"Young people living in vans, tiny homes and containers"

From the BBC, following the journalistic guideline "Don't mention land or access to land! It's only about the physical building!":

Case One

Harriet Baggley, 24, her partner, Tom Offen, 25, and their son, Ruben, two, live in a van fitted with a log-burning stove, insulation and a makeshift kitchenette.

The 2008 Volkswagen Transporter 4, nicknamed "Iggy", has been their home since they left rented accommodation in April last year. They move their home-on-wheels to different spots every few days, spending two to three nights a week at a relative's more conventional home while helping them with child care.

They appear to be doing it the hard way, and I hope it works out for them.

Case Two

For Aubrey Fry, 37, and his wife, Clare, 34, life in a repurposed 40ft shipping container was only meant to be short term.

Three years later and the steel box is still home, sweet home. The pair moved to Hay-on-Wye, where Aubrey's family own a farm, after growing frustrated with London property prices. They wanted to keep their costs low, while building their new home and business premises on the land, and Aubrey had an itch to try something different.

Yes, the couple have access to free land. On her parents' farm.

Aubrey would also appear to be stupidest man in the UK:

"I've always wanted to develop a shipping container and make it into a home," Aubrey said. "There are millions of them all over the world, they get used once and then get taken out of action; and I think they are a good space to live in."

Correct, he actually said "they get used once"

Case Three

Tom, who lives in Porthleven, Cornwall, is hoping to build his [tiny home aka caravan], mount it on a trailer and then move it between his friends' smallholdings.

So he's an intermediate case between the Baggleys and the Frys. What will happen when his friends get tired of him, or some officious planner tell him that he's not allowed to live on a smallholding semi-permanently?

Housing crisis sorted!

Now all they need is some land...

"Builder charged over £4m new homes digger destruction"

From the BBC:

A builder has been accused of causing £4m of damage by ripping apart five new homes with a digger... Daniel Neagu, 30, from Athelstone Road in Harrow, north-west London, has been charged with causing criminal damage.

I call bullshit.

I'm happy to accept that those five homes could have been sold for £800,000 each, but not in a million years is the (re)build cost £800,000 each, probably more like £200,000 each, tops. The rest is land value and profit margin. So by all means do him for £1 million's worth of criminal damage, but not £4 million.

Excellent work by the ONS

From This Is Money:

Property in the priciest area of England and Wales cost a huge 25 times as much as in the cheapest spot, according to a new interactive map from the Office for National Statistics.

It shows that one square metre of floor space, an area about the size of a red telephone box, costs £19,439 in the salubrious London borough of Kensington and Chelsea. 

However, in the valley region of Blaenau Gwent, South Wales, the same amount of space costs just £777. Use the interactive map below to see how much a square metre of property costs in your local area and how it compares

I'm not clever enough to embed the interactive map, but it seems accurate enough to me. It's too coarse grained for proper LVT or Council Tax revaluations, because it's at local authority level and in many local authorities there is too much of a difference between the most expensive and cheapest areas, but where I live it's pretty much equally expensive all over the council area, so I can use that to illustrate the point.

It says just under £5,000 per sq metre. On that basis, our house should be worth about £650,000, a tad more than we paid for it three years ago. Seeing as typical build costs for a new build are £1,000 per sq metre, that means that the value of my house is 80% location value and 20% bricks and mortar, a percentage we can apply to the rental value to arrive at the location element/site premium.

All of which puts paid to the KLN that working out the site premium is difficult.
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Via Josh Ryan-Collins:



Which sort of illustrates the point that as land and buildings are such a huge proportion of national wealth, there is no point having a general wealth tax, you might as well just tax land (secured on the land and the buildings thereon). Seeing as you can apply a much higher rate to immobile land than 'mobile' (or easily hidden 'wealth'), that means overall you can raise more money more efficiently by exempting all other forms of wealth. There's also the point that most other wealth is used to generate income, and that income is taxed, so most other wealth is already taxed, albeit indirectly.

Which neatly deals with another KLN, and the squealing from the lefties for a general 'wealth tax'.

The New Economics Foundation land value database

They've ground out the sales figures published by HM Land Registry to come up with this.

