Wednesday, 2 December 2015

"Why are so many British homes empty?"

A mildly interesting article at the BBC on the subject.

But really this is about agglomeration benefits.

At one extreme, there are the multi-£-million buy-to-leave flats in London standing empty. The only thing which gives them value is the fact that they are in London i.e. agglomeration benefits (actual or potential).

At the other end, the abandoned streets in seaside towns, the reverse applies. If one house is standing empty in a road, it makes the area a bit less attractive and so depresses the value of the other houses a bit. If two are empty, that depresses the values by more than twice as much. The effect is geometric and reaches a tipping point, so once a third or half the homes on a street are empty, the others are now virtually unsaleable.

In which case, Liverpool was doing the right thing selling off a whole street for £1 each, that gets people back into the houses and kick starts the process again.

(In either case, LVT would have sorted it out, but that's by the by).


Woodsy42 said...

Liverpool - and many other places - would have done even better had they renovated what they had instead of bulldozing vast areas of potentially ideal starter housing, then, having devastated communities and owner's lives, having to sell off the leavings at £1 each.

Mark Wadsworth said...

W42, yes, exactly, same thing.

Random said...

We need a massive increase in housing building regulations to at least Passivhaus standards. We should be building houses that use next to no energy. Massive house building programme so we can start demolishing crap houses.
It is not just the land but the buildings as well. It's another example of market failure. This can only be fixed by strict building regulations, increased building control inspections and updating consumer legislation so that consumers can go after house builders for crap installation for as long as the building remains. If Denmark has Passivhaus, why can't we?

Bayard said...

Why do we need more energy-efficient homes by diktat?

Ben Jamin' said...

@ R

We've covered this one. The incidence of build costs fall 100% on land prices. We could in theory increase the costs of building a new home three fold and aggregate house prices would stay the same.

While there are good reasons we shouldn't go that far, we could and should be leaving future generations homes fit for humans, rather than simply keeping land prices as high as possible. It's a true scandal.

Ultimately, this is something that the market can only sort out with an LVT.

Given the assumption people's current preferences split land/capital, there's no doubt given higher discretionary income a lot of this will go on bigger and better quality new homes for ordinary people.

In the meanwhile, the lack of adequate size/volume/quality standards is a blot on our politicians and our economists. Shame on them.

Random said...

"Why do we need more energy-efficient homes by diktat?"
So less power is wasted and to release less carbon as to solve the problem with Climate Change (which I know many on here doubt is a problem.) Also to employ the steelworkers who have lost jobs.
"Steel making from iron ore is a silly thing to be doing in the UK. We no longer have supplies of Iron Ore and there is sufficient diversity of steel supply from elsewhere. So why is there a difference between importing steel and importing the ore? UK steel works should be about recycling steel that is already here – and it should be near fully automated.
The engineering the steel workers should be doing is constructing automated housing production lines – creating energy efficient houses that can be simply bolted together on site."
See also B. Mitchell's blog I link to on steel wokrer's jobs.
Both "diktats" and free markets are just tools to use to achieve good for people. That's why I take the middle road between geolibertarian and Communist and I am just a standard J.Corbyn supporting lefty.

Random said...

"Ultimately, this is something that the market can only sort out with an LVT."

BJ, I fully support 100% Land Value Taxation. "Markets" (aka competitive valuation) are indeed useful tools. I support this as well.
The other thing needed is to create jobs where people live so they don't have to commute. This is a *very significant* microeconomic issue, and of course Job Guarantee puts labour to use and the enormous human cost of uenemployment is more than any 'deadweight loss' microeconomic problems.

There is significant open post on here where Neil and I have talked through various issues such as open borders with Blissex et al and some lefties (225 comments so far!):
Comments that are applicable here:
"And that's the point - create the jobs where people are. Having people wandering around the continent like permanent refugees in search of their next meal is destructive to communities and cultures.

It only serves the corporate masters, who then have no reason to innovate their management and control techniques to take the work to where the people are. Hence why we have massive commute times, clogged roads and overloaded trains. "

""If you're living in London and depending on the rental property market you'd need an income much higher than anything I've seen proposed for the JG to be above any reasonable definition of the poverty line."

Or you leave London knowing that there is a job for you anywhere else in the UK where you will get significantly more bang for your buck.

London will then run short of vital workers and have to put their wages up.

The 'black hole' effect of unreconstructed capitalism is halted. People are no longer sucked into London out of desperation.

Switching to a bottom up system starts to move the income distribution curve back to where it should be and the production curve back to where it should be - dealing with needs firsts and then wants.

Wealth is redistributed because the rich suddenly have to start providing services for the poor if they want to earn the money.

Once you have a JG and the 'business confidence' bogeyman that Kalecki mentions is laid to rest then you can be far more aggressive pushing up the living wage. At the top end you give the Ministry of Competition real jack boots to stop oligopolies forming."

So yes I support LVT/BI, but also the Job Guarantee and improving building standards.

