Saturday, April 21, 2012

Rising Damp!

Buy-to-let threat as benefit cuts see landlords struggling to rent

Housing benefit cuts are threatening the buy-to-let market's resurgence as more than half of landlords can no longer afford to rent to tenants reliant on local housing allowance (LHA).

Posted by happy mondays @ 03:09 PM (2759 views)
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26 thoughts on “Rising Damp!

  • This is the dirty little secret. Housing benefit makes housing less affordable by:
    a) Pumping money into the sector causing inflation
    b) Housing benefit reduces people’s ability to rent by taxing their income and destroying the jobs that would pay for housing, i.e. greater unemployment equals worse housing affordability and taxation destroys jobs. This should be obvious to most but needs to be explained to the average socialist retard who is a true fanatical believer and knows nothing about economics.

    Remember, that Marxist Leninists were the original 19th Century fanatics. The whole theory is based on wishful thinking.

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  • mark wadsworth says:

    Unusually, I find myself agreeing with Libertass. I suppose we ought to add that HB itself pushes up rents, thus making it doubly difficult for private tenants (they lose in tax and in higher rents). Suffice to say, subsidies to land ownership are the worst kind of subsidies for the same reason that taxes on land values are the best kind of taxes.

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  • i remember the 90`s says:

    I take it your a politician Mark W ,as u keep spouting LVT at any opertunity just a shame no one is hearing u.lol

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  • Of course, a tax on land would increase the cost of housing. You would need to be a liar to dismiss that possibility. Marx always talks about new taxes to replace existing, when there is another solution, which is to slash spending. For example, the Chancellor (Traitor) just handed £10bn to the IMF, which is almost 50% of all Business Rates. Now slashing Business Rates in half for a year is what I call economic stimulus!

    Problem is that Osborne is an admitted Rothschild Agent, having partied with Nathanial Rothschild in his private Island repeatedly. This is where he agrees to pay billions to the IMF to hand direct to Goldman Sach’s, et al.

    Neo-Feudalism with international bankers as our overlords.

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  • Also, Marx ignores the FACT that the creation of a new tax, bureaucracy and legal system, that this is highly inefficient, unproductive and will by default destroy additional jobs.

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  • A tax on land would not increase the cost of housing, quite the contrary in fact.

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  • mark wadsworth says:

    Ah, back to the irritating Libertass.

    “Of course, a tax on land would increase the cost of housing.”

    Right, put to one side your general loathing for LVT. Would it be possible to debate this one isolated issue on a proper, arm’s length scientific basis? As it happens, a tax on the rental value of land would not increase the cost of housing by one penny. I am perfectly happy to explain this to you using your choice of weapons:

    1. Logic, i.e. what Adam Smith explained, and what you yourself alluded to (i.e. subsidies to rents make rents go up – this is true, so why would it be true that taxes on rents push rents up? Surely they’d push them down if anything or more likely leave them the same).

    2. Real life examples (like when interest rates go up, house prices go down, so the monthly cost of buying/renting stays the same)

    3. Supply and demand curves – taxes are borne by whatever is less price senstive – supply or demand. If demand is price insensitive and supply price sensitive, then the consumer bears the tax (best example, tax on cigarettes). Conversely, if supply is completely fixed and hence insensitive to changes in price (like land) and demand is to some extent price elastic, the tax is borne in its entirety by the owner of the land.

    4. More real life examples – like the fact that goods sold in the shops cost much the same anywhere in the UK, even though business rates (plus rents) vary enormously between desirable locations in wealthier towns and not so desirable ones in poorer towns.

    5. Research carried out for HMRC which shows that rents in business-rates free Enterprise Zones are higher than rents in adjacent areas which have business rates, and the extra rent demanded = 100% of the business rates.

    6. The fact that when taxes on residential land-buildings were reduced – noteably when Schedule A was scrapped and when Domestic Rates went, house prices had a nice upwards tick.

    I am also well aware that you dislike LVT, but please, find a sensible reason to dislike it, don’t just make up reasons out of thin air. If you say “I don’t like it because I own several acres of prime development land” (which Uncle Tom was honest enough to admit) then fine, I accept that most people act out of self-interest, but don’t just pluck implausible stuff out of thin air.

