobs' entirely voluntarily. They'll be the first to slag off the first lazy Millenial who says "I'd like to inherit some cash, buy a house at a discounted price and then work part-time'.

Why the use of the word "clobbered"? Why is it OK for younger people to be "clobbered" with VAT, NIC and rent?

Mainly because they have managed to build up some capital, which is located in their houses.

They clearly haven't "built up capital" by his own admission . They have ridden a government-sponsored house price bonanza and are now resting on their laurels. The actual 'capital' they own (the building) is largely unchanged. Rule of thumb: if the price of something varies inversely to interest rates, it's not real capital, it's a source of rent.

He sneaks in a diagonal comparison as well.

The fair comparison is: younger tenant on £25,000 a year is paying additional tax to fund the public services which benefit Sobers' semi-retired example, also on £25,000 a year, but living in a £500,000 home.

How the fuck is that 'fair'??

Thus they are exactly the one who will scupper any LVT - politically speaking its not a pure balance between winners and losers that determines which side wins, its how many winners actually side with the losers, because they feel its unfair whats happening to them.

Hence why tobacco taxes are politically fine, because the winners don't care a jot about smokers, they just think 'If you don't like the price of fags, don't buy them, and you won't pay the tax'.

If you don't like paying LVT, then downsize.

Whereas if significant numbers of ordinary people with below average incomes are hit by LVT, then many more people will vote against it, even though they might be winner themselves, because they consider it unfair on someone else

Again the word 'hit'. He glosses over the fact that he wants landowner subsidies to be paid by taxes which 'hit' somebody else.

Sobers is proposing continuing an unfair system on the grounds that is 'fair'. Well it's not; why should working tenants 'with below average incomes be hit with [VAT, NIC and rent]' to pay for landowner subsidies?

What the Homeys really want is socialism for land speculators; I don't like socialism and I don't like land speculators, sorry. Younger people just have to learn to be as selfish as the Homeys.