Tuesday, 15 August 2017

Poor interpretation of statistics of the day.

From City AM:

New research seen by City A.M. has shown that most British househunters are snubbing new-build homes in favour of older properties…

But in a survey of 2,000 UK adults, 81 per cent said they were not keen on the prospect of living in a new-build, while 79 per cent thought the government should focus more on supporting the refurbishment of traditional properties.

Efforts to solve the housing crisis have resulted in a record 162,880 new homes being built over the past year. But 1.4m properties are currently empty across the UK, a 20-year high.

1. Define "new build". If it means completed in the last few months and for sale to the first occupant, it's about half a percent of the housing stock. So if 19% are happy to live there, that is quite enough demand and irrelevant.

2. People might not like "new builds" because they

a) are smaller than older ones, or built to lower standards (the old housing which was low standard has largely been demolished or refurbed since) and

b) older homes tend to be in the more desirable spots (either because that was the most obvious place to build them or the town has grown up around them) and new greenfield housing estates are a bit bleak for the first few years until shops, kids nurseries etc open up and buses are re-routed.

So it's not comparing like with like. The pricing mechanism will sort that out.
Also from City AM:

Taxpayers already dish out almost £5bn annually to the [railway] industry, despite the fact a relatively small number of people use the railways. Office for National Statistics (ONS) figures show households on average spend just £3.60 per week on rail travel, compared with over £30 on the operation of personal transport.

Actually, support for rail users is incredibly regressive too. The bottom fifth of households by income spend on average just £1 per week on rail. This compares with £11.20 for the top decile. Little surprise then that ONS stats show that the bottom fifth of households obtain £26 in rail subsidies per year, on average, compared with £173 for the richest. 

It stands to reason that increasing taxpayer support would exacerbate this regressive effect, with measures such as freezing rail fares or limiting increases effectively taking from working taxpayers to give to the rich.

His argument is, subsidies for rail transport are wrong, with which I would largely agree (I'm not quoting the bits I agree with). But the factoids he quotes do not particularly support his argument.

1. A small number of people commute by train because it is largely a south-east/London thing. Much higher population densities make railway more viable. In turn, while going by train is more expensive than by car (on a per mile basis), with higher population densities/land values, you need to focus more on efficient use of available land. So overall the extra cost of running a train network is less than the cost of the land that roads and car parks would use, so it is still a saving to the economy as a whole.

2. The statistic on lower earners spending less on trains is also facile. Firstly you can strip out the south-east/London effect. And nobody is going to pay thousands for an annual travel card to go and do a minimum wage job miles away. But it's worth it if you are commuting to a higher paid job.

3. Lower earning non-rail users are *not* subsidising higher earning rail users. Subsidies come out of tax, and higher earners pay a lot more tax. So it's higher earning non-rail users who are subsidising higher earning rail users.

4. For example, my wife and I spend about £4,000 a year on our London Transport travel cards and earn a fair whack between us. Half TFL's budget is from ticket sales and the other half is from subsidies out of taxes we pay. AFAICS, if they abolish the subsidy, double ticket prices and give us a tax cut, we would end up better off, with the upside that the trains would be less crowded. Sounds good to me (out of narrow self-interest) but that's not much consolation to all the people doing low paid jobs in London, who would clearly end up worse off. If the extra taxes I pay go on reducing travel costs for all the burger flippers and office cleaners in London, then that seems like a fair trade-off to me - but that is the very thing he opposes.

5. From a Georgist point of view, his statement that subsidies are "effectively taking from working taxpayers to give to the rich" is quite true if you mean that taxes on output and employment are spent on subsidising rail fares, which in turn boost land values in areas with a good rail network, which end up in the pockets of landowners. But I'm sure that's not how he meant it.


James Higham said...

The bottom fifth of households by income spend on average just £1 per week on rail.

On benefits, no job?

DCBain said...

New builds here in the People's Republic of South Yorkshire are awful; slums in the making. They are built as cheaply as possible with three stories, tiny rooms and no gardens so they can cram as many as possible onto a given acreage.

Lola said...

Surely if rail subsidies were removed the demand for burger flippers would not reduce. But their wages woukd have to rise. Which would mean either higher burger prices or lower rents for burger sellers.

Mark Wadsworth said...

JH, yes that's another good example.

DCB, it's the same everywhere. Problem is, the NIMBYs use that as a reason for not building any new homes at all. Clearly they are better than nothing.

L, yes, to a certain extent that would happen, some combination of burger prices going up, burger flipper wages going up, and rents going down. But in relative terms, the high paid (rail user or not) will win out and the low paid rail user will lose out.

Bayard said...

Another thing that militates against new builds is that a five-year old house, by and large, has had all the teething problems sorted out. OTOH, older and really old houses tend to be more expensive to heat.

Mark Wadsworth said...

B, that too.