All it needs is your postcode and it will tell you an approximate selling price per sq m of land where you live.

The estimate for mine came up within +/10% of my own estimate, so well done! Not sure how much use it is, but it does illustrate that valuing urban residential land is pretty easy.

Formula to replace Council Tax and more

Column A is the total number of households in each region taken from ONS (thousands)
Column B is the value of housing in each region taken from Savills (£ billions)
Column C is B divided by A to give an approximate average house price (£ thousands)
Column D is C minus the average capital value of a dwelling assumed to be £80K giving the site only value
Column E is A multiplied by D to give the value of land in each region.
Column F is percentage of the total value of land in the UK (£3,994bn) for each region

Firstly this is just a bit of fun so don't take the figures too seriously, they are just back of a fag packet. I'm just trying to show how in principle the percentage of total land values for each region of the UK can be worked out. However, they are going to look something like the above.

Secondly, while the capital value of housing in London/SE might be higher than elsewhere, on the other hand they pay around 70% of all SDLT receipts. I would imagine its similar for Capital Gains and Inheritance Tax. So for the purposes of keeping things simple I'm going to assume they cancel each other out. Futhermore London has the second highest number of second homes in the UK, especially in high value areas. So that would tend to make C higher, but wouldn't necessarily effect F.

Right, with those caveats out of the way lets discuss why this could be a good ruse. I think that in principle most people would agree that our property taxes are a bit of a mess and need tidying up. A Land Value Tax would be the best option, but you've got to get past the "army of surveyors" argument "tax on gardens" etc, etc. One possible way around this is simply to calculate each regions share of whatever amount revenue you are trying to raise, based on the formula above. We could call it a "commonwealth fee" paid into the "commonwealth fund", from which each region would get an equal per capita share. Then leave it up to them on how they want to raise it. 

Say we want to scrap Council Tax, SDLT, CGT and IHT we'd need about £55bn. London would be billed £18.5bn and get back £6.6bn. The current grants given to each council would decrease on this basis.

But we don't have to stick at £55bn. The current rental value of land under homes in the UK is around £200bn pa so in theory the "commonwealth fund" could raise and re-distribute upto that figure. As that would essentially level the playing field between the regions, I think they could just get on with it and raise the fee by which ever way they feel best. A bit of tax competition would be good. Of course we'd all advise them to do an LVT along the lines of Mark's submission to the Scottish tax commission  but others might prefer VAT. 

Economic Myths: "Party-loving couple build their OWN ultra-modern home for just £100,000"

From The Daily Mail:

* Derek Wright and Christine Burford wanted to retire in Kent from Huddersfield
* They could not afford the house prices so bought a plot of land for £160,000
* Mr Wright, 71, then set to work building a three-bed home, despite no experience
* Couple are now living in a modern, personalised home which cost £108,000

... despite a series of hiccups along the way, the couple ended up with a personalised, ultra-modern home, which they say would have cost them £200,000 more if bought ready-built from an estate agent.

Fuck off, it did NOT cost £108,000, it cost £268,000. Can these people not add up?

If a ready made home would have cost £308,000 then their £40,000 saving is basically their wages/profit for the effort they put in building it and the risk they took with their own cash. In the light of events, that's not much of a reward. And they saved a fair bit of SDLT, I suppose.

Land prices, truly the elephant in the room, people just refuse to mention the topic to the extent of pretending it doesn't exist.

Local council incompetence reaches rage-inducing levels.

From the BBC:

A pre-fabricated property dubbed a "shed" in south-east London has been auctioned off for just under £1m. The 1950s bungalow situated on 0.6 acres of land in Peckham contains three rooms, a kitchen and unfitted bathroom.

Described as "dilapidated", Southwark Council said it was "extremely pleased" it sold for £950,000. The money raised for the property, which is not thought to have been lived in since 2002, will be ploughed back into the council's housing programme.

FFS. They did not sell "a shed", they sold land which will be worth at least £3 million* if it had appropriate planning consents, planning consents which the very same local council will now be granting to the lucky new owner.

* Call it four terraced/town houses similar to the ones on the left of the picture along the front of plot, plus another four along the back, sell them for £600,000 each (according to the article) = £4.8 million, knock off 8 x £100,000 build costs = £4 million, round it down to £3 million for margin of error.

