"Government has not been a great landlord, and is itself so hugely overborrowed that it is not in a good position to borrow to build Council houses on a big scale." explains John Redwood, adding, "I have no problems with the government helping bridge the gap for people with too little savings to make the large deposit for a first home. Banking Regulators have lurched from allowing or encouraging banks to lend far too much against each home, to letting them lend too little. The government has decided to intervene directly whilst the banks and their regulators are being so cautious".
"intervene directly?" - what can he mean. And we do of course know precisely what the "preferred mechanism" for funding social housing is.
"If we wish to see more homes built where people want them then we do need to ensure a sensible flow of finance to the home market. Recent years have seen all too few new homes built, making it more difficult for people to find the home they need in the parts of the country under pressure".
I think we can safely assume that John isn't talking about ensuring a sensible flow of finance to facilitate "social" or heaven forfend "council housing" in those areas where people find it difficult to find the home they need - "those people" probably aren't wanted in those areas unless and until they can afford to buy...
Friday, 16 August 2013
"to build council houses? are you quite mad?"
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23 comments:
He is mad.
A government subsidy to land owners (like FLS, HTS etc) is money down the drain, they'll never get it back.
Money spent on council houses pays for itself within a few years.
And he is the head NIMBY - when he says "IF we wish houses to be built" the answer is clearly "WE DON'T" so everything he writes after that is hypothetical gobbledygook.
I mean, FFS, if it makes commercial sense for an individual to borrow to buy an existing house + overpriced land, then it makes sense twice over for the government to borrow to build a new house, especially as it has to pay much less for the land.
And if council houses were so awful, why are the waiting lists so long?
MW. It gets worse - "Funding for lending, which launched in July last year, enables banks to borrow money from the Bank of England for up to four years to lend to small and medium-sized businesses." Housing associations are neither 'small' nor 'medium sized businesses'. They are subsidised rent seekers. So these funds are not going to help small businesses create wealth at all. They are going to their cronies. Bastards.
"Government has not been a great landlord, and is itself so hugely overborrowed that it is not in a good position to borrow to build Council houses on a big scale."
FFS, can't he come up with a better excuse than that? Any fule kno that the gov't can never afford to d the things it doesn't want to do, be they ever so worthy and can always afford to do the things it does want to do, be they ever so pointless.
L, you know what it's really about: what it's always been about - public money into private (crony) pockets, so why get upset at the implausible propaganda. As Christine Keeler said, "They would say that, wouldn't they".
If you read the comments to JR's blog piece it gets pretty well panned. That must be a good sign, surely?
L, Housing Associations is glorified social housing, it's all state owned, state controlled, state funded, only they have lots of lovely glossy layers of management in between.
B, yes the government CAN afford to "borrow to build". If they take the £8 billion Housing Benefit a year handed out to private landlords plus God-knows-how-much being spent on FLS, HTS and so on, that would pay the interest on (say) £200 billion of borrowing or something.
With £200 billion cash to play with, you can build two million units of social housing, so that's hacked the council house waiting list down to zero and pushed rents down for non-HB claimants, what's not to like?
L, I can't bear to look.
Redwood also shows the typical blindness towards the private rented sector that British tenants have far fewer tenancy rights than on the continent.
I would point this out but there is already too many comments, it's not worth the trouble.
"B, yes the government CAN afford to "borrow to build"
Of course it can. The fact that it says it can't simply shows that it doesn't want to.
OK, I have read down the comments a bit and somebody does point out the tenancy rights issue, using the "blindness" terminology as well.
RT, very brave of you to venture in there and I'm relieved to see we aren't the only ones.
As it happens, a large part of the explanation for the rapid rise in owner-occupation between 1945 and 1975 or so was the fact that tenants had so many "rights" and landlords were taxed so heavily, it simply wasn't worth being a landlord any more.
Mark, I know all the arguments about ownership and renting over the years.
What grates me is that people keep saying that Britain should have "continental style" renting.
If we are going to have "continental style" renting then we will have to have "continental style" tenancy law.
Or, we could just say that Britain is too different from Europe to have "continental style" renting.
But what the politicians are trying to do is make us put up with much worse tenancy rights than Europe whilst telling us to put up with it because it is "continental style" renting.
In a word: it's a trick.
RT, agreed, it's all DoubleThink.
The other DoubleThink is to say "Tenants have no rights so we have to 'help people on the ladder' with massive subsidies to land owners."
As you point out, the other response is to say "Give tenants better rights", which is a tricky balance to get right
Q - what's the worst that can happen if we introduce pretty socialist rent controls and savage taxation of landlords like until the 1970s or 1980s?
