Land banking logic

Further to my post of two days ago...

Let's assume in their neo-lib fantasy world, we abandon planning restrictions and everything in a radius or two or three miles around each town is zoned for residential development.

For simplicity, let's assume that all land in this zone is owned by one feudal landowner, who hitherto has just been selling off the odd acre here and there to developers to expand the town. Which is exactly what Prince Charles and his ancestors have been doing for centuries. His ancestors were doing this long before they invented planning laws, and if he really wanted planning permission, does anybody think he wouldn't get it?

Why does he drip feed it? To maximise the total value that he and his heirs can wring out of it. He might sell off the most valuable fraction of a percent each year (the parts immediately adjacent to the towns) but his remaining land, in particular the bit that is now adjacent to the expanded towns, goes up in value by a larger percentage.

Does the fact that he could theoretically sell all his land to developers or anybody else tomorrow mean that he will do so, and that tens of thousands of homes would be built? No, why would he? Developers have a steep input cost curve, if they try and increase output, their input costs rise dramatically, which reduces their gross profit, which reduces the amount they are prepared to pay for land. And they don't want to depress selling prices short-term by flooding the market. So they are only prepared to pay full price for small amounts of land each year.
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Does it make much difference, if any, if the land surrounding the town is divided into smaller and larger farms, each with a different owner? No, why would it? Collectively, their wealth-maximising strategy is to do the same as the monopolist, i.e. drip feed it, starting with the most valuable bits.

Let's look at three farmers who are thinking of offering some land to developers.

1. Farmer A owns land adjacent to the developed area. Homes in the area sell for £250,000, each home costs the developer £100,000 to build and he expects £50,000 profit per home. At ten homes per acre, he is prepared to pay max. £1 million per acre for the land.

2. Farmer B owns land a mile out of town, same numbers as above, but it will cost the developer an extra £40,000 per home to build/widen the narrow track out of town (or pay the council to do so under a s106 agreement) and connect it up to the normal utilities a mile away (water, sewage, utilities, internet etc), which will involve also sorts of hassle, costs, ransom and wayleave payments. So the developer is only prepared to pay £600,000 per acre for this land.

3. Farmer C owns land two miles out of town, it will cost £80,000 per home to hook it up to the town two miles away, developer is prepared to pay only £200,000 per acre.
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Which Farmer is most likely to sell and/or which land is a developer most likely to buy and actually build houses on it?

1. Farmer A has an offer of £1 million on the table. That land has reached its maximum value - it's next to the developed area and can't get any closer - so future increases in value will be minimal (might even fall temporarily if a developer buys other favourably situated land and builds a new estate there). A developer who buys it will be able to get the houses up and sold, recoup his outlay, and bank his £50,000 per home profit fairly quickly. There are few uncertainties involved here.

2. Farmer B has an offer of £600,000, but if the town expands a mile towards him over the next decade it will be worth £1 million. So if he hangs on for a decade, his compound growth is 5% per annum. Maybe he wants to sell anyway, but whoever buys it (another farmer, a developer, a speculator) will probably decide to hang on and bank the 5% compound until the land has reached its maximum value. The large developers do this, and they explain in great detail in their published accounts how these carefully chosen marginal sites are steadily ticking up in value.

3. Farmer C has an offer of £200,000. If he is lucky and the town expands towards him, in thirty years it might be worth £1 million. So if he hangs on for thirty years, his compound growth is also 5%. Maybe he wants to sell anyway, makes no difference, same as 2.
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So Farmer A is most likely to sell, and whoever buys it might as well get those new houses up and get his money back ASAP, there is no advantage to hanging on. This also happens to be the most efficient strategy in economic and environmental terms as well (lowest costs, least additional car use, least land being covered with roads etc).

While the developer is busy building and selling these homes, no developer is going to be particularly interested in buying land from Farmer 2 or Farmer 3 - they'd risk having to sell for lower prices and will face higher input costs (on top of the high connection costs).

Economic Myths: Supply and demand - planning permission vs Premiership football players

The usual suspects keep insisting that if we abandoned all planning restrictions, then the value of land would fall. "It's simple supply and demand, innit?", they sneer.

Clearly not true, but I can't be bothered explaining how land prices arise in real-life for the umpteenth time, so let's use an analogy:

1. 'Demand' for footballers (as measured in £££) is mainly all the people who subscribe to Sky Sports, so Sky Sports is prepared to bid a lot of money for Premiership TV rights; it needs that content to get the subscriptions.

2. Premiership clubs can hold out for huge sums of money (or else they sell to the BBC or ITV or whoever).

3. Premiership clubs in turn need the best 200-300 football players they can afford (to stay in the Premiership). There can be - by definition - only 200-300 of such players, so the best 200-300 players can in turn hold out for huge sums of money i.e. all the club's receipts minus the actual costs of maintaining the stadium, selling tickets and so on.

4. It would be fatuous to say that Premiership player wages are so high because there is a lack of supply of footballers. Tens of thousand of people play football regularly with a reasonable degree of skill and proficiency. Premiership players aren't actually much better than the average, they just have to be in the top 200-300.