    Having settled this like grown ups rather than spoilt children, we can then move on to your next spurious objections, for example the claims that

    1. Assessing and collecting LVT (or council tax, business rates, whatever) involves more bureacracy per £ tax collected (it is far, far less actually). So shifting to LVT is a win.

    2. As a separate issue, we can look at “dead weight costs” of taxes, the Laffer Curve, tax avoidance and evasion and so on, and we will establish that with VAT or income tax/corporation tax, the dead weight losses to the economy are staggering (10% or 15% of GDP, by HM Treasury’s own admission) and that with LVT the dead weight losses to the economy are quite simply nil% (and there is even a small boost to the economy, as has been proven in real life). So again, shifting to LVT is a win.

    3. Total government spending is a separate topic, I think we are agreed it is far, far too high, so I fail to see the relevance of this in a debate about what the difference is between LVT and VAT and so on.

    And so on. Like grown up gentlemen with a genuine interest in economics, rather than having a shouting match.

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  • Marx, being fixated on Land Value Tax (who is paying you?), you ignore that I am against ALL taxation. Why? Because “Thou Shalt Not Steal” applies not only to individuals but also to organizations and government. It is immoral because it relies on force rather than consensual contract, and since us humans are made in the image and likeness of God, with free will, the use of force against humans is a grave sin. The results are a destruction of our very humanity and this causes terrible harm and damage to individuals, society, the economy, environment, etc.

    If what Government has to offer is so bloody good, then set up tariffs and compete in the free market. If you really think that your bi-weekly bin connections are so bloody good, then advertise the service, charge the cash, stop grabbing tax money and see if you can compete with private providers.

    Fact is they cannot, reason why, is because that system is based on theft and force.

    A system based on theft and force fails to respond to the needs of the individual receiving that service, which is why it does not work.

    So, I’m not picking on you, no, I’m picking on your immoral Marxist assumption that taxation (forceful re-distribution of wealth) is necessary and that it is merely a question of what form that redistribution takes. This is like saying that murder punishment is not immoral, that we only need to find a more humane way of killing. But this, like taxation is fundamentally immoral so cannot be resolved by alterations.

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  • mark wadsworth says:

    Libertass, in other words, you refuse to back up or justify your original claim? Would you be so gracious as to concede that taxes on land do not push up rents, do not push up prices, do not reduce unemployment or harm business activity etc for the reasons I stated?

    No, I though not. So OK, let’s move on to your next claim:

    “A system based on theft and force fails to respond to the needs of the individual receiving that service, which is why it does not work.”

    Does it never occur to you that land ownership itself is based on the force of the state? Without a stable system of government and citizens prepared to exert their efforts in the free exchange of goods and services and to abide by the rules, there are no rental values for land owners to collect, indeed, without these it is impossible to consider yourself a land owner. Compare and contrast Dubai with Somalia. Compare and contrast Rhodesia under Smith with Zimbabwe under Mugabe.

    That is neither moral nor immoral, it is merely a statement of the facts. Therefore, land rental values are generated by the whole community (mainly citizens and businesses, with the government as referee and final arbiter). Clearly, rental values represent “wealth” in the wider sense (again, compare Rhodesia with Zimbabwe) but who creates and sustains it? Having answered that question – and i doubt sorely that you ever would – to whom does it belong?

    Forgive me for not being a politician who claims to have all the answers and then just goes along with people’s prejudices, I am genuinely curious about the way the world works and whether you base any of your claims on actual observed facts or logic, or whether you just spout the first thing which comes into your head 🙂

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  • Marx, the acknowledgement of the existence of theft predisposes the acknowledgement of property rights, since theft cannot exist without there being property rights. One’s property includes one’s self, and the products and fruits of one’s labor, so long as those actions do not infringe upon the property rights of others. One’s property can be given away or traded via contractual exchange with others. This is basic common sense but must be explained to socialists who generally have their head in the clouds.