A - lower house prices and more owner-occupiers.
The cost of HS2 would fund 400,000 new houses at £100k each (including land purchase).
But of course HS2 is great for whisking grandees from London to Birmingham with no stops in between.
AC - as you've mentioned HS2, worth pointing out that the costs of that project will include provision for "knocking down houses" which is to say to cover compensating some people who have their houses knocked down to enable its construction, which is fair enough, assuming of course that we are talking "adequate and fair compensation" and to compensate other people who find themselves within a certain distance of the new line and will swear blind the value of their houses, and of course the quality of their lives, have been "blighted" as a result. As Bayard pointed out the money can always, by hook or by crook, be found to do what governments want to do ...
"Q - what's the worst that can happen if we introduce pretty socialist rent controls and savage taxation of landlords like until the 1970s or 1980s?"
A - There won't be anywhere to rent for those who want to rent.
I bought my first house simply because I couldn't find anywhere to rent. I wasn't surprised by this: by the time I was a student (when I was also suffering from the shortage of rented accommodation) I had already worked out that you might as well give a house to someone as rent it to them. It was like HOism for tenants: the ones who already had tenancies, or had got them before most landlords gave up were sitting pretty: artificially low rents and security of tenure. Latecomers were reduced to lodging or staying with friends and family, which is what I had to do when I first went to London to work.
B, I'm not disputing that the Socialist rent controls which were in force for the first three-quarters of the 20th century went "too far" hence your observation that:
"There won't be anywhere to rent for those who want to rent."
But the houses were there and houses were being built, so...
"I bought my first house simply because I couldn't find anywhere to rent."
And how much did it cost you?
As I have been saying for twenty years, the reason for the rapid rise in owner-occupation levels in the UK during the 20th century was because of strong tenants' rights. Theses have been watered down to negative over the last thirty years, hence owner-occupation levels have stalled.
Don't those arguments rather cancel each other out? Strong tenant rights => nowhere to rent => people forced to buy versus weak tenant rights => no-one wants to rent => people prefer to buy.
"And how much did it cost you?"
Not a lot, it was back in the mid eighties (although I thought it was a lot at the time), but then banks were only lending on 2.5 - 3 times income. ISTR that interest rates were about 7% and that rent worked out at about 6% (my brother had a friend who was a professional landlord).
B, arguments don't cancel each other out or defeat each other in a vacuum.
That's why we look at real life evidence to see what the overall effect is.
And, in one of those quirks of the land market, evidence in the UK is:
More tenants' rights -> more owner-occupiers
Fewer tenants' rights -> fewer owner-occupiers.
i.e. the opposite of what you might expect.
The same as the observation that building more houses does not push down the price of homes, because houses are infrastructure and push up the price of land (or whyever it is, nobody knows).
There seem to be two influences here operating on the housing market. The first is that the price of land is governed by the price of credit (due to a tendency (only amoungst Anglo-Saxon cultures?) of buyers always to max out their borrowing capacity when buying land?). This is independent of supply of houses. The second, is the tendency of landlords to snap up available housing when landlording is good business, i.e. when interest rates are low compared to rental rates. This too is governed by interest rates, but is also governed by the legislation affecting tenancies. One would expect that this was affected by the supply of houses in that if there is a plentiful supply, a smaller proportion will be bought by landlords, so that for a given legislative regime more housebuilding => increasing owner-occupancy and less => decreasing, which is largely what we see since the WWII. So the problem we have is that changes in tenants' rights have almost exactly coincided with changes in rates of housebuilding, which could both be down to a change in government and popular thinking. I do remember that when I bought my first house was when the idea of a "house as an investment" first started doing the rounds. There were also changes in credit regulations around the same time and the start of RTB, to muddy the waters further.
Oh and another change in popular thinking that occurred at that time was debt is bad => debt is good.
B, exactly, it is difficult to control for all these variables.
NIMBYism in its moden form is a relatively modern invention (1970s?) and rabid full-on Home-Owner-Ism only really came in under New Labour (around 2000).
Bayard, it's even worse than that. I can see three influences on the housing market: the two you mentioned plus low-rent social housing. After WWII there was a ton of good social housing built (and a lot of crap -- but at least it was cheap crap) and private landlords had to compete with that. So they had to provide a "service" which was at least as good.
But as you point out, all three influences started to unravel from the 1980s until now, owing to policy changes.
So here we are in today's housing debacle. It seems to me that we have to reverse some of those policy changes if we want to get back to something resembling a sane market. And the one which would do most good most quickly (in my opinion anyway) would be to build up the council housing stock again.
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