5. It is not the skills of the players (in absolute terms) which dictates their salaries (they are not ten or a hundred times better than First Division players in the 1970s or 1980s), is is the fact that Sky Sports can monetise what you used to be able to watch for 'free' on the BBC/ITV.

6. Thought experiment: all Premiership players are in the same aeroplane crash and die. So Premiership clubs quickly go out and recruit the best 200-300 players who are left. By definition, these players aren't quite as good as the recently deceased but they can still hold out for the same salaries.

In case people don't get the analogy:

* Contracts with a Premiership team = the best locations
* Contracts with a Championship team = the next best locations
* All the way down playing for your local pub team = zero location value (in £££)
* Premiership players = people who 'own' the best locations = rent collectors/landlords (If a landlord dies or sells, the next owner collects the same amount of rent.)
* Increasing supply of footballers/number of teams in lower divisions has no impact on wages further up the chain = liberalising planning laws increases value of the land now unburdened, but has no impact on value of more favourable locations (which were developed first).

Economic Myths: Profit maximisation

Exhibit A: from Wikipedia:

In economics, profit maximization is the short run or long run process by which a firm determines the price and output level that returns the greatest profit.

Which is of course not a myth at all. By trial and error and on the basis of very incomplete information, this is what businesses do - they tweak price and/or output levels.

Clearly, there is a sliding scale between perfect competition, where the market sets the price and all you can do is vary output levels; and a monopoly or cartel situation, where you can choose the best price/output combination to maximise profits.

It appears that the UK land bankers home builders have discovered that their profit maximising output level is somewhere in the region of 120,000 - 150,000 new residential units per year; they know that their own inputs (skilled labour, building materials) are price-insensitive, so an increase in demand for those means that their costs would go up disproportionately and profits would go down. Fair enough.

Exhibit 2: So why do all the Faux Libertarian twats in the City AM believe that if we "liberalise planning laws" that they will suddenly increase output? Why would they?

Which is why the six largest home builders own enough land with planning or outline planning for eight years' supply. If the government gave them planning permission for another million units or another ten million units, this would not change their profit-maximising level of output by a single unit.

(Of course, the whole notion that increasing supply of housing in high demand/high price areas would reduce house prices overall is nonsense anyway - there is simply no evidence for it or else house/land prices in large cities would be lower than in the countryside and they would be giving away apartments on Manhattan for free.

And don't give me "Spanish and Irish ghost estates", those were not built in areas of high demand/high prices and are thus irrelevant. They might as well have built them in the middle of the Australian outback for all the difference they make.)

Fun Online Polls: Budget hotels & planning regulations

The results to last week's Fun Online Polls were as follows:

UK budget and mid-priced hotel chains. Thumbs up, thumbs down, what? Multiple selections allowed.

Premier Inn 20 votes
Travelodge 11 votes
Ibis 7 votes
easyHotel 0 votes
Holiday Inn 5 votes
Mercure 3 votes
Novotel 2 votes
easyHotel 0 votes
Thistle 1 vote
Other, please specify 2 votes

'Others' suggested were Days Inn (have smoking rooms!), Comfort Inn and Big Sleep.

Premier Inn got the most reasonably favourable comments, so that appears to be the winner - but perhaps that is because there are more of them, so people are more likely to have stayed in one?
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There appears to be some misunderstanding or disagreement as to planning regulations.

In my experience, local councils restrict the amount of buildings which developers can build on any plot; others (NIMBYs, Faux Libertarians and Homeys generally) appear to think that local councils encourage developers to build more than they really wanted to or more than what is appropriate.

It is possible that both are true: suburban and rural councils try and keep densities as low as possible (even when higher densities would make sense) and turn down more planning applications, and that urban councils ask developers to build as much as possible (more smaller units) and nod everything through.

(I'm not talking about the indirect effect on densities or home sizes of high land prices and taxation of profits rather than land values, I mean in terms of how much building a developer can put on a plot.)

So what's your experience/impression?

Vote here or use the widget in the sidebar.

Land Speculation and Housing Design

In an earlier post our host stated:

It's private, profit maximising developers who bash out the tiny homes because they can get away with it; ...

But why?  He then stated that:

...they arise because of the absence of state intervention. If local councils reintroduced minimum room sizes or better insulation requirements, this twat would still be shrieking about state controls and state rationing.

I do not think that this is the full story.  I think that the cri de cour for more state intervention is on top of existing failed state intervention, and policy failures.  Successive layers of intervention cannot surely be the answer?

It is generally observable in the free market that the magic happens and quality goes up as prices fall.  More is done for less every day. Cars are a good example of this.  There is no - as far as I can tell - state intervention in space standards or quality standars for cars.  (I am of course aware of 'safety' and 'emissions' standards).  Competion is pretty fierce between manufacturers.  And I will also concede that the car makers are the recipients of an awful lot of government subsidy, notably GM.

