Wednesday, Jul 22, 2009
JRF Housing Market Taskforce launched today
Mortgage Introducer: JRF establishes Housing Market Taskforce to end boom and bust
A number of the UK’s leading housing and economics experts have been brought together by the Joseph Rowntree Foundation (JRF) to develop a series of long-term policy options that would help end the cycle of boom and bust in the housing market. Launched today, the JRF Housing Market Taskforce will seek to challenge the root causes of instability in the housing market that have led to a damaging cyclical pattern.
Posted by jack c @ 12:35 PM (802 views) Add Comment
26 Comments
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1. mrflibble said...
No taskforce needed, the answer is simple, loan a rigid maximum of 3.5x single income with a genuine deposit of 10%.
2. mark wadsworth said...
What Mr F says.
Plus of course sensible banking supervision; scrap the BoE Monetary Policy Committee; liberalise planning laws and replace as many taxes as possible with LVT or Progressive Property Tax (like Business Rates, but for residential properties as well).
3. 51ck-6-51x said...
But you've got to love the social ideals of late Quakers ( Religious Society of Friends ). Don't smoke, don't drink - eat chocolate & live in towns with more green space than developed ( oh and roundabouts )...
4. seanb303 said...
http://renegadeeconomist.com/blog/prepare-dead-certainty-boombust.html
5. str 2007 said...
mrflibble & MW
You also need to make sure that BTL have no unfair advantage. In fact it could be argued that with 3.5x single income and 10% deposit there would be no need for the rental sector as everyone could afford their own home.
Mobile workforce I hear you say, well with all that extra disposible income they'll be able to stay in hotels and boost the economy further.
Or indeed why doesn't each local authority invest in housing for the mobile workforce requirement for it's particular area and allow private & local investment in the form of shares in that.
But yes, we have essentially drawn the Taskforces work to a swift conclusion in minutes.
Who on earth is paying/funding this taskforce and how much is it costing?
6. Dunkindogdo said...
Simpler still, include house prices in the measure of inflation. If they had been previously, inflation would have been running well over the 2%, and interest rates would have been adjusted to reflect this.
7. mark wadsworth said...
@ Mr Flibble "You also need to make sure that BTL have no unfair advantage."
I forgot to add to my list, "scrap housing benefit for private tenants and build more social housing if necessary"
Don't forget that BTLers piled in hoping to make capital gains, they're now making capital losses. All the measures I suggested = low and stable house prices, so there won't be such a wave of suckers ever again.
I'll give it another hour and I guess that subsequent posts will add a couple more tweaks to this and then we're all sorted, we can present it to JRF as a finished work.
Actually, you can take the JRF at face value (they are NOT a fakecharity) - they were set up by dear old Mr Rowntree a century ago, and did originally campaign for measures similar to what I proposed above (in particular LVT and social housing), don't forget a century ago 90% of us lived in private rented housing or housing provided by employer (including Mr Rowntree). There was no social housing.
8. 51ck-6-51x said...
MW, yes... as I said, you've got to love the social ideals of late Quakers.
9. george monsoon said...
I have a few suggestions.
Monogomous home ownership. You can only ever own one property at a time. The only rented property should be state owned public housing. Bring this law in, and force all the BTL leeches to sell up, with an option for the government to buy them.
10% deposit and 3.5 x earnings capped, no loopholes, no excuses - already stated earlier.
Repayment mortgages only, but offer fixed deals for the term of the mortgage.
10. mark wadsworth said...
GM, I'd be wary about statist/authoritarian measures like only owning one property.
Where is the moral difference between one family having a £300,000 main residence; and another family having a £200,000 main residence and a £100,000 holiday flat?
What if man owns a house and woman owns a house and they want to get married? Would they have to sell one first?
And so on. It would not work!
Far better to sort it out with LVT, that way people would just keep the properties they really need and are prepared to pay for.
11. mrflibble said...
I love it when a plan comes together...
To think.. To dream... To imagine... A housing market based on solid foundations, where good, honest, hard working people can own there own place, for a reasonable pot of cash. A housing market so tame, sensible and boring that is allows people the privileged of enjoying the lions share of the money they earn, on whatever it is they enjoy.
We are now so far away from this that is seems impossible to achieve, probably is. What we have achieved, however, is what we have now. It's magnificent, isn't is? Young people have no hope, they are stuck in rented, paying the BTL'er who priced them out, and for the few who have saved hard and broke the chain, at least over the last few years, what is their reward, a pile of negative equity, a lifetime of crippling debt, the majority of what little income they have consumed. It's awful...
