Wednesday, Feb 24, 2010
Release some land and the housing crisis can be solved
BBC: House of the future is plastic
Interesting feature especially at 1:15 when he quotes the price.
Personally I have always suspected (based on 1995 buiders prices) that
a bricks and mortar house wouldn't be much more.
Posted by tenyearstogetmymoneyback @ 09:37 PM (885 views) Add Comment
19 Comments
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1. freemanphil said...
Nonsense. This has nothing to do with land availability. Price is a function if supply and demand in a free market, but, artificial inflation of credit has provided builders artificially high expectations of demand. Even if we give them this land, the real demand doesn't exist until prices fall, so they will only end up going bust when interest rates rise, but that time is not far off.
The Austrian Theory of the Business Cycle
2. devo said...
hypothetical question...
What would happen if ALL land could be bought and sold as building land?
Imagine there's no greenbelt
It's easy if you try...
3. devo said...
well for a start, the price of most building plots currently for sale would plummet
4. powerofnow said...
@ fremanphil: Nonsense. This has nothing to do with land availability. Price is a function if supply and demand in a free market...
I suspect that anyone who says housing affordability has nothing to do with land availability doesn't really understand the importance of land in the supply and demand equation. FMP should go back and read Henry George or the Silver Bullet by Fred Harrison, there is a free download of the book here: http://www.theiu.org/learning-resources
5. landofconfusion said...
"Release some land and the housing crisis can be solved"
No, No, No, No, No.
Why do so many people on here think that building more housing is the solution?
Sorry Thatcherites/Labour Lovers but we need to take a progressive approach to this problem:
1. Reduce this countries' population.
2. Ban BTL.
3. Stop people having the 'Right to buy' council homes (if they can't afford it in the first place then they shouldn't get subsidised by the more productive, working population).
3. Tax land so that it's utilised more efficiently.
4. Encourage high-level job growth outside of London.
6. landofconfusion said...
@ powerofnow: suspect that anyone who says housing affordability has nothing to do with land availability doesn't really understand the importance of land in the supply and demand equation.
In that case how come some land rich parts of the US still experienced significant (some might say astronomical) rises in house prices?
7. freemanphil said...
Power of Now, there is enough land out there, and enough planning applications. They just want a new toy for speculation.
8. alan_540 said...
@5 landofconfusion ... Rather than reducing the population, wouldn't it be easier to build more houses?
9. str 2007 said...
landofconfusion @ 6
That's an interesting point, however in those circumstances I think you'll find there will be a correlation between, land (farming) and land (with planning permission.
In the latter case the land will have a higher value.
I agree plots with permission can be had all over Europe inc. Germany for as little as £10k. Build cocts as we know are say £100k for a 4 bed detatched (depending on spec).
The increase in value in these instances is down to credit availability. But the increases will be roughly inline with the basic land/plot price.
The truth is in these areas where plots are readily available house prices are not out of control, because ultimately a family can go through a year of hassle/pleasure depending on your view point and save say £30-£50k by doing it themselves or having a builder do it for them.
This option naturally holds back the price of a finished project to say a year or 2 of jooint salary between DIY or buying a finished house.
So personally I think plot availabilty has a lot to do with final prices.
As for the plastic house, not sure that's going to catch on as I suspect we'll find in time that there will be problems associated with this particular build method. EG the whole house smelling very 'rubbery' on hot summer days. Or someone managing to prove that the odour given off is in someway carsonogenic.
If it was me I'd prefer to spend double or triple on a traditional build.
10. alan_540 said...
@9 str 2007... and we're back to simple affordability of up to 3x income which is where we were 12yrs ago. Plastic or cardboard or brick, doesn't really matter if it's too expensive.
11. Mwmolloy said...
I would be quite worried about claims arising from gas leakage from the plastic bricks. I think its a red herring. Can they get liability insurance for this? What about fire? He said it didn't rot. Can you imagine a plastic house having even a small fire? Dead in seconds from fumes...
As far as I know, plastic contains quite a few nasty chemicals.
It's a far better idea to turn them into wind turbines maybe or bus shelters or cow sheds are car ports... I don't really want to live in one though.....
12. mark wadsworth said...
Re land availability, the USA is two quite distinct housing markets.
There are some areas with more or less no planning restrictions (Houston, Texas) and prices did not go up nearly as fast as the average increase (and have not fallen much since the bust) even though they built loads of houses for people who'd left New Orleans.
Conversely, there are some areas with strict planning restrictions, where prices rose much faster than the average.
But this is of course only one factor, the others are the credit bubble and the absence of Land Value Tax.
None of this is in any way hypothetical - just go back to the 1950s and 1960s in the UK when we
a) Built twice as many houses (including a lot of social housing)
b) Had strict mortgage rationing (sensible deposit, record of saving, three times income and so on)
c) Had Domestic Rates and Schedule A tax (Which added up to a property value tax although heavily disguised, and property value tax in turn is fairly close to land value tax).