In the comments to MW's piece I related how I had known well two spec. house builders, and both were exercised as to how they could build good houses. The one I knew best, each year as part of his business planning sat down and worked out if he could build what he considered to be a suitable First Time Buyer three bedroom house and make a profit. His standards were close the Parker Morris Standards and were based on the analysis that the first house bought by a young couple may have to be suitable for ten years or so, and that this implied the need for at least three bedrooms to give space for children. By the late 1980's he could no longer do this.

You will recall that the Parker Morris Standards were space standards for public housing which were abadoned in 1980 under MW's favourite P.M.

So what is going on?  As regards house prices/space standards there are seemingly two factors that mitigate against competion delivering its magic.  One, that land is in finite supply and two, state interventions and policy failures.

We on here generally accept that LVT would sort out the unearned scarcity and exclusivity premium enjoyed by landowners.  We also know that existing tax policy favours land over production.

We also know that planning constraints driven by bureaucratic incompetence and nimbyism further restrict supply.

We also know that bad money and inflation (and that inflation is a function of money) drives asset prices, and specifically land price speculation. (We also know that speculators per se are not a Bad Thing in that in other areas of the economy they act as a form of insurance shouldering risk for others).

And with incipient inflation "honest work and sound production will tend to give way to speculation and gambling. There will be a deterioration in the quality of goods and services and in the real standard of living" [Henry Hazlitt - Man Vs. The Welfare State].

Surely then by removing the interventions and correcting taxation and policy errors developers would not be able to profit from speculation and standards would rise and prices fall.

Discuss.
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MW adds: "By the late 1980's he could no longer do this."

Yes of course, because by then full-on Home-Owner-Ism was taking off, banks and building societies were lending higher and higher multiples; rent controls were being abolished; NIMBYism was becoming rampant; council housing was being sold off.

So from 1945 to the early 1980s, builders lived off volume and 'earned' profits (good design etc) not land price speculation. Selling prices were effectively capped (at approx. half today's unregulated prices), but the builders were still happy to build 200,000 - 300,000 new homes per year.

Faux Lib idiot of the day

A comment under this article in City AM was abbreviated and published as a reader's letter today:

Modern homes, as decreed by modern planners and politicians, are too small, too dark, too inflexible, too crowded and too like C19th slums for them to be bought by anyone in their right mind - assuming they had a free choice of houses within their budget and location.

The sad truth is that 'what the State controls, the State rations' and that has never been more true than for housing and infrastructure.

The solution is blindingly obvious - scrap planning controls and let landowners, builders, developers and buyers have a free choice of what, where and how they want to live.

HD2

Bizarre.

It's private, profit maximising developers who bash out the tiny homes because they can get away with it; they arise because of the absence of state intervention. If local councils reintroduced minimum room sizes or better insulation requirements, this twat would still be shrieking about state controls and state rationing.

And who built those C19th slums? Was that not private developers operating without state regulations?

And it's the NIMBYs crying out for planning restrictions, I don't think that the government in the abstract sense could give two hoots how much gets built.

FFS.

Buyers and non-landowning "builders" (i.e. construction workers) will never be on a level playing field with landowners and developers (aka land bankers). They will never have a free choice of where to live or ply their trade

Those land bankers have got plenty of plots with planning, but to maximise their profits, they are just allowing them to trickle onto the market. A load of contsruction workers were laid off back in 2008 so that the land bankers could wait for prices to go back up, so if you are a buyer you have to wait ever so humbly and patiently until they deign to actually build one or an existing homeowner decides to sell one, it's not like you can buy from the competition instead because there isn't any.

Why house prices in California and New York are so high.

There is a school of thought that this is largely down to planning restrictions around the most densely populated and/or desirable parts of California and New York, which in turn are the first and third most populous/popular states.

How much evidence is there for this (and how indeed do you measure the restrictiveness of planning and zoning laws?)..?

Let's download the stats from here and get crunching!

1. House prices vs earnings


As we see, there is a good correlation between average local earnings and house prices for the 714 counties (excl California and New York) for which we have data. The coefficient of correlation is 0.80, if you factor in the property taxes, the coefficient is even higher at 0.84.

A lot of California (red dots) and some parts of New York (green dots) are well above the trend line; most parts of New York are in the middle of the pack. The green dot in the top right corner is Manhattan 'island', of course.

2. House price-to earnings ratios vs earnings

Their evidence to show that housing is particularly expensive in those two states is that house prices are a high multiple of local average earnings, so let's do another chart:
As we see, the ratio of house prices-to-earnings is not a constant. In low wage areas ($40,000) the ratio is only 2.5; in high wage areas ($120,000) the ratio is 4.8, but the coefficient of correlation is quite low, only 0.46.

That's because this is a false comparison. You get a much more sensible figure if you use the first chart and compare house prices with the excess of earnings above the basic minimum household expenditure of (say) $20,000 - the trend line is now house price = [earnings - $20,000] x 4.2.