Sadly we cannot stop people from being greedy, it's in our nature, but that is why the regulators are there, to restrain us, to stop us getting out of control. Instead they threw petrol on the fire, now the whole hillside has gone up...
12. 51ck-6-51x said...
GM
- and more pertinently, what about companies? They would, no doubt, be excluded, and then all a landlord must do is start a company - this would just act as a barrier to entry, which would be a worse situation for those that must rent ( less competition ).
13. flashman said...
How about doing absolutely nothing. A completely free market would be far less volatile. Governments over the last 30 years or so have repeatedly interfered and tweaked the market causing all sorts of unintended booms and busts. All preferential tax laws and any other unique treatment of the housing market should cease.
An example: The only reason I ended up renting is because I built a house on a plot I owned. My accountant recommended that I have no other address other than the new house so I sold up and rented before the build started. I then moved out of the rental and lived in the house for almost a year. I sold it just before the sh*t hit the fan and paid absolutely no tax on the profits (because the tax laws permitted this). Obviously I’m not Ghandi, so I gladly pocketed the money but it is a classic example of the preferential treatment that distorted the houswing market. The free market is much criticised at the moment but we really haven’t ever had one
14. flashman said...
PS They even gave me the VAT back on the building materials. Why?
15. cyril said...
Why don't people come up with ideas like these during the boom times? Oh silly me, I forgot. Nobody wanted to spoil the party.
16. Mark Wadsworth said...
@ Flashman "How about doing absolutely nothing. A completely free market would be far less volatile."
The more I think about this, the more I come to the conclusion that housing is just about the least free market we have - it's a series of state-protected local monopolies. For sure, there is nominally a "free market" in shares in those local monopolies, but the underlying substance matter of the transaction is a privileges vis-a-vis everybody else which are guaranteed by The State (and the value of which is partly driven by what "the state" does, police, law and order, street lighting, refuse collection etc).
An example of this is that of UK surface area, only approx. 5% is given over to housing. If we are growing wealthier by 3% a year, then we are producing and consuming 3% more - so every year we go on 3% longer holidays, drink 3% more beer, go to the cinema 3% more and so on. Is it not unreasonable to assume that the amount of housing we can occupy should also increase by 3% a year, i.e. apprrox. 750,000 new-builds?
By analogy, we know in e.g. London there is a limit on the number of taxi licences. So there is no "free market" is becoming a taxi driver, so this restricts supply and pushes up cost of a taxi ride and generates super-profits for incumbents. The fact that there is a "free market" in those licences on the second hand market does not address the underlying problem.
Pulling that example together with the fact that we clearly aren't allowing 750,000 new builds a year (and never have, not even in the golden days of the 1950s), who benefits? And who loses?
17. bellwether said...
Flash, your bullish comment on yesterday's post has been irritating me off and on. While many on this site are perma bears and like it, I'm keen to turn bullish, when the time is right, indeed being bearish is hopefully only a temporary state before rampaging into sunny pastures.
I just feel that we have not done enough to burn the forest down as yet. Nothing has become truly cheap and there is no real revulsion and too much optimism, even the equities lows in March were reached in an almost complacent manner.
Also the structural problems which predicated the crisis (and made it so easy to predict) have not been solved, and in a sense can only be solved by enough liquidation, which is just not being allowed to happen.
It feels like we are trying to pull off the trick that worked in the earlier part of the decade, where we created a bull run within a bear market, by getting the consumer to leverage up further on the back of inflated property prices. This unleashed an unspeakable, but ultimately illusory, volume of capital, and it is impossible to see how that can be replaced until it is allowed to collapse. We want to forestall that, but in so doing fear we only prolong the agony.
18. str 2007 said...
Bellwether
You've summed my feelings precisely, I just don't think we've seen enough pain yet for this to be over. Unless of course Gordon Brown has saved us and the World.
Looking forward to being bullish myself, but will struggle until I see what I consider to be a bottom and this isn't it IMO.
19. quiet guy said...
@cyril
Yes, exactly. It will be politically impossible to introduce LVT or any other change that threatens the free money machine when the next boom starts.
(I also believe that banking regulation is doomed to fail for similar reasons in the long run.)
20. flashman said...
Bellwether: I am sorry to hear that. Putting on my pyscology hat for a minute, I'd have to say that my bullish comments are not what's irritating you. It' more likely to be that you think I might be right but I damn well shouldn't be.
You have a far better grasp of the fundamentals that almost anyone on this site and I can fully understand your sentiment that a bit of bubble manipulation and ramping of attitudes couldn't possibly work for the second time in a decade. However my bullish sentiment is not based on a belief that we can achieve this light weight manipulation..