I'm a little confused by YPP's anti-poverty ideas? I know you support LVT/BI (I do too) but do you support more Basic Income on top of that etc? What is the official policy?

I support LVT/BI, JG and Basic Income from Nuclear Power.

Ben Jamin' said...

Again dealt with here.

All value, above subsistence comes from the efficient exploitation of agglomeration effects. It is the only thing that gives land it's value.

Because our economic system tilts everything in favour of London, our network hub, the nodes that feed it suffer. A black hole sucking the vitality out of the surrounding economy. In the long run not just bad for the rest of the Country but London and the SE too.

Only by not taxing output, and sharing land and other economic rents, can agglomeration be optimally exploited. It's what a functional market does. Allocates resources efficiently.

However, and land rents are a perpetual free lunch, there are an overwhelming minority interest in preventing that from happening, aided and abetted by willing fools, calling themselves (mistakenly) Capitalists and free marketeers.

CI is just everyones share of rent they are justly entitled to. So, of course, because this is inherently fair, aligns incentives, and therefore increases efficiency (including net economic welfare, of course).

Fairness and efficiency are the same thing. Only through economic justice can we reduce absolute poverty at the maximum rate. It just so happens that because land by value is so concentrated, a shift to LVT also reduced relative poverty. A win-win which no rational person cause argue against.

Only when it comes to the perpetual free lunch, rational goes out the window.

I think the YPP should also be eco-modernist, that is 100% in favour of 4th gen nuclear power. like this

Random said...

"So on a 100% LVT only model. London and the SE would be paying an extra £134 bn per year (2007 figures). Or an increase of 75%.
We don't need redistributive government policy. That has, and always will fail. Just a level playing field so Birmingham, Leeds and Glasgow can up their rate of agglomeration too. "
Agreed, but I don't see why you can't have "redistributive" policies as well.

Random said...


The problem is that one of the axioms upon which monetarism (and perhaps your views?) is built has unemployment as voluntary - they won't train for skills, they're in the wrong place, they won't take a low enough wage. However there comes a point when these excuses don't wash and the alternative explanation becomes obvious - that there are 100 people and 95 jobs and no matter how good they are at looking 5 are going to be disappointed.

If there are 100 jobs and 95 people, jobs will be eliminated to balance the market. Get that the other way around and 'markets' require people to be eliminated.

If you read the link I posted it explains why the JG is necessary to end poverty.

"Fairness and efficiency are the same thing. Only through economic justice can we reduce absolute poverty at the maximum rate. It just so happens that because land by value is so concentrated, a shift to LVT also reduced relative poverty. A win-win which no rational person cause argue against."

IMV, these are "subjective." To free up resources for the government to spend you have to tax flows and/or ban stuff and/or delay stuff or cut bank lending.

Random said...

There is enough resources in the UK to fully end poverty.

The way to end poverty is to provide the real resources needed to the poor and give them something to do to destroy boredom and resentment. So create Jobs for them at the Living Wage.

What you'd be doing is reversing the trickle down process by implementing a full Job Guarantee, increasing the amount of competition authority investigations to break up oligopolies and jumping on rentiers by banning lending for speculation - particularly in property.

You see you don't have tax excess wealth from people if you simply stop them getting it in the first place - by changing trickle down into a bubble up economy.

The living wage *is* disruption, and you slowly push it up over time. Capitalists must then compete for labour from the JG pool - investing and training to receive any profits. It's the latter that is the valuable process in capitalism - just as the heat out of a nuclear reactor is the valuable bit. To get that you simply have to contain the nasty stuff using effective engineering.

That is what MMT is all about - effective engineering to make the system work properly.

If the JG is £10 per hour then capitalists must compensate people properly for doing anything else that is less pleasant than the JG job. That may be money, or it may be promises - but compete they must. It's the lack of competition in the labour market that is causing the current malaise.

If capitalists can't make a profit out of a process, then the process either dies, or if it is considered to have public value it becomes part of the JG job list.

Overtime you get towards equality as you move the bottom to the top.

What many on the left struggle with is that things still need to be made - which capitalism is very good at - and you have no other rational mechanism by which relative value is ascertained even remotely accurately.

Once you strip rents and oligopoly out of the system competitive valuation is pretty effective - particularly when you no longer have to worry about whether a business lives or dies.

It's a bad idea to throw the baby out with the bathwater. We tried that with the Russian Communist based systems, and they don't work. That's why China changed course.

The thing about the 'captains of industry' is that ultimately they only have one vote each.

Ben Jamin' said...

"Agreed, but I don't see why you can't have "redistributive" policies as well."

Because we don't need it, and it's counter productive. I'm a strict Utilitarian, and the greatest good is best measured by how high can we lift the standards for the very poorest over the long run. LVT has no Laffer Curve. It quite simply is optimally efficient, fair and so the best way of alleviating absolute poverty. I'd still be in favour if it increased relative inequality. But is does the opposite in fact.

