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.
---------------
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.