3. The coastal effect - California

We know that in the UK, there is a large premium attached to areas with a sea view. It's also nice being within driving distance of the coast, and because of the size and shape of Great Britain and Northern Ireland, three-quarters of it is within 25 miles of the nearest bit of coast or estuary and just about all of it is within 50 miles thereof.

Not so for the 48 main states! Only a per cent or two of the area is within 25 miles or even 50 miles of the coast. So we would expect the premium for being near a beach or even near the coast to be higher.

We can easily split Californian counties into 16 "coastal" counties and 24 "inland" counties and compare the two:

And we observe that having controlled for earnings, people are prepared to pay about $100,000 more to be nearer the sea, i.e. they are prepared to pay an extra $6,000 a year to for the benefit of coastal walks, surfing, sailing, fishing, sun bathing etc. If somebody inland spends an extra $6,000 a year on his inland hobbies, or extra gasoline for getting to the coast, then we would not count that as housing costs, would we? So I'm not sure that the extra $100,000 along the coast truly counts as housing costs either

4. The coastal effect - New York

New York state is triangular and has hardly any coastline whatsoever, just a few miles of beach, river and estuary at the southern tip (around Manhattan).

So I separated out the eight counties at the southern tip and contrasted them with the other 30 counties:

As we see here, the premium for a home in those areas is $150,000 to $200,000, much higher than in California because of the additional scarcity - less than a fifth of New York counties are 'coastal' as against over a third in California. And New York City is a huge economic and cultural draw as well, of course.

5. Strip out the coastal effect, and prices in California and New York are no different to anywhere else

Finally, I reworked the first chart comparing the rest of the USA with inland counties in California and New York, as we can see, there are only half a dozen outliers and the rest of them are slap bang in the middle of the pack:

The 'shadow tax' on housing: drawing the incorrect conclusion from a small sub-set of correct facts.

Something which has been bugging us is the Neo-Classical concept of the 'regulatory tax' or 'shadow tax' on housing, which seems to say that the main, if not only, reason for high house prices is restrictive planning laws, see for example this from the LSE:

In the US and elsewhere, zoning policies and other land use regulations are now widespread. Christian Hilber and Frédéric Robert-Nicoud look at the reasons behind these policies, finding that, driven by lobbying from developers and property owners, places that are more developed tend to adopt tighter land use regulations.

With land regulations operating as a form of ‘shadow tax’, of over 50 per cent of housing value in some cities, land regulations may now have become too much of a barrier to development in urban areas.

Correct facts

They then list lots of interesting statistics showing the correlation between build/population density, location values, and how restrictive planning laws are. To their credit, they explain that more restrictive planning regulations seem to be caused by higher build densities.

Which is of course blindingly obvious.

Imagine a little commuter or farming village/hamlet out in the countryside. If somebody wants to build one additional home, he can plonk it anywhere he likes and there is no need for any restrictions (local NIMBYs will oppose it anyway, separate story). The additional one or two cars make no difference to how crowded roads are, he can built his own sceptic tank, compost his own kitchen waste in his garden, maybe obtain fresh water from a well etc.

But in a large conurbation, people have to look at the bigger picture - they have to decide which areas to retain as parks, where the roads and parking spaces will be, where to route the utilities and drainage, how to get rid of the resulting household waste and so on. And once some maximum density has been achieved, it requires a colossal step-change before the next level can be reached. In London, for example, this means Cross Rail or the new Thames super-sewer, which are multi-billion pound investments which are of course vehemently opposed by existing NIMBYs (who are actually collectively cutting off their noses to spite their faces, as we will see).

Incorrect conclusion

While they correctly identify location values as a 'shadow tax' (or privately collected tax*) Their incorrect conclusion is that in the absence of planning regulations, location values and the price of a single unit of housing in those areas would fall.

We can tell straight away that this is nonsense. If you go back in time long enough (a century or three), places where the great cities like Los Angeles, San Fransisco, New York, London etc now stand were very sparsely populated and location values were negligible. There was no discernible difference between the value of these locations and anywhere else inhabitable on the US or European land masses at that time…

The full facts

… and where has most of the new construction taken place? In those great cities. Where are location values highest? In those great cities. It is a multi-factor feedback loop:

If an area is ever so slightly preferable to another (natural infrastructure such as a harbour, coastline, river, flat dry land for buildings and roads etc) then more people move there. It only requires one little spark to ignite things.

More people => more specialisation, more efficient usage of natural or man-made infrastructure
More specialisation etc => higher wages, profits, trade
Higher wages etc => More people want to live or set up their business in the area
More people wanting to live and work there => higher location values (the amount which people are prepared to pay to live there)
Higher location values => more investment in buildings, higher population densities
Higher population densities => more man-made infrastructure (container ports, wharfs, mains water and sewerage, railways, motorways etc)

And so on and so forth. We could summarise these in a sort of flow chart, but each element feeds into and is fed by every other element, and there are plenty of other self-reinforcing elements I have not yet mentioned, so it would get very confusing. And at the centre of this whirlpool is of course the Land Monopoly Black Hole, that is where all the extra value disappears.