At the risk of irritating you some more, I have almost no respect for the fundamentals. They are a moveable feast and are open to interpretation. Esoterically speaking my bullish sentiment is based on the mercurial nature of mankind and his astonishing ability to make periodic leaps.
Mankind can seemingly pull a rabbit out of the hat whenever the chips are down. We have done it throughout history. Getting back to earth for a minute, there are other factors at work that can overcome the so called fundamentals without drawing breath. The last ten years or so have seen the addition of another 2.5 billion souls who aspire to be middle class. These people have a burning desire to succeed and more importantly a belief that it is possible. They are educated and raring to go. The worlds' propensity to consume and create is at an explosive level that has, maybe, never been seen before. The current economic problems look small to me when compared to the burning desire and belief of billions of people. These people want to buy stuff now and they are jostling to start. Booms have positive feedback loops and if these people take the initial steps it could escalate like crazy
Getting even further back to earth, we are clearly entering into a new era of technology. Everyone is linked by super fast fiber optic cables and everyone has access to mind blowing computing power. Imagine the synergistic effects of this new phenomenon. We we will soon have new sources of energy. The pace of energy development is starting to reach a critical mass and governments are starting to get seriously motivated. Genetic scientists are finding ways to grow food in the desert and to cure cancer. All this activity will feed on itself and cause a kind of economic white heat (to paraphrase Macmillan).
I haven't really covered it very well because my wife is calling me for dinner but hopefully that is a taste of my thoughts. I'll finish by saying that I have seen the fundamentals shift and fade, too often and too quickly, to pay too much attention to them.
Jesus, you'll probably be apoplectic now if you were irritated earlier
21. quiet guy said...
@flashman
Very interesting post but I'm struggling to contain my scepticism. Hopefully Bellwether hasn't trashed his computer by now.
I presume that the "2.5 billion souls who aspire to be middle class" you refer to are mostly from the BRIC economies? The reason I ask is that I don't see much benefit to the UK in this development.
22. flashman said...
quiet guy: They are not just limited to BRIC. My work is 'international' so maybe I am more excited by global developments that people whose work is more UK based. Many UK people will benefit, if they are useful but they will have to compete in a way they haven't done before. I understand your skepticism but there is a reason that economics is the most lowly regarded of all the sciences. It has an appalling record of predictive success. I am an economist by education but I became skeptical of its methods many years ago (including its unimaginative use of the fundamentals).
What I am saying is not that unusual. We have suddenly exploded out of many seemingly dark situations. It would be far more unusual if we didn't.
23. uncle tom said...
One upon a time, the Joseph Rowntree Foundation effused a quiet modest air that was all the more powerful for its unsullied commitment to help the less fortunate. I have no idea what they paid their staff at the time, but they certainly had a hair shirt image, and were the epitomy of altruism.
Now they are using trendy acronyms like 'JRF' and hiring people like Kate Barker (probably for an indecently fat fee.) to produce management speak edicts.
This is not the best way ahead for them...
24. timmy t said...
Quote from the article - "“There is no better time to grapple with the fundamental questions surrounding our housing market model." Ummm hello!!! - don't try and come up with ways to fix house prices when they are still unaffordable - give it a couple of years for this crash to really kick in.
Reckon they should read this thread if they want some quick solutions. The only ones I would add are (1) take property porn of the telly, and (2) sort out the education system so people leave school expecting to have to work for a living rather than being able to either live off the state or get rich quick through property.
25. mander said...
Too many people are acquiring properties not have a home to live in but to make a tax free investment. At any point in time young families will always loose the to the elder competitor. There are 3.9 million properties rented to young families and not sold to them. And this madness continues.
Every homeowner has enjoyed their house price erection and this has been taken as an economic miracle.
26. bellwether said...
Flash thanks for taking the time to respond to my fit of pique! Find your response genuinely interesting and will bear it in mind. Reminds me somehow of something Charlie Munger said recently about feeling more optimistic about the economic outcome of all this as he was getting closer to death.
For now I don't share the optimism, but I guess I'm optimistic about being able to be optimistic in the nearish future. I also believe that the sort of change you speak of is quite possible but somehow feel the ground isn't right yet, although it will be in time. It is not so much that further pain is programmed or inevitable, but more that it is perhaps necessary before we can really get the change. The incredible golden era that has existed for us since 1945 was preceeded by nearly 3 decades of suffering, not that I'm suggesting that's necessary just that we have maybe forgotten what collective pain is (and that it is not Princess Diana dying !) before we detach to take the sort of leap you describe. Most of all a leap involves letting go