How Much Do You Think It Should Cost To Give Someone A Home

[Democorruptcy]

No, that isnt how money works.

Short term interest rates are low now, but you need to borrow over the life-span the house, so you need to use the interest rate which would be charged on a 100 year loan, not the short term interest rate. Now, there's no such thing as a 100 year gilt, but for reference the current yield on a 2 year gilt is 0.66% while the current yield on a 30 year gilt is 3.44%, so as you can see, it goes up sharply. A 100 year gilt (if it existed) would be substantially higher than the 30-year, probably around 5% if we do a crude adjustment.

But even ignoring that, the opportunity cost argument is still relevant, because even if borrowing was low cost, the government could still be borrowing that money for other purposes.

The first bit is why they would be a good idea for the government now.

Osborne's been thinking about it:

UK chancellor George Osborne is planning a ‘super’ gilt, a government bond that lasts 100 years or even into perpetuity, as he seeks to reduce the cost of the nation’s debt payments

http://citywire.co.uk/money/osborne-mulls-100-year-super-gilt/a574356

What's good enough for Mexico....

[byron78]

I like the monopoly analogy..

It's a bit like continuing to play monopoly long after one player has got hotels on Park lane, Mayfair and the green spaces. Soon all the other players will have handed over everything they have to that player, and their salary pretty much the moment they get it. Since this is entirely within the rules of the game (in fact pretty much inevitable given the rules), it's 'fair'.

Except, of course, that in real life you don't get to stop playing.

It's even worse than that.

One player has everything other than Old Kent Rd. He inherited this board position from his parents, who inherited that board position from parents who in turn inherited that board position, right back to ancestors who invented the monopoly rules and took that board position from the game's start.

All of the other players are on Old Kent Rd which has been carved up into smaller land tracts. These are quite expensive, but fear not, friends of player 1 are quite happy to lend the dough (having been bailed out with taxes collected from all of the stuck Old Kent Rd players of course).

Edited April 16, 2014 by byron78

[fluffy666]

And today a house on Old Kent Road will cost you £500,000 ... see Greater London thread where someone spent that on a semi next to a railway line.

The answer to the OP is it should cost just £1 short of what will stop the proles rebelling and threatening the 1% (maximum return for the 1%), hence why there was a different approach after the War with lots of soldiers returning .... suddenly in spite of the war-debt houses could be built, NHS, jobs etc.

Yes - somehow, despite the national debt being something like 250% of GDP, and half the country being bombed out, we managed to create the NHS and engage in a large scale house building program, whilst the debt shrank.

Spot the huge debt crisis:

[@contradevian]

And today a house on Old Kent Road will cost you £500,000 ... see Greater London thread where someone spent that on a semi next to a railway line.

The answer to the OP is it should cost just £1 short of what will stop the proles rebelling and threatening the 1% (maximum return for the 1%), hence why there was a different approach after the War with lots of soldiers returning .... suddenly in spite of the war-debt houses could be built, NHS, jobs etc.

+100

..and if you go back to the time when this country had an Empire that straddled the world and was a manufacturing giant, the lot of the average Brit was pretty squalid. Certainly decent housing and living conditions for the masses was very low down the priority list

[NorthamptonBear]

Rents are higher in London because land costs more.

If you want to reduce house prices/rents then the best solution is to lower the cost of land. The best way to do that is either scrapping green belts, or allowing more high density development.

The best way is Land Value Tax.

[NorthamptonBear]

The topic is "how much does it cost to give someone a home". Opportunity cost is a real cost, and needs to be included. DItto for the cost of land, since (at least in majori cities) that costs a substantial amount of the house.

This is wrong, because some plots of land will always be inherently more valuable than others. A square mile in the centre of London will always cost a lot more than a square mile in the North of Scotland. Waving your magic fairy-land wand does not change that..

You can already live in the UK and pay a very low rent, by relocating to Skegness. Its very cheap up there, you can get a 3 bed detached house for less than £700 a month. So if you are annoyed about paying a high rent, why do you not move there instead? Probably because you dont want to live in Skegness. Guess what - neither does anyone else. Thats why its cheap there, and more expensive in more desirable places. Not everyone can live in Mayfair.

The high prices in London are partly due to low tax, criminals and others parking money and people jumping on a band wagon.

Pay isn't much higher in London.

Land value tax, an investigation and public register of owners (especially expensive properties) to catch money launderers and their accomplices (lawyers, bank transfer of money, tax consultants).

That will be enough to get some sales to people who will live in London full time.

The prices will lower and some of the copycats will stop buying and realise that the LVT makes selling sensible.

[Corruption]

You are forgetting about opportunity cost, as are most other people in the thread.