There is no point arguing about which is most important, they all are.
13. alan_540 said...
@11 Mwmolloy ... Spot on - it's a Red Herring.
14. alan_540 said...
@12 mark wadsworth... Why won't government contemplate reintroducing a) to c) - it could be done by whoever wins the GE and could be brought in as part of the rebalancing of the public expenditure and the economy. It saddens me that we will be where we are now in 20yrs time - my children having spent their working lives not having the choice to buy their own house or at best having a much poorer quality of life because of a ridiculous sized mortgage.
15. mark wadsworth said...
Alan 540 comment 14, you tell me!
I suppose it's because the older Home-Owner-Ists have cheerfully airbrushed this chapter out of history - they took advantage of (a) to (c) while the going was good, and then pulled up the metaphorical drawbridge. As you point out, the Achilles' Heel of Homw-Owner-Ism is that they are ruining the life chances of their own children, which I think is the best line of attack.e
16. landofconfusion said...
@8 alan_540 said...
"@5 landofconfusion ... Rather than reducing the population, wouldn't it be easier to build more houses?"
In the short term, yes but it's hardly a sustainable solution and causes more problems than it solves. We can take measures like reducing immigration and placing the cost of having kids on the parents (or sending them to jail if they can't pay because they've never had a job in their life) which admittedly might upset a few people but tough sh*t. If you can't afford them then don't have them.
@9 str 2007 said...
"That's an interesting point, however in those circumstances I think you'll find there will be a correlation between, land (farming) and land (with planning permission.
In the latter case the land will have a higher value."
There are lots of ways you can cut it but the point I was trying to get to is that we must discourage land speculation. A LoC government would reduce taxes on wealth generated though productive means and increase taxes on capital gains, with the intent of pushing society into getting it's wealth primary via productive effort.
Let's take your agricultural land as an example. I can buy some, do noting with it except rent it out to a farmer who actually uses it for productive purposes and then, a few years later pocket a nice capital gain. In my book this is wrong and should be stopped.
17. str 2007 said...
landofconfusion
Yes there's a balancing act between longer term investment and being able to support one's self after retirement and out right speculation.
With more stability shares in Blue Chip companies should provide capital and income in retirement.
The bankers have raised concerns with everyone about investing in anything to do with the City. Look at the number problems there have been eg. endowments not performing, Pensions comapnies going bust. Survive that lot and you find annuity rates dropped from 10%ish to 2-3%. add in several serious crashes in the last 20 years and you can see why people don't bother with pensiuons anymore.
The government have now made it possible for Joe Bloggs to invest in residential property ( or steel their neighbours future labour) whichever way you look at it.
Personally I think this is wrong as it puts alot of pressure on the whole system.
Investments should be of money earned, although it works, borrowing to invest in (non productive) assets is where in lies alot of our problems.
18. landofconfusion said...
I agree. The emphasis should (must?) be on investing in productive assets, as opposed to merely speculating for capital gain.
productive investments . Selling the same old assets to each other at inflated prices only leads to a crash, as we have (and will) see.
I understand you completely when you mention that people speculate in land in order to increase their retirement income. It's one of the problems which has caused this mess and, to be honest has most likely damaged otherwise productive investments as money is being sucked away from them, both at the investment end and at the consumer end as people no longer have the disposable wealth to buy those products.
"Personally I think this is wrong as it puts a lot of pressure on the whole system."
Agreed. When I see so called investment bankers taking a lot of money out of the economic system I often ask myself "what have they produced which is so valuable?" The answer is, of course, nothing. Much like investments in land and other assets which pay out almost solely though capital gain, they have made their money though speculating and in some cases destroying wealth. The whole system is now biased towards easy money though doing nothing at all and it is this (IMHO) which leads to pensions and annuities being so poor.
And as you point out it's cyclical affecting generation after generation.
What we need to do is direct investment money so that it goes into
On a last point, it's funny how out of all the Euro nations only Germany, the only nation to emphasis productivity over capital gain, is the one which seems "best placed" to survive this global recession.
19. tenyearstogetmymoneyback said...
This has certainly sparked a debate. My main concern about a plastic house would be fire.
Anyway back to the main point which is the cost of the land to build these houses on.
re devos comment about green belt etc I don't think you would even have to go that far.
A real example just a couple of miles from here is what used to be RAF Sopley which is on the edge of a local village.
View Larger Map
This is owned by a comapny who in the past has sought permission to replace the Nissan Huts
there with housing. The planning people refuse permission saying the land must be returned to the
state is was in before 1940 when the camp was built. So there it sits while the stalemeate continues.
How long has this been going on ? Ceratainly since I moved here 20 years ago and possibly since 1974
when the camp closed.
:- Duncan
p.s. Question for Mark. What would the value of this land be given that it is neither useful for building
(because they won't allow it, or farming, as it is covered in Nissan Huts.