"That's partly down to ... the way property developers work."

On the subject of new towns, the BBC states the obvious:

In a revealing article [page 72 onwards of this] published last year, Francis Salway, former chief executive of the largest listed property company in the UK, Land Securities, explained that developers don't relish huge empty sites like the former quarries at Ebbsfleet.

They like "established demand" and "existing communities", he wrote, which prove people really do want to live there. The developers like to "limit the forthcoming supply" - that is, to ration how many homes come on to the market at one time so that the market is not flooded.*

Exactly. Apart from providing shelter, when you buy a house, you are paying for access to an "established community" i.e. jobs, shops, schools, neighbours good or bad, transport links to other towns etc.

The developers - i.e. the bricklayers, roofers, architects and the material suppliers - have to be paid for their inputs to the finished house, of course. But who is 'providing' the "established community"? The developers? The landowners? Methinks not. So why do they get paid for its existence? And if you buy an existing home from somebody who is moving away, what contribution is he going to make to the "established community" in future? Precisely nothing, of course. So why should he get paid for it?

Ho hum.

* Which puts the developer in a tricky position, on the one hand they like to drip feed new homes onto the market, but on the other hand, the more homes already exist, the easier the new ones are to sell. Prisoners' dilemma with one prisoner.

Blissex nails it

Blissex, in the comments to the second post on the question of whether people underestimate commuting costs when deciding whether to buy/rent somewhere small but close to where they work or somewhere larger but further away…

Well, either many men don't even think of women's influence on them, or are too politically correct to point out the obvious.

Usually the dominant influence on house location and type is the female partner (after all both before and after divorce she considers it *her* house), and usually the male partner somehow gets the longer commute.

Perhaps the male partner would rather like the 3 bed flat near *his* workplace, but the female one will just fall in love with the 5 bed detached with the big garden in the outer suburbs. And it would be misogynist for the male partner to be abusive to the point of disregarding her needs :-).

"According to economics..."

James James in the comments here:

"According to economics, the burden of commuting is chosen when compensated either on the labour or on the housing market so that individuals’ utility is equalized. However, in a direct test of this strong notion of equilibrium, we find that people with longer commuting time report systematically lower subjective well-being."

There are endless studies by estate agents showing that each extra minute's walk from the nearest Tube or train station in London = £A off the rent or £B off the price of a home; that each extra minute's commute time from London overground stations = £C off the average rent or £D off the price of a home etc.

It's a bit presumptuous of these psychologists to say that all this numbers are "too low". Nearly half of people in London rent and most new arrivals rent; the rental market is very fluid so if people were really so hacked off with commute times, they can move somewhere else in six months' time. We have to assume that £A, £B etc. are roughly correct.

We can reasonably assume that if we have two same aged people with same amount of savings, who both start a new job at the same place in central London with the same pay and working hours will make that difficult trade-off between walking time, train time, ticket cost and rent. This tells us the value in £'s per hour that people place on shorter commute times.

But you can bet a pound to a penny that the psychologists haven't equivalised for all these factors.

So on the whole people with longer commute times will probably be younger people on lower pay with high rents; and those with shorter commute times will be older people with a small or no mortgage who had the luck to buy nearer the centre more than fifteen years ago. So the latter group has shorter commute times, lower effective housing costs and lower travel costs and it's hardly surprising that the former group has a systematically lower sense of well-bring.

(And we also know that plenty of people who move out of London into the Faux Bucolic Rural Idyll end up bitterly regretting it; they just can't survive out in the real world any more, just like zoo-raised animals released into the wild.)

More Picketty-related nonsense

James James refers us to this article about Matthew Rognlie, which contains the following embedded chart:



Although Rognlie is closer to the mark than Picketty He's got the shares going to 'capital' and to 'housing' completely upside down. Let's just look at UK household income not business profits (which is a bit artificial but avoids the need for adjustments for double-counting).

According to HMRC tables 3.6 and 3.7 for 2102-13, total taxable employment and self-employment income was £711 billion and total household income from capital (dividends and interest) was £53 bn. I'll ignore pension income because that is just a confusing mix of taxpayer-funded, deferred employment income, dividends, interest and rent.