    Those who do not accept property rights also cannot accept the concept of criminality, contract, commerce or even economy. This is the principle reason why Marxists seek an end to capitalism, since it is wholly incompatible with their immoral perspective. It is why you see Socialists trampling property rights, the rights of the individual, calling for the end of the family unit, etc, etc. indeed anything which conflicts with their exercise of power and domination.

    The right and proper way to assess whether property rights have been infringed is through a jury of peers. Presently, the court system is administered by government, but it is conceivable and indeed their is historic precedence for private Common Law court systems whereby those entering into contracts agree that those contracts be under the jurisdiction of Jo Blogs Court System Ltd.

    So, contracts need never be controlled or regulated by the State and in that circumstance one can have competing legal systems. I believe that this was the medieval system in Ireland and, since it lacked centralised control, the British establishment could not infiltrate it and this apparently is one of the main reasons we destroyed them with the potato famine. The Bank of England provided finance to buy up all the farm land and then exported all the crop to the Empire, leaving the Irish to starve and emigrate.

    Of course, the one role where government could be involved are criminal infractions where no contract exists. Of course, those courts need not operate at the national level and can be administered at the local level with treaties for different jurisdictions for extradition if the culprit lives in a different area.

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  • ZZZZzzzzzzzzz……….

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  • @Libertas / P4AC

    You stated “Of course, a tax on land would increase the cost of housing.”

    Mark responded “Would you be so gracious as to concede that taxes on land do not push up rents”

    This is a very specific question that gets to the heart of the disagreement between Mark and yourself and you seem to be dodging the question.

    So I will ask again: If you are so sure that a land tax would would result in higher rents, please explain why.

    Seriously, I would be interested in your argument about this very specific question – not another lecture about Austrian economics and Libertarianism.

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  • i agree with libertas

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  • Oh goodness, the IQ here is about 65. Do I have to explain this Re-Khard? If it costs more to purchase land, less people will purchase land to rent it, reducing supply, increasing rental prices and, those who do purchase land with higher tax costs have greater over-heads which will be passed on to the renter either in higher rent charges or, lower quality of housing.

    Why do I have to explain this to you? Just because Marx is capable of asking questions does not mean that he has any relevant points to make. Why on earth can’t you do your own reasoning for yourself?

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  • A question for Marx. If tax on land is decreased, according to his model, rental prices will not fall. How the heck do you work that one out then, you liar/moron, idiot.

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  • Libertas, you clearly don’t understand the first thing about Ricardo’s law of rent and why the cost of land wont go up if it is taxed. educate yourelf here: http://www.henrygeorge.org/rent1.htm

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  • I did acknowledge that rent may not rise if quality falls, so of course rents will not rise if people cannot afford more. But certainly either rent or rental value WILL fall.

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  • And further, on good taxes v bad taxes: http://www.henrygeorge.org/canons.htm

    “Can a Tax on Land Values Be Shifted?
    Taxes on commodities are usually passed on to the consumer in higher prices. What is to stop landowners from doing the same thing? That is, can a landowner increase the rent charged to tenants so as to pay the land value tax and still collect the same net rent as before?
    Remember: land is not produced by labor. It is fixed in quantity and its price is a monopoly price (all the traffic will bear). A tax on labor products increases the cost of those products and this is reflected in the price. If the new price meets consumer resistance, the supply of that product is checked.

    But a tax on land does not affect either its cost of production (it is not produced) or its supply (which is fixed). Thus its price is not increased (for it is already all the traffic will bear), and the tax falls directly on the owner. The rent of land is determined by the margin of production and it is a certain amount whether taxed or untaxed. A tax on land is simply a division of the rent between the owner and the community.”

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  • Greenmind, yes, you are a true believer. Now, 1 + 1 = 1, 2, 3, 4 and 5. Your indoctrination has worked a treat.

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  • @Libertas / P4AC

    OK, I claim no special knowledge about economics but I’ll try to answer your somewhat less than gracious reply.

    If you tax land, less people will be able to purchase it

    Nice try! That argument would make sense if it related to consumer goods and services whose supply is responsive to demand e.g. if the government decided to tax smartphones by £5000 per handset there would soon be a lot less people buying these things. Unlike consumer goods, all the land is already owned and the supply cannot be changed. Land ownership distribution can change but the amount of land cannot change by its very nature.

