Tuesday, April 10, 2012

Research

Government’s timid reform will not solve chronic housing affordability problems

Not enough is being done to reduce the extraordinarily high cost of housing in Britain. This is the finding of a new report released today by the Institute of Economic Affairs Abundance of land, shortage of housing. In the research Kristian Niemietz looks at how housing costs in the UK have exploded in recent decades. Real-terms house prices in 2011 were more than two-and-a-half-times higher than in 1975, with rent levels following suit. Nothing about this was inevitable. Many other countries have experienced rising housing costs as well, but in most other cases, the increase has been much lower and/or largely transitory. In the USA, Germany and Switzerland, real-terms house prices are still close to their 1975 levels.

Posted by dill @ 10:14 AM (4006 views)
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9 thoughts on “Research

  • mark wadsworth says:

    Well, he’s seeing high house prices somehow as a “problem” which the government should [allow the free markets to] “solve”.

    That’s completely upside down, the key aim of UK governments for the past twenty or thirty years has been to push house prices as high as possible and to restrict new development as far as possible. As far as the Home-Owner-Ist majority is concerned, these are all Good Things, and not “problems”. And the Homey elite are laughing all the way to the bank.

    And LVT would sort all this out overnight without any need for further tinkering.

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  • I am not sure it is all to do with a shortage of housing . I live in outer London and there are quite a few empty houses near where I live. They be bank repossessions but I don’t know – a couple have been left in the middle of having work done to them. These houses stand empty, they are not for sale. There is something else going on and I suspect its being done to deliberately keep prices and balance sheet valuations high. If the owner, be it bank or individual, has no plans for these houses, someone who could make use of them should be allowed to do so.

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  • With roughly two thirds of people owning their own homes, high house prices are the rational democratic outcome. Except for children living in owner occupied houses. And people who own but will need to trade up at any time. And people who have other things they’d like to spend money on apart from their mortgage.

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  • mark wadsworth says:

    Mombers, correct, but among people aged forty and under, only about half are owner-occupiers, these people probably own relatively small home and pay the most in tax compared to the value of their home (so would benefit enormously from shifting the tax burden). And these people are our target voters, forget the over-40s, we can write them off.

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  • Mark – those under 40s could be in government in a few short years – they might be a bit more radical in their thinking than the current lot…?

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  • mark wadsworth says:

    Cyril, that is the plan.

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  • Cyril,
    They’ve already infiltrated the media, and the non-homeowners are rising up the ranks of the civil service in London too.

    But don’t worry, the home-ownerists have a plan to keep them in check. They start by offering unpaid internships to new recruits. The only people who can afford to live in London unpaid are those with wealthy parents who can support them.

    A few years later, those same parents will be providing a mortgage deposit (the Bank of Mum & Dad). Cue lots of articles by blissfully unaware reporters, and press releases by ignorant civil servants, telling the masses that it’s easy to get on the housing ladder, just borrow £60,000 from mummy and daddy. After a few angry letters to the editor, they soon realise that poorer people don’t have rich parents and therefore can’t get their hands on £60,000. Their brains jolt into action (always a dangerous thing with this lot). If daddy’s £60k deposit enabled them to get on the ladder, they reason, then a £60k loan from NatWest should do the same trick for those less fortunate. These well-meaning middle-class do-gooders campaign tirelessly in favour of low loan-to-value mortgages.

    The idea of LVT doesn’t even cross their minds.

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  • mark wadsworth says:

    D, yes, good summary, the idea of LVT does cross their minds, but their logic is thus: if we have LVT and house prices fall then Mummy & Daddy will have less unearned windfall gain to be able to take out a second mortgage to pay a deposit for me to get on the ladder.

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  • European Bear says:

    “One way to achieve this is to extend the coalition’s ‘localism’ agenda to local finances and planning. If local authorities had to cover most of their expenditure through local taxes, they would have an interest in enlarging their tax base, and granting planning permission would be one way of doing so. People would be free to vote for NIMBY policies, but they would be aware of the cost. Blocking development would mean foregoing tax cuts or better local public services.”

    This is exactly how they do it in Switzerland (one of the places with no real increase since 1975). Switzerland is very densly populated in the places where people can live (i.e. the small amount of land that is not mountains). probably more densly populated than the SE of England. But even that part of Switzerland (I live there) has lots of green rolling countryside and nice places.

    Most taxes are paid locally and the local community sets the income tax rate (as well as deceiding on planning). So if the community decides to build lots of apartments for commuters to Zurich, then the resistance is ameliorated by lower local taxes. Indeed some of the villages surrounding Zurich, where there are lots of new developments have amongst the lowest income taxes in the Canton, in the country ands indeed in Europe.

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