The total annual rental value of all residential land is £200 bn. The return on bricks and mortar (the actual capital) is something in the region of £50 bn, which we can add to the £53 bn from above.

So... total income = £1,014 bn.

The percentages are actually as follows:
Employment and self-employment = 70%
Capital = 10%
Land = 20%.

If you want to treat 'housing' as a separate category, the split is:
Employment and self-employment = 70%
Capital = 5%
Housing = 25%

In other words, on average, one-third of tenants' gross earnings goes on rent, which we knew anyway. Rognilie's chart suggests that it is only one-seventh, which is clearly bollocks.

The building itself probably only has scrap value.

From The Daily Mail:

A mansion on London's Billionaire's Row which was built by the owner of the Tate and Lyle sugar empire has sold for £25million - just a quarter of its original asking price.

Heath Hall on The Bishops Avenue in Hampstead, north London, a 24,000 sq/ft trophy home set in a plot of around 2.5-acres, was put on the market three years ago for £100 million.

If you look on Google maps, the plot appears to be about 100 yds x 120 yds, is nearly rectangular, with a road along the back for the houses behind.

So you could build a row of about fifteen nice big terraced houses along the front (on The Bishops Avenue itself) and another ten along the back, with off street parking for two or three cars in front and decent sized back gardens (by London standards).

You can sell each finished house for (say) £1.5 million (Zoopla's Z-Index for that postcode is just under £1 million), knock off a couple of hundred thousand for the cost of building it, £1 million for the land (£25 million ÷ 25), the rest is your profit margin, Bob's your uncle.

Location, location and, er, condition

In some cities oop north, houses are being sold for as little as £1, on condition that the buyers repair them and then lives in them for five years. In Stoke on Trent the local authority is even giving interest free loans to the buyers and it now turns out that the renovated houses are worth £60,000.

So where has all this value come from?

The building's location hasn't changed. Some of it has obviously come from the repairs made to the building, but it seems unlikely that the entire value came from that source, after all, the council only lent them £30,000 to begin with. Perhaps the council sold at undervalue, but if you have a house which needs a large amount of money spending on it and no-one wants to rent anyway, what is it worth? Up in Durham, landlords have just abandoned houses as not worth repairing.

There's a clue a bit further down the article: "We're looking forward to it becoming a family area again where we can bring up children and people know their neighbours" says one of the new homeowners.

That suggests the rise in value has been partly due to "gentrification", i.e. the aggregate effect of. many properties being repaired in a given area is much greater per property than the cost of repair. Not only that, however, but the aggregate effect in reducing location value of many properties being in need of repair can be so great as to wipe out the location value entirely.

Killer Arguments Against LVT, Not (354)

One genuine problem is that we LVTers argue and bicker between ourselves too much over relatively minor matters (while agreeing on the broader principles). So the Homeys can play divide and conquer. I pointed out that in the grander scheme of things and at current price and rent levels, the site premium of most homes is in the range of 3% - 3.5% of its selling price.

Physiocrat: Why is it even necessary to think about selling prices at all? There is so much rental evidence on the property websites.

One of the things you will notice is that there is a "floor" to these rentals - for example, you will not find a three-bed semi to rent anywhere for less than around £500 pcm. As a first approximation, it could be assumed that the land value in these instances, which covers a substantial area of the scabbier parts of the UK, is zero.

This assumption also does away with the argument for homestead allowances and other complications - the allowance is built into the valuation on the basis that the land value is too small to measure or be worth collecting.

In principle he is quite correct and I do not disagree (apart from the word 'scabbiest'), but let's look at the numbers:

The purist approach

A quick search on Zoopla tells us that you the rent for a three-bed semi in one of the cheapest areas (TS6) is indeed about £6,000 a year gross (£450 a month plus council tax).

Knock off £4,000 a year actual costs (amortisation of bricks and mortar, repairs, insurance etc) and the site premium here is about £2,000.

The rough and ready approach

Three-bed semis in TS6 sell for as little as £70,000 - £75,000.

£70,000 x 3.5% = £2,450 site premium.