Something else they wilfully ignore

Further, location values within an urban area follow the same general pattern, i.e. they are proportional to population density/total population. The average value of land per acre in a large city is ten times as much as in a small town etc.

And the gradient within a large city is much steeper than in a small town. While the value of land at the very edge of a small town might not be much different to the value at the outer edge of a large city, the value increases as you head towards the centre.

So in a large city the value/acre in the very centre are ten times as high as in inner urban areas, which in turn are ten times as high as in outer-urban areas at the outer edge = a ratio of one-hundred-to-one between centre and outer edge. But in a small town, the value in the very centre is only ten times as high as at the outer edge. And so on.

You can observe this very easily by remembering that location values, build density and population density are three different aspects of the same thing (see feedback loop above).

So the usual supply/demand rule does not really apply to land.

If all European motor manufacturers decided (or were somehow forced) to produce and sell twenty per cent more cars every year, you would expect the price of new and thus second hand cars to go down. But they would have to pay more for their inputs: steel, rubber, car workers' wages etc, and they would probably end up all going bankrupt (which is why they produce the number of cars they do - that is their profit maximising level of production). Further, the price of a new car is decided as between customers and manufacturers. There is no competition between customers.

Conversely, relaxing planning laws means that the value of the most important input i.e. land will always go up to soak up the difference between what the highest bidding customer is prepared to pay and the build costs. The price you pay for a finished house in that location is fixed and decided by whichever individual customer bids the most. The land value cannot be competed away (or else, show me evidence that it can) and land owners will never go bankrupt, even if you abandoned all planning laws.

Loosening planning restrictions only has a measurable downward impact on land values at the existing outer margin but an upward impact on the 'new' area

Residential land on one side of 'the fence' (which demarcates the Hallowed Green belt) is worth £500,000 per acre; farmland on the other side is only worth £5,000 per acre. But if you shift 'the fence' a hundred yards out, the value of the existing residential land might fall slightly to £450,000/acre (no longer has direct view over the HGB) and the value of the new residential land rockets from £5,000/acre to £400,000/acre. The total location value of land in that conurbation will always be slightly higher afterwards than beforehand.

(The only counter-force here is that most people actually like having a back garden to themselves and to be near fields and forests. So half of new graduates in the UK move to London but not all of them. The best of both worlds is having a big plot with a beautiful view over nature within a few minutes of the amenities of a town centre).

Loosening planning restrictions has a measurable upward impact on land values in the centre

So what happens to the average rather than marginal value of land in a conurbation if we move 'the fence' a few hundred yards further out? More houses get built and people fill them up, so the values in the centre and inner-urban areas go up even more, because there is now a larger pool of customers, workers, entrepreneurs, more specialisation etc.

And more subtly, the convenience value of being at the centre, rather than having to slog your way in from the outer edge depends on the distance from the outer edge to the centre (in the same way as the value of a place in a queue is dictated by how many people are behind you more than by how many people are in front of you) is now greater, pushing up location values in the centre even further.

And what happens if we allow people in the inner-urban areas to build more densely (smaller gardens or higher buildings)? The value of that land goes up even more, obviously. The developer knows that the basic rental value of a residential unit is £10,000 a year, and people are only prepared to pay a small premium to have their own back garden (a luxury rather than a necessity). So if he can build fifty flats instead of twenty terraced houses or ten semi-detached houses, he'll go for fifty flats and make three or four times as much money as if he built ten detached houses.

The same goes for city centres, the most valuable bit is at pavement level, ideal for retail, pubs, restaurants etc, and above that is offices. While most people don't like living high-rise, people probably couldn't care less whether their office is in a five-storey or twenty-storey office block.

Here endeth

So while I have no sympathies with NIMBYs whatsoever, both they and the Neo-Classicals are completely missing the point. The point is that location values arise quite naturally from the way that people behave, and whatever you do with planning, location values are the naturally arising, minimum and irreducible level of "tax" in any organised society.

Your only decision is whether to allow this tax to be collected privately (for the benefit of a few individuals only) or to pool these values and spend it on stuff which benefits everybody (which of course includes cutting taxes on wages, output, profits etc).
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* A publicly collected tax is when private individuals are forced to pay money to the government, which the government then distributes to other private individuals (including their own friends and family). A privately collected tax is when private individuals are forced to pay money to other private individuals without the official government actually stepping in.

Pot, kettle, boot, other foot etc.

Via Alan at HPC, who asks: "Would the DM adopt the same tone for illegal Bulgarians living in Cheltenham?"

From The Daily Mail:

'We're trapped in a ghost town': The 100,000 British expats whose Spanish homes could be bulldozed any day

* Thousands told their homes were built illegally after they bought them
* 'Barmy' planning rules and topsy-turvy laws leave residents in limbo
* Concrete jungles left behind as construction stops mid-development...

Yes, what the Spanish authorities are doing is completely mad, but it is no worse than what the self-same DM readers are trying to impose on the next generation in the UK.