    I suggest rephrasing your statement as:
    “If you tax land, it will be less attractive to rent seekers.”

    Those who do rent out land will have an extra overhead, the tax, which will be passed onto the renter

    The rent level will be determined by whatever the market can bear which is a reflection of earning opportunities, environmental quality and facilites in close proximity to the property (Kirstie Allsopp chants Location! Location! Location! at this point.)

    Alternatively, think of the effect of accomodation cost subsidies – particularly housing benefit. If the government chose to inject more money into the rental market by raising housing benefit, what would happen? My answer is that rental prices would rise. So if the government chose to tax land values i.e. extract money out of the housing market, why would prices rise in response?

    Another way of thinking about this: imagine a street of similar rented houses in which half of the landlords own their properties outright and the rest are heavily underwater. Will the rents charged by the landloads vary because some are in debt and some aren’t? Of course not! Landlords cannot beat the market and the market rate is determined by what tenants are willing to pay – regardless of the landlord’s circumstances.

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  • Land is a consumer good, you numbskull, and don’t forget that when things are taxed, government ends up buying it like, if there was no taxation, government wouldn’t buy up heaps of land in our cities for the bulging bureaucracies.

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  • @Libertas / P4AC

    Land is a consumer good, you numbskull,

    Thanks. I think I’ll bookmark that for future reference.

    Just out of interest, in your opinion, which is the best manufacturer of this consumer good and what are the odds for new entrants to compete with more efficient production and perhaps push down the prices a bit?

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  • Quiet Guy, as you are well aware, unless of course if you were dropped on your head at birth, engineers and architects must employ technology to make land habitable, to prepare land for construction and must provide housing efficiently enough to compete with farming and other uses. The Danes salvaged sea with their dyke system, we protect land with sea defences, we make better use of land buy building upwards and excavating downwards, and make more effective use of space with better design and transportation systems. We must also defend land with our military and emergency services and have to provide services such as gas, water, etc. We must also maintain our land and property once we have it lest we wish it to deteriorate and return to nature.

    All of these things require capital, labor and skills, and that creative talent is sapped by taxation, because any capital spent on tax is capital which could have been employed getting land prepared or maintained for habitation. This is why taxation of land will reduce provision of what we all desire from our land.

    Of course the Marxist would state that land is in Common but no, any land of value has that value because somebody has put the time, effort and money into making it valuable, with the exception of course of wilderness but of course, wilderness has no development or agricultural value until capital has been employed.

    The recognition of property rights is the recognition of the human activity required to make land available to human needs. The taxation of land disregards the work required to maintain land in a productive state. This is why in the Soviet Union, all production collapsed, because the Socialist State did not recognise the value of these things and set about destroying them in the name of re-distribution of wealth.

    And I have to explain this to you? As I said, the Socialist public school system run for and by the government has done a wonderful job of destroying people’s ability to think.

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  • @Libertas / P4AC

    It’s getting a bit late so I won’t go into everything in your last response but I was struck by this part of your reponse:

    “any land of value has that value because somebody has put the time, effort and money into making it valuable”

    Good grief, your actually a Georgist!! I agree entirely that land values are determined by the time, effort and money into making land valuable.

    Now here’s a question for you: if you examine some typical high value land plots around the UK, how much of that value was the result of time, effort and money by the current owner? You see some people reckon that land value is created by the building of infrastructure, provision of utilities, economic development and other factors in the area that have little to do with who happened to own the land at the time.

    If a farmer gets planning permission for a field on the edge of a town (a common scenario) did the farmer create that land value by his investments and efforts in that field?

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  • Quiet Guy. You fail to separate out issues, which is the same reason why Marx comes to the wrong conclusion. I speak on the one hand of economic fundamentals, of the types that drive free markets. However, we are not in a free market. Artificially low interest rates and, artificially low capital reserves in banks, both caused by government intervention, cause inflation and change the time preference of investors and consumers. These distort the market and create the problems you see