I rest my case.
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Clearly, there must be a few little houses in the most run-down streets in the areas with the lowest wages and highest unemployment where the site premium is zero or close to zero, but that's only a few thousand houses out of millions and not worth worrying about. Such houses sell for £20,000 or something, and 3.5% of not much is next to nothing. £700 a year is the marginal cost of pavement repairs, refuse collection and street lighting if nothing else.

The other point is that when somebody buys an existing home, what he is paying for is future profits i.e. gross rental value minus running costs i.e. the 'site premium'.

Therefore homes trade for a multiple of their site premium and that multiple is surprisingly similar for all homes except the bottom one or two percentiles and the top one or two per centiles. But who cares? You can't base a sensible tax system on outliers; you start in the middle and work outwards.

Killer Arguments Against LVT, Not (353)

One of the top five KLNs of all time is that is would be very difficult and expensive to establish the site premium of each plot, and most land value taxers skirt round the issue (there are plenty of countries which do it simply and cheaply, noteably Chile of all places, but that's by the by).

Having thought about this a bit more, establishing the site premium (rental value/LVT bill) for each residential plot is actually very simple if you start at the right end and apply the 'divide and conquer' concept.

1) The correct way of calculating the site premium/ tax base for each plot is to look at the total £ rental value of each home/plot and deduct the real £ annual costs of maintaining the building = £ tax base. I have done this over and over and establish that by and large and in the grander scheme of things, for most homes, the rental value is between 3% and 3.5% of its current potential selling price (as at 2014-15). It's a bit of a short cut, but it will do.

(Nobody says you have to collect 100% of site premiums in LVT, so you can choose any number between 0.0% and 3.5%)

2) You split up the country into lots of smaller areas with a few thousand homes in each (such as a postcode sector) and you work out the total site premium for that area by e.g. looking at average selling prices as recorded by HM Land Registry and multiplying by anything up to 3.5%. You can do the whole country in a few minutes with a spreadsheet and pivot tables.

3) If such a smaller area consists entirely of very similar houses - all semi-detached or all medium sized terraced houses, for example - then all you have to do is divide the site premium for that area by the number of homes, they all get sent the same tax bill, no discussion and end of back chat.

4) Clearly, such homogeneous areas are few and far between. In most areas there will be a mix of all types of homes, from small high rise flats to large detached homes with massive gardens. So the valuer just has to ascribe a relative value to each home, starting in the middle with 1.0 'units' for a three-bed semi, down to 0.4 'units' for a high rise flat and up to 2.0 'units' for a detached house with a massive garden. There's no harm in having a national set of guidelines for this which will get honed over time.

5) The valuer then adds up the resulting number of 'units', divides the total tax base by that number to work out the tax per unit and then multiplies up again. So if the tax per unit in an area is £7,000 and medium sized flat counts as 0.6 units, the bill on that flat is £4,200.
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We then get into the related topic of appeals...

6) The valuer publishes his initial list with ratings and tax bills for each plot/home and waits for the inevitable outcry with people moaning that their home is a only 0.8 units not 1.0 units because it's in the shadow of a motorway flyover or whatever. Some of these appeals will be justified and nodded through; others get turned down or put to some sort the popular vote: the gimmick is that the valuer doesn't particularly care.

7) Whatever happens, the total tax to be raised from that area is a fixed figure and gets divided by the number of units and multiplied up again, the total yield is the same.

To illustrate the point, let's imagine the total site premium is £24 million and the area consists of 3,000 very similar semi-detached homes, rated at 1.0 units each. The tax per unit is £24 million divided by 3,000 units = £8,000 per unit = £8,000 per semi-detached.

Everybody whines and moans and half of all houses are rerated down to 0.8 units, so now there are only 2,700 units in the area. Divide £24 million by 2,700 units = £8,889 per unit. The semis which still count as 1.0 units now pay the higher amount £8,889 and those which got downrated pay 0.8 x £8,889 = £7,111. Total tax collected is still £24 million.

8) So although every homeowner wants his own home(s) to be rerated downwards, nobody wants anybody else's to be rerated down, because the less they are paying, the more you are paying. So basically the valuer is a referee not a player and can let people bicker among themselves.