A JG may be necessary in a dysfunctional economy where we penalise people of what they contribute by taxing output. In a sane economic system, people would be free of HMRC and DWP. With the CI, people have the flexibility to be as economically active as they wish. A boon to the economy and their own economic welfare. It's taxes on output and conditional benefits that trap people in economic inactivity. Distorted incentives.

Fairness and efficiency are not subjective, at least in the affairs of man. Although I admit most people are not ready to believe things really are this simple. They cannot see the wood for the trees because they cannot fully separate Land from Capital.

Anything that maximises aggregate wealth/welfare must by definition be fair.

It's a simple axiom. But the most important one to learn. IMHO.

The most difficult thing in life is the realisation of just how simple things are at their base.

The Astonishing Simplicity of Everything - Neil Turok

DP said...

Dear Mr Wadsworth

The number of empty properties has been an ongoing panic-on-a-stick since time immemorial (as far back as I can remember and took notice of such things). The usual figure quoted then was 750,000. Things have improved if it's down to a mere 610,000 in England and another 50,000-odd in Scotland and Wales, and an increased housing stock.

So what is the problem?


Mark Wadsworth said...

R, creating jobs where people are is a lovely idea, and it works with manufacturing but it's not going to work with service jobs or in construction etc. You can't move a London restaurant job to the north east or a London construction job to Poland.

Mark Wadsworth said...

DP, was I talking about the number? No. I was talking about "agglomeration" effects.

Mark Wadsworth said...

R, how do you mean "what's YPP policy"??

A BI, of course, starting at around £75 a week but we would like to increase it (and get rid of Housing Benefit).

The more you reduce taxes on output and employment, the more output and employment you get. So on top of BI there will quite simply be far more jobs. We only need to increase the number of jobs by ten or twenty per cent to have full employment

With BI plus what people earn plus cheaper housing will mean that very, very few people are in any sort of absolute poverty.

L fairfax said...

Why not move people who don't work to places where they are cheap homes? I guess many of them would suddenly find a job but that would be an advantage. I know someone who has lived in London for 18 years and has never officially worked.

Random said...

MW, yes but there still will be some unemployed. If there is going to be full employment then why not introduce a JG? There would just be zero workers in the JG. The JG is there to mop up anyone left behind.
"In the normal job selection process, first a job is created and then the matching system looks for people to match to that job. Once you get to the margins you end up with jobs that cannot be filled and people that cannot get jobs.

You have a matching problem.

That can only be resolved a little bit via training, job redesign, sanctions, etc. and you always end up with a list of vacancies and a list of people who want a job.


"We only need to increase the number of jobs by ten or twenty per cent to have full employment"

Maybe. But why risk anything?

We're not talking a small number of people here. The number of people unemployed is the population of the cities of Glasgow, Liverpool and Bristol combined. The number of people wanting work if they could get it is the same as the population of the cities of Glasgow, Liverpool, Bristol, Sheffield, Manchester, Leeds, Edinburgh and Leicester combined.

Don't these people think that 8 cities worth of people deserve a better deal?

Random said...

"Fairness and efficiency are not subjective, at least in the affairs of man. Although I admit most people are not ready to believe things really are this simple. "
Surely it is better to have an employed buffer stock instead of an unemployed one. There is no 'long term unemployed' problem and they are cheaper to hire for a start.

Random said...

The other thing is the State needs to take a more pro-active approach towards attacking rent-seeking.

You can get to that by increasing the heat of competition. Breaking up firms, requiring them to be smaller and there to be many more of them in any particular marketplace.

The natural capitalist approach is to eliminate competition using a variety of techniques – from market niche to oligopoly. The state should spend a lot of its time ‘stirring the pot’ to prevent this happening. And the indication that the pot needs stirring is price rises of any magnitude in any market. That means encouraging and even funding competitors, forcing IP to be shared, etc to break the market power.

Wages are then controlled since excessive wage rises mean that some of the firms go bust and everybody loses their job – falling back to the Job Guarantee.

The level of competition considered ‘acceptable’ by regulators is too low. And that’s because of the ‘business confidence’ meme that scares them into inaction.

Bayard said...

R, I guessed that the purpose of the diktat was some sort of MMGW bollocks (In fact I agree that saving energy is important, but only because there's only a limited amount of oil and once we've burnt it all, we'll be screwed for a feedstock for the chemical industry). However, my question was, why do we need energy efficiency by diktat. If people want more energy-efficient houses, they will buy more energy efficient houses. An energy efficient house isn't any cheaper because the builder has been forced to build it that way, so the only result of the diktat is to prevent poorer people buying a slightly cheaper house and wearing an extra jersey to compensate.

DP said...

Dear Mr Wadsworth

Mark Wadsworth said...

DP, was I talking about the number? No. I was talking about "agglomeration" effects.

3 December 2015 at 07:00

So what is their problem?

That's what I meant.