But you forgot to read the original post.

He said " Assuming they print the money"

Thus the 70K didnt exist until the computer made it.

[Democorruptcy]

The high prices in London are partly due to low tax, criminals and others parking money and people jumping on a band wagon.

Pay isn't much higher in London.

Land value tax, an investigation and public register of owners (especially expensive properties) to catch money launderers and their accomplices (lawyers, bank transfer of money, tax consultants).

That will be enough to get some sales to people who will live in London full time.

The prices will lower and some of the copycats will stop buying and realise that the LVT makes selling sensible.

Low interest rates?

Savers all over the UK are seeing what used to be their interest income go to Londoners to buy property. The main beneficiaries of low rates are where house prices are highest because it saves more on the mortgage interest. London property is a money sucking black hole for savers in the UK.

[NorthamptonBear]

Low interest rates?

Savers all over the UK are seeing what used to be their interest income go to Londoners to buy property. The main beneficiaries of low rates are where house prices are highest because it saves more on the mortgage interest. London property is a money sucking black hole for savers in the UK.

This as well.

Corrupt, evil, selfish - UK becoming a banana monarchy.

Actually already there. Most civic institutions have been bought, co-opted or lost to normal people.

[Parkwell]

You are forgetting about opportunity cost, as are most other people in the thread.

If you build a house for £70k that means that you have £70k sitting in a house rather than generating returns elsewhere. So the rent paid by the tenant needs to cover that.

Let me just stop you there because frankly that's ********.

You have decided that needs to be costed whereas in reality it is not necessary. If it were true then the government may as well invest all tax takings in the LSE and the country will reap the profits, no? No.

Perhaps you should give up eating steak and stick to mince and invest the difference, no? No.

There comes a time when you actually have to spend money to improve people's lives and put aside the idea of profit and endless hedging your bets to the point of incomprehensible complexity. Otherwise you end up on the rather sad and pathetic road we are already on. Unless of course you think everything is tickety-boo, I can assure you it's not for everyone - far from it.

[NorthamptonBear]

Let me just stop you there because frankly that's ********.

You have decided that needs to be costed whereas in reality it is not necessary. If it were true then the government may as well invest all tax takings in the LSE and the country will reap the profits, no? No.

Perhaps you should give up eating steak and stick to mince and invest the difference, no? No.

There comes a time when you actually have to spend money to improve people's lives and put aside the idea of profit and endless hedging your bets to the point of incomprehensible complexity. Otherwise you end up on the rather sad and pathetic road we are already on. Unless of course you think everything is tickety-boo, I can assure you it's not for everyone - far from it.

If housing is cheap, less wages needed to live, more jobs, better economy.

House prices and rents set at the margin and get worse when housing is undersupplied.

Over supply housing and prices/rent crash - much better for normal, working people, their employers and customers.

[(Blizzard)]

Ok fine, I think it should cost £0.01 to give someone a home. If its a 7 bed detached house in Mayfair then i think it should cost £2.17. I also think it should cost £3.48 to give everyone a yacht and a pony.

Unfortunately in the real world in which we live, there are costs and allocation problems associated with the provision of non-scare goods, and someone has to pay for these.

For land allocation to be efficient, you must pay more for better land, that's pretty obvious. The reason our system isn't remotely efficient is not because of the amount you pay, it is because of who you pay. It is equally obvious that in a free-market - a market in which all agreements are voluntary - a user of land must pay-off other, rival, users, in order for them to agree with his claim. That is, the user must pay the provider.

In this way, the market incentives work to ensure that the people sitting on the most valuable land are making the most productive use of it, and people who do not make productive use of the land are incentivised to move.

The simplest, least radical, way to do this is for the government to charge land users and to distribute the money either as citizens income, reduced taxes or increased spending.

Alternatively, we could have land contracts brokered by private-sector middle-men who guarantee exclusive use of land in return for a fee. That fee is paid to subscribers who sign a contract, voluntarily, agreeing to respect the rights of the land users.

Since this has never been tried, I'm sceptical that it could actually work. However, if you can't accept this as a practical solution, then you don't really believe in the power of markets to allocate resources.

Edited April 16, 2014 by (Blizzard)

[byron78]

If housing is cheap, less wages needed to live, more jobs, better economy.

House prices and rents set at the margin and get worse when housing is undersupplied.

Over supply housing and prices/rent crash - much better for normal, working people, their employers and customers.

Spot on.

Better for the UK in general when it comes to competing globally as well.

We don't need higher wages if living costs are lower.

[erat_forte]

...Now, its not quite that simple because the house itself will go up in value...

Can you explain how that works?