9) If people really can't agree, well then the local council just threatens to shut all its schools and hospitals, sack all its bin men and turn off the street lights. If that's what people want, let them have it. If people are selfish enough, they will end up with homes which are unsellable. If people are clever enough, they will use this as a bargaining chip to persuade the council to shut down a few white elephant projects and rein in excessive salaries etc. Who knows?

10) It is important to distinguish between reliefs which relate to a plot and those which relate to the individuals occupying it.

a) A majority of people in an area might see their vicar as the pillar of the community, and the vicarage as something for everybody's benefit. If they want to reduce the parish's cost of owning the vicarage they can agree to treat it as 0.1 or 0.0 units as a quasi-public building. So the bill for the vicarage is little or nothing and everybody else in the village has to pay a couple of quid more each year.

b) The same goes with listed buildings.  This is a financial and practical burden on the owner of the building and, in principle, of vague general benefit to 'everbody else', so if people want certain buildings to be preserved, the building is valued at a lower number of units. If only a minority are prepared to chip in, then the listing is cancelled and the owner can redevelop.

c) Or maybe there are certain 'pillars of the community' who live in rather grand houses and/or have little in the way of income i.e. Poor Widows In Mansions. A sensible system would simply give them the option to defer the tax until the next sale, but if a majority of 'everybody else' in the area agrees that she/her heirs should have to pay little or nothing, the grand house itself is still pencilled in as 2.0 units, but in a separate column in the spreadsheet, the Poor Widow gets a personal credit of 1.9 or whatever. But when she dies or leaves the area, the personal credit is cancelled and the next owner of the house is liable for the full 2.0 units' worth of tax.

d) The Homeys like pointing out that if people's income falls, then at least their tax bill goes down, which is a fair argument (and just about the only argument) in favour of income tax. So let's see them put their money where their mouth is:

A local council could agree a scheme whereby, for example, if the main earner in a household loses his or her job, he or she gets a personal credit of up to 1.0 units and a corresponding LVT reduction for the next six months; the exemption to be only used once every ten years. On average, a couple of percent of people will be involuntarily between jobs at any one time, so on average, 'everybody else' will be paying a couple of per cent more LVT as quasi- unemployment insurance.

That's fine by me, and if the terms of the scheme are sensible I would probably be happy to pay a couple of hundred quid more a year to be on the safe side.

To the untrained eye, it would appear that a flat costs more than a semi-detached house.

From page 4 of HM Land Registry's December 2014 House Price Index (pdf):

Average prices by property type (England and Wales)

Detached - £279,298
Semi-detached - £167,069
Terraced - £134,226
Flat/maisonette - £170,822

The relative prices of detached, semi-detached and terraced houses are pretty much in line and as you would expect.

But why is the average price of a flat higher than the average price of a semi-detached?

Simples, it's Von Thünen's law of rent, which factors in transport/travel costs.

People make a trade-off between convenience (living near the centre) and comfort (having a nice big garden), regardless of income. So you end up with flats in city centres and houses in the suburbs, with people being prepared to pay pretty much the same in £-s-d for either.

To exaggerate this effect further, the bigger the city, the bigger the trade-off between convenience and comfort; so the bigger the city, the more flats there will be.

So most flats are in the centre of the biggest cities, where the convenience premium is highest and most houses are in smaller towns and cities and at the outer suburbs of larger cities.

Or put it this way, they are not comparing the price of a flat with the price of a semi-detached house on the same street; they are comparing the price of flats in the centre of large cities (where land is very expensive) with the price of houses in smaller towns and cities and the outer suburbs of larger cities (where land is much cheaper).

Outrage

"Developer's advert boast sparks outrage" says the article in the Evening Standard.

So it should; private developers profiting from public expenditure on transport without contributing a penny. That's outrageous!

Oh, wait, that's not what the outrage is about, it's about the fact that they haven't provided any "social housing". Private profit at public expense doesn't even get a mention.

I suppose that's the norm these days...

They can't have it both ways (part 2)

Lie #1: I paid for my land
Lie #2: The rebuild cost of my house is much higher than what you say, so only a small part of the total current value relates to land.

I'm not disputing that people paid for the cost/value of the building, I am talking about the land element.