Do these people not realise that from the Spaniards' point of view they are "immigrants putting pressure on local services, concreting over swathes of the Spanish countryside, etc"?

So they've lost money? Tough. That is absolutely no different to forcing first time buyers in the UK vastly overpay for the privilege of having somewhere to live.

"Rabbit hutch style homes face curb"

From the BBC:

The government is to consider curbing the building of so-called "rabbit hutches" in England. In a consultation being launched on Tuesday, it said it was considering the introduction of basic space standards for domesticated small mammals.

The Department for Communities and Local Government (DCLG) said England's pets from the family Leporidae of the order Lagomorpha may already have some of the smallest accommodation in Europe. Since the 1920s the average living space in enjoyed by our large eared pets has fallen by more than a third.

As a result the DCLG is also thinking about the possibility of "space labelling", which would give bunny owners a clear understanding of how much room there will be left for them to sit doing that cute thing with their noses when there is a saucer of water in one corner and a plate with carrots or lettuce next to it.

Major Retailers’ Rabbit Hutches Inhumane, Says Major Animal Charity

The idea has been welcomed by the Royal Society for the Prevention of Cruelty to Animals (RSPCA). A spokesman for the DCLG stated there were no plans to extend the regulations to homes intended for human habitation.

In a surprise move the DCLG also abolished 90 out of 100 planning rules that can be applied by local authorities.

"Moving from 100 standards to 10 is a good start in reducing red tape, while safeguarding good quality home-builder profits," said David Orr, the chief executive of the National Housing Federation.

"But we look forward to seeing the other 10 rules scrapped as well," he added. "Beggars can't be choosers and our experience is that we can sell these wannabe Homey fuckers just about any old pile of shit for just about any price we like as long as they've got a house number and if we just drip feed them onto the market."

Reader's Letter Of The Day

From yesterday's Evening Standard (page 41, top left):

Don't blame the planners for the lack of land for housing in London (July 26).

There is enough land with planning permission for many thousands of new homes. Developers are not building on these sites either because of lack of finance or because they expect land prices to rise and are speculating.(1)

The Coalition has made many promises to solve the housing crisis but instead fuels the next land price bubble by under-writing homebuyers' deposits. As planning minister Nick Boles has previously admitted, the only way to seriously deal with this speculation is to tax vacant urban land on an annual basis.

While this would cause a temporary fall in house prices it would also make the existing homes more affordable to first-time buyers and stimulate the housing market, with a knock-on benefit to the wider economy.

Dr Tony Vickers, Professional Land Reform Group.

1) Actually there's a contradiction there. If the banks (or others with a bit of spare cash) are unwilling to lend to developers, that must mean they fear price falls; if the developers are hoarding land, that must mean they expect prices to rise. They can't both be right.

Each year, an area of countryside the size of Southampton is "randomly despoiled" by covering it with concrete according to Nick

"Today, simply relaxing planning controls wouldn't just see creeping suburbia: it would allow random development on any countryside that someone would sell".

“Giving a cowardly wink to developers won't build the houses we need. They are already sitting on 400,000 unused planning permissions, yet they choose to "land bank" to build their balance sheets rather than new homes. It's the economy, stupid, that will determine when the construction firms actually construct".

Nick Herbert, minister of state for policing and criminal justice and Conservative MP for Arundel and South Downs, takes to the pages of the G, and in passing repeats the allegations about land-banking that the industry is always at pains to try and dispel; to point out that Letting developers vandalise the countryside won't solve the housing crisis

"There are enough brownfield sites for 1.5m homes, yet speculative developers are being encouraged to submit applications on open countryside regardless of emerging local plans, which carry little or no weight. Communities that have put hours of work into their plans have watched them torn up by random development, licensed by government inspectors".

So one minute Housebuilders aren't building new homes "because of the state of the economy" - presumably they think no one can afford them, hence Nick's fellow Minister Mark's splendid schemes to help would be buyers out; and the next they are throwing them up all over the countryside whilst planning inspectors pretend not to notice ...

"Today, the Campaign for the Protection of Rural England, dismayed by the random despoliation of precious landscape, launches a Save Our Countryside charter. Its president, the poet Sir Andrew Motion, calls for the defence of "our great inheritance". A laureate before him, Wordsworth, asked: "Is then no nook of English ground secure from rash assault?" The answer, if the goal of winning the global race will licence any expediency, is no."

Update : the Mail is running with :Rural charter will challenge developers to stop the Government 'destroying the English countryside'

"Since 1989, an average of 26 square miles of undeveloped land – an area larger than Southampton – has been lost to building projects every year".

A series of very unfortunate coincidences...

Huffington Post, August 2012:

New Zealand's Olympics hospitality house during London 2012 has caught on fire - after an outdoor barbecue exploded on Wednesday evening.

The fire broke out as guests were watching a game of hockey and up to 300 were evacuated. No one was hurt but Kiwi House is now closed until further notice.

