Fun Online Polls/Economic Myths: The rapid increase in owner-occupation 1950-1990.

The responses to last week's Fun Online Poll were as follows:

Which factors contributed to rapid rise in owner occupation in the UK from 1950 to 1990?

Selling off council housing at undervalue - 36 votes (a)
Tax deduction for mortgage interest - 25 votes (b)

Rent controls in private sector 20 votes (c)
High taxation of rental income - 12 votes (c)
Lots of affordable council housing - 12 votes (c)
Mortgage lending restrictions - 11 votes (c)
Domestic Rates and Schedule A taxation - 11 votes (c)
No Housing Benefit for private landlords - 7 votes (c)

Lots of new private construction - 12 votes (d)
Low population growth - 5 votes (d)

Other, please specify - 4 votes
Total - 60 voters

a) We can rule that one out straight away. The percentage of owner-occupiers increased from 30% in 1950 to 68% in 1990 and had been steadily increasing by about 1% a year. The council house sell off didn't take off on a large scale until the 1980s. The rate of increase in owner-occupation during that decade was actually no faster than between 1950 - 1980.

b) We can rule that one out as well. For sure, first time buyers paid a bit less tax than tenants on the same income thanks to the tax break/subsidy, but the overall impact is probably zero either way.

Remember that:

i. one man's tax break is another man's tax burden, so if most people qualify for a tax break they are all chipping in the same amount to pay it. The net cash tax saving to a first time buyer is only a fraction of the nominal amount (which wasn't that much anyway).

ii. To the extent there was a small net benefit to first time buyers, that merely went into higher selling prices and/or higher interest rates, there is plenty of real life evidence to support this.

c) These are the real reasons:

Strict rent controls make housing a less attractive investment for landlords but do not affect owner-occupiers; so the amount owner-occupiers have to bid is lower. Mortgage rationing dampened the tendency of owner-occupiers to outbid each other.

High taxation of rental income, Domestic Rates/Schedule A tax and the absence of large scale subsidies to private landlords (Housing Benefit) reinforced all this.

I would argue that as well as explicit rent controls, you can have implicit rent controls, i.e. if it's not too hard to get a very affordable council house, that pushes down private rents as well.

So by and large, the availability of council housing as a low-cost alternative until the 1980s was just as positive for owner-occupation rates as was the Thatcher-Blair sell-off thereafter. The two are opposites and cancel out!

d) These two must have helped, although new construction petered out in the mid-1970s. But new construction only helps if the rest of the system (items labelled c) is geared towards discouraging landlords from cashing in and banks from ramping up prices; new construction in itself does nothing to increase owner-occupation rates.

Fun Online Polls: EU Parliament elections & The rise in owner-occupation during the 20th century

The responses to last week's Fun Online Polls, on a very good turnout of 152, were as follows:

How do you intend to vote in the EU Parliament elections?

BNP - 3%
Conservatives - 1%
English Democrats - 0%
Greens - 2%
Labour - 5%
Liberal Democrats - 2%
No2EU - 2%
Pirate Party - 2%
UKIP - 74%
Undecided - 3%
I won't bother voting - 6%

That pretty much speaks for itself, I would have thought!
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This week's Fun Online Poll is something else which has been bugging me for years.

We Brits pride ourselves on the rapid increase in the number owner occupiers during the 20th century, and it is generally accepted in this country that owner-occupation is the best form of tenure (although it appears to reduce employment levels).

The most rapid increase was between 1950 and 1990, up from 30% to 68%. UK government housing policies during the bulk of the 20th century and for most of this period were quite the opposite of what we have been doing for the last twenty years, as a result of which, owner-occupation levels have started falling again.

In economist's terms, this is easy to explain, I'm just wondering whether people have forgotten what it was that we were doing?

So vote here or use the widget in the sidebar.