Having argued over the numbers with Bayard, this is what it boils down to. Assume average house price has gone up from £60,000 to £210,000 and that RPI inflation was 50%:

My view:
1994
Average price - £60,000
Build cost/value - £54,000
Balance is land value - £6,000

2014
Average price - £210,000
Build cost/value - £81,000 (£54,000 + 50% inflation)
Balance is land value - £129,000

Average build costs are £900/square metre (£800 to £1,000) and average new built semi-detached is 88 square metres.
Semi-detached houses built twenty years ago were a bit larger but the fabric of the building has depreciated a bit, cancels out.

If we index up the original £6,000 we get £9,000, meaning that people who bought in the good old days when houses cost about three times the gross average salary (from 1945 to 2001, ignoring a couple of spikes) only paid for 7% of what the land is now worth.

Bayard's view:
1994
Average price - £60,000
Build cost/value - £40,000
Balance is land value - £20,000

2014
Average price - £210,000
Build cost/value - £60,000 (£40,000 + 50% inflation)
Balance is land value - £150,000

Even if Bayard is correct, that would still mean that older owners only paid for one-fifth of the current value of the land on which their house sits.

The rest was a free gift, kindly engineered for us by the UK government when we had rent controls and mortgage restrictions etc, a free gift which the neo-liberals took away again from the 1980s onwards, with the Boomers and Homeys cheering them on.
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Predictably, Sobers in the comments:

If you can build a 3 bed semi for £81K, you better start a property development company, you'll make a killing.

For a undeveloped but serviced site to finished house ready to live in, you'd need £125K minimum, assuming you aren't doing the work yourself. My parents have just had a cottage in rural Wales (so cheaper builders than England) completely renovated for about 60K, labour and materials. Thats new roof, new doors and windows, back to bare walls, complete new everything inside. If you had to start from an empty site you could more than double that easily.

I am not interested in rebuilding cottages in Wales. I am interested in the average selling price of an average 3-bed suburban or urban semi.

If Sobers is correct and the current rebuild cost of such a home is (say) £120,000, indexed backwards to 1994, it would have cost £80,000.

Seeing as the average house price at the time was about £60,000, this would suggest that builders either made a loss of £20,000 on each home or that they paid negative £20,000 for the land. We can rule out both of those.

So his figures simply do not add up and can be ignored, and if he were correct, it would imply that older home-owners actually got a free gift of £20,000 when they bought their home, which nukes the traditional Homey nonsense of "I paid for my land".

Rebuild costs and land prices

There is one simple statistic which enables us to kill two KLN birds with one stone.

The first is that "I paid for my home out of taxed income.".

The second is a long running argument I have had with various people about the typical rebuild cost/value of an average three-bed semi as distinct from the land value.

We know from Nationwide statistics on the ratio of house prices-to-earnings, that for the period 1953 to 2001, the ratio only went above three (never quite reaching four!) twice: for a couple of years in the early 1970s bubble and for a couple of years in the late 1980s bubble.

But throughout that period, builders were happily building 200,000 - 300,000 new homes a year in all parts of the country, it is NIMBYism and land price speculation which put paid to that, we're now down closer to 100,000.

We can argue over various up or downward adjustments, but we can safely assume that builders did it to make a profit, and that their average costs per new home were less than three times an average year's salary. And we can also assume that building techniques are little changed, it's largely manual labour. The cost of copper has gone up, but the cost of white goods has gone down so it all nets off.

The average full time male annual salary is currently £26,500 (the median is much lower than that), times that by three = £80,000 (which is what I have always said).

Going back to the first KLN, yes, people paid for the bricks and mortar out of taxed income, the same as they pay for anything out of taxed income (glossing over the fact the mortgage was subsidised via MIRAS), but most people who bought before 2001 did not actually pay a penny for the land, they got that for free.

And as Land Value Tax is only on the land element, for which any pre-2001 purchaser paid effectively nothing, it is clearly not double taxation for these people.

Agreed, people who were first time buyers after 2001 will have to pay twice for the land, that's as can't be helped, but they are all still of working age and will still pay far less tax overall if we shifted taxes from earnings and output to land values.