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30 Years Of Unsupplied Demand

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http://ftalphaville.ft.com/2014/01/02/1730982/30-years-of-unsupplied-demand/' rel="external nofollow">
To understand how it came to this, you have to go back to 1979, when Margaret Thatcher began forcing local authorities to sell council houses to any sitting tenant able and eager to buy, at discounts of up to 50 per cent. It was one of those rare policies that still seems to contain in its very name the entire explanation of what it means: ‘Right to Buy’. Cherished by Tories and New Labour alike as an electoral masterstroke, it offered a life-changing fortune to a relatively small group of people, a group that, not by coincidence, contained a large number of swing voters.
Right to Buy differed from the period’s other privatisations in many ways. It was tightly linked to the buyer’s personal use of the asset being privatised. If the Royal Mail had been sold on the same principle buyers would have got a discount on the share price based on the number of letters they’d posted over their lifetime. According to Hugo Young, Thatcher had to be talked into Right to Buy by a desperate Edward Heath, then her leader, who’d been persuaded by his friend Pierre Trudeau after his electoral defeat in February 1974 that he needed a fistful of populist policies. No wonder Thatcher baulked. Right to Buy violated basic Thatcherite values: that self-reliance was good, state handouts bad. Right to Buy was a massive handout to people who weren’t supposed to need handouts. In fact, that was why they got the handout – because they were the kind of people who didn’t need handouts.​1
It was Britain’s biggest privatisation by far, worth some £40 billion in its first 25 years. But the money earned from selling Britain’s vast national investment in housing – an investment made at the expense of other pressing needs by a poor country recovering from war – was sucked out of housing for ever. Councils weren’t allowed to spend the money they earned to replace the homes they sold, and central government funding for housing was slashed. Of all the spending cuts made by the Thatcher government in its first, notoriously axe-swinging term, three-quarters came from the housing budget.
Matt Griffith, author of an incisive paper for the think tank IPPR about the housing crisis, We Must Fix It, points out that
the interconnecting problems afflicting the private housebuilding industry do not reflect a deeper economic malaise; they are the deeper economic malaise
. Britain’s established housebuilders, Griffith reckons, no longer have housebuilding as their primary function: they’ve essentially become dealers in land. Griffith estimates that
British housebuilders have enough land to build 1.5 million houses
. This is much higher than most estimates because he includes not only land that has been given planning permission for homes to be built on it but also the shadow land bank: the vast stretches of agricultural land that housebuilders’ canny local agents guess will get planning permission in future, and have tied up through confidential option deals with landowners.
I won't paste the FT specific text 'cause I know they get sniffy......the above sections are external quotes in the article (which is free not firewall)
But it's well worth a read, especially the supply chart, and the builders landbanks withholding supply.

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This is a terrific article, thanks for posting. But the argument that the big housebuilders are sitting on such huge land banks seems very tenuous. They hold options to buy, not actual title, on some agricultural land, that just might (NIMBY's and craven local councils permitting) become available for building. That's a very long way from the accepted definition of a landbank, as owning land with existing planning permission to build.

That apart it's well argued and well worth a read.

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There is a very easy to break the land monopoly.

Redefine the greenbelt.

The greenbelt was placed around EVERY town and village in the UK to prevent urban sprawl and increase building density within the towns. Mission accomplished, towns and villages are now high density - Infact the towns and villages are now over populated.

Now it's time to redefine the greenbelt and allow building on the edge of every town and village up to the boundary of the refined greenbelt area. In another 20/30 years it will be tome to redefine the greenbelt again..

Since building in the countryside has essentially been made illegal there is ZERO chance of people getting together making new villages and towns out of their own need. If you look back in history you will find that towns and villages appear out of the 'need' of the people to live and work in an area, they did not live in an area because legislation forced them to.

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This is a terrific article, thanks for posting. But the argument that the big housebuilders are sitting on such huge land banks seems very tenuous. They hold options to buy, not actual title, on some agricultural land, that just might (NIMBY's and craven local councils permitting) become available for building. That's a very long way from the accepted definition of a landbank, as owning land with existing planning permission to build.

That apart it's well argued and well worth a read.

That's fine

Except these options are risk free since if there is a whiff of insolvency (like if you get in above your head with a leveraged bet on land banks, say) then the govt steps in with help to buy and as if by magic the insolvency disappears owing to a guaranteed income stream

Hence the builders get carte Blanche to gamble on multiple land ownership types, and can absorb the risk of just sitting on even land with planning permission hoping it will go up on value, since they cannot go insolvent

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I do wonder which conservative MPs have interests in the big builders...

and with interests in the land (even as farmers currently benefiting from relatively low farmland prices) that those builders might have options on.

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I guess if you lived on a large council estate in an ex-mining town, it hasnt made much of a difference to your life, but if you exercised RtB in London or the south east, its been a great removal of wealth inequality (unfortunately replacing it with intergenerational inequality) Round here, most were built in small lines on existing roads, so dont have the stigma of an'estate' As its fairly rural round here, and rationing was still in place in the 50s and most were built in the 50s and 60s, most have HUGE (like 200 to even 400ft long) gardens to encourage the original tenants to grow their own food. Most of those have since been sold off as plots.

The 'austere' 50s were a time of greatly lessening inequality, yet demonized by all todays bankster economists, both left and right.

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There is a very easy to break the land monopoly.

Redefine the greenbelt.

The greenbelt was placed around EVERY town and village in the UK to prevent urban sprawl and increase building density within the towns. Mission accomplished, towns and villages are now high density - Infact the towns and villages are now over populated.

Now it's time to redefine the greenbelt and allow building on the edge of every town and village up to the boundary of the refined greenbelt area. In another 20/30 years it will be tome to redefine the greenbelt again..

Since building in the countryside has essentially been made illegal there is ZERO chance of people getting together making new villages and towns out of their own need. If you look back in history you will find that towns and villages appear out of the 'need' of the people to live and work in an area, they did not live in an area because legislation forced them to.

Major conurbations yes. Every town and village -no

Surprisingly large amount of the UK including much of the South East are actually not covered by Green belt restrictions though some areas like the South Downs are national parks which have their own protections.

greenbelt.jpg

Edited by stormymonday_2011

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I guess if you lived on a large council estate in an ex-mining town, it hasnt made much of a difference to your life, but if you exercised RtB in London or the south east, its been a great removal of wealth inequality (unfortunately replacing it with intergenerational inequality)

The lottery lifts people out of poverty, and in much the same way. Not much of an economic policy though.

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Major conurbations yes. Every town and village -no

Surprisingly large amount of the UK including much of the South East are actually not covered by Green belt restrictions though some areas like the South Downs are national parks which have their own protections.

greenbelt.jpg

Interesting chart. Thanks for posting.

Plenty of boomer dog pooping territory to go at there.

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This is a terrific article, thanks for posting. But the argument that the big housebuilders are sitting on such huge land banks seems very tenuous. They hold options to buy, not actual title, on some agricultural land, that just might (NIMBY's and craven local councils permitting) become available for building. That's a very long way from the accepted definition of a landbank, as owning land with existing planning permission to build.

That apart it's well argued and well worth a read.

We should also note that Options to purchase Land will be at a price to be fixed AT THE TIME OF PURCHASE - not therefore the agricultural price. Having negotiated such documents for Land Owners, the attraction is a payment just for an option for a period. When the period runs out, the Option is finished unless exercised. The developer cannot usually force a sale unless they manage to obtain planning consent and that's when the price would rocket to developable land values. They spend alot of time and money trying to get planning consent! So, it's a win win for the Land Owner.

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