Daily Mail, November 2012:

A £2.8million mansion in London's most exclusive street nicknamed 'Billionaires' Row' has been destroyed by a fire that ripped through the property in the early hours of this morning.

The wealthy Russian owners of the six-bedroom detached property on The Bishops Avenue, in Hampstead, escaped unharmed but the house, which was still smouldering this afternoon, was almost completely destroyed with much of the roof collapsed.

London Loves Business, January 2013:

Russian oligarch, Omar Murtuzaliev, flew to London today to restore his dream £23m London home after it burnt down.

The Bayswater mansion burnt down just months before Murtuzaliev was due to move into the six-storey property. The fire started in the basement and burnt through the rest of the house, visibly charring the outside of the house.

Evening Standard, July 2013:

A £4 million west London house was destroyed by fire early this morning.

Dozens of firefighters fought the blaze which engulfed the three-storey house in Campden Grove, Kensington, at about 6am. The house was under renovation with work underway to build to basement extension.

"Sustainable development"

From the BBC:

What is 'sustainable development'?

That's part of the problem - critics of the draft plans said the phrase was too vague. It had been defined it as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" to be "interpreted and applied locally". The Commons environmental audit committee said the lack of a definition in draft plans opened the door to legal challenges.

That seems crystal clear to me.

If somebody wants to build something now it's because they need it now, so that meets the need of "the present". They're not depriving owners of other houses of their houses, they're not depriving them of anything. This is not a zero sum game, the sum total of human wealth increases when more houses are built in response to demand. For sure, owners of existing houses might lose the nice view or some of their privacy, but it was never 'their' view or 'their' privacy, was it? The view or privacy is just there in the negative, they just means an absence of other buildings, i.e. they are a measure of the amount by which the sum total of human wealth has been reduced.

The chances are that "future generations" will be glad that what we've built is already there when they arrive on the scene, in the same way as people who live in a house must be glad that the house exists; and they must have been glad that the house existed when they bought it (or else they wouldn't have bought it). It makes no difference how much somebody else may have objected to that house being built decades or centuries ago, relative to the past, we are the future etc. I've never met a NIMBY yet who agrees that his own house should never have been built, pays to have it demolished and moves into a tent.

Sorted.

Blue Socialism

From yesterday's FT:

Sir, Martin Wolf believes that “a big danger for the UK is a sharp fall in house prices which would threaten the finances of households and banks” (1). He does not connect this big danger with the government`s proposed changes to planning regulations, which could easily make the danger a fact.

Most UK property prices include a significant site scarcity value. (2) Relaxation of the current restrictions on land use will produce a rapid increase in the supply of building sites. Unless this increase is matched by an equivalent demand, prices will fall. Only in London is there evidence of robust demand for residential and commercial property. The whole of the rest of the country is experiencing falling values and low volumes of transactions.

In the medium term, lower house prices should produce benefits for those who cannot now afford to buy. (3) But the shorter-term effect on the economy could be a large negative. The mark to market convention will oblige developers to write down their stocks of houses and land while mortgage lenders will – as Mr Wolf says – have to add to their impairment provisions at the expense of their capital. (1) If existing house owners experience a large drop in the value of their main asset, it is very probable that consumer confidence will fall.

Has the government thought through the probable financial and economic consequences of its policy? (4)

Timothy Bees, Wadhurst, East Sussex.

1) Maybe he did say that, a lot of people say that, but it is simply not true. While each individual mortgage is secured on land and buildings, all loans taken together are secured on all current and future borrowers' ability and willingness to repay them. If banks really have to write down mortgages which are in negative equity, then the same logic says that all unsecured loans and credit card advances have to be written off one hundred per cent as soon as they are made, which is a nonsense.

2) Yup, this socialist-style rationing is imposed by the incumbents for their own narrow benefit.

3) In the very short term, I think you'll find. This is a straight battle between Baby Boomers and young people, or parents waging economic warfare against their own children.

4) The financial and economic consequences of a fall in house prices would be largely positive, but all the government cares about is political consequences (and lining its own pockets), which is why the Blue-Yellow Wing of the Home-Owner-Ist Party is as keen to prop up house prices as much as the Red Wing was.

"Why are housing problems not more visible?"

The Building & Social Housing Foundation sent me a hard copy of their latest report, which is full of interesting statistics (none of which are any big surprise to me). The best bits are on page 11...
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Problems caused by housing undersupply are largely unseen (1). They receive sporadic attention in the media and are not a school-gate conversation topic. Much of the impact of these problems is experienced literally behind closed doors. Education and healthcare are accessed in shared communal spaces; police visibly patrol; and buses pass up and down our streets. Housing is different. Our homes are private spaces for those close to us. Few people may enter, particularly if we perceive them to be inadequate or not matching the standards that we expect.

Housing as a broad topic rarely tops the list of public concerns and yet individual housing problems fill the mailbags of MPs from across the country. The worst housing problems affect only some parts of society. Much of the population is well housed and benefits from the status quo. They may be unaware of the significant harm the system is doing to others, or unwilling to give up the benefits that the current system has given to them.

Crucially, the beneficiaries tend to be those with the greatest power and wealth (2), which gives them the loudest voices in housing debates. Those who are most affected by housing crises may struggle to have their say, or may not realise that their personal circumstances are part of a wider problem in society. There is no social consensus that more housing would be positive, or is a national priority.

1) There's an easy way of making this visible: here's a chart from the BBC:2) I'm unhappy with the expression 'wealth', elsewhere the report says that "[Housing] wealth represents the largest store of wealth in Great Britain".

For sure, bricks and mortar are net wealth, if your house burns to the ground, then that is a loss of a valuable asset and we are collectively poorer. But the underlying land values in themselves are not wealth at all, they are merely a measure of the wealth that is transferred from the productive economy to land owners, partly via our bizarre system of taxing incomes to provide the services which push up house prices and also because land 'ownership' in itself gives the 'owner' the right to income generated by others, even in the absence of publicly collected and spent taxes.

I'd guess that a bare majority of people are both a) active in the productive economy and b) home owners, so by and large, they break even under the current system (in a hopelessly inefficient and distortionary fashion).

Another good way of looking at this is to compare housing with public sector pensions. We're all dimly aware that the net present value of the accrued liability for future pensions is about £1,000 billion, but from the point of view of the recipient, that is an asset - it is a right to future income. But for some reason, with public sector pensions, we only look at the expense side (and wail about the burden on future generations) and with housing we only look at the income side (and completely ignore the fact that it is an equal and opposite burden on future generations). So-called housing wealth and public sector pensions are in fact more or less the same thing; they are a transfer of wealth from future generations to today's incumbents.
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... and on page 66, of course.

Reader's Letter Of The Day

From The FT:

Sir, Claims by the Campaign to Protect Rural England and the National Trust (Letters, August 25 and 30) that the government’s proposed planning reforms pose a serious threat to the countryside are baseless scaremongering.

If we were to build 250,000 homes a year for the next 25 years, we would largely solve England’s housing supply crisis, help make housing more affordable and generate local economic activity and jobs in the process. Yet even if a much higher proportion of these homes were built on greenfield land than over the last decade, after 25 years they would cover only 1 per cent of England’s land area. The anti-development CPRE and National Trust put protecting every blade of grass ahead of providing decent homes and our economic well-being.

It is primarily younger people who will pay the price of protecting this 1 per cent...

John Stewart, Director of Economic Affairs, Home Builders Federation

NIMBY's with their knickers in a twist...

Well Simon Jenkins does anyway. He warns his readers "... the government this week sneaked out the most astonishing change to the face of England in half a century. A "national planning policy framework" replaces all previous regulation and encourages building wherever the market takes it.

So what changes in the new Draft National Planning Policy Framework? Do Town Planners stop producing their little 5 year plans? Is the green belt going? Are NIMBY conservation zones to become a thing of the past? The answers are no, no and no.

Page 7:

Each local planning authority should produce a Local Plan for its area ... Local Plans should be aspirational but realistic. They should address the spatial implications of economic, social and environmental change. Local Plans should set out the opportunities for development and clear guidance on what will or will not be permitted and where.

Page 38:

The Government attaches great importance to Green Belts. The fundamental aim of Green Belt policy is to prevent urban sprawl ... The general extent of Green Belts across the country is already established. It should not be necessary to designate new Green Belts except in exceptional circumstances. If proposing a new Green Belt, local planning authorities should ...

Page 50:

Local planning authorities should set out a strategy for the conservation and enjoyment of the historic environment, including heritage assets most at risk through neglect, decay or other threats ... The principles and policies set out in this section apply to the heritage-related consent regimes for which planning authorities are responsible under the Planning (Listed Buildings and Conservation Areas) Act 1990, as well as to plan-making and development management decisions.

I really can't see what Mr Jenkins has his knickers in such a twist about. It doesn't look to me like all that much is changing!

UK land use at a glance

The BBC did a handy chart on different types of land use in the four nations of the UK. Remember, England is just over half of the UK by surface area and sixty-two million of us are living, working and commuting back and forth on those little grey bits:

NIMBYs Of The Week

From the Basildon Recorder:

A DEVELOPER has been accused of trying to “sneak” extra homes on to a controversial green belt site.

Campaigners from Save Our Spaces Billericay are angry Banner Homes submitted a planning application to build a further 19 homes on the former Billericay School Farm, in Noak Hill Road. Banner Homes has permission for 51 homes, after an initial application for 70 properties was rejected by Basildon Council.

Billericay School sold the 1.7-hectare site to the developer for £5.5million...

Here's a picture of the Basildon, pop. 40,000, from Google Maps. To give you an idea of the massive devastation this will cause, I stuck on a white square* (showing an area of 1.7 hectares, i.e. 427 foot square)) on the affected area:* It's more of a rectangle shape actually, see here, but a rectangle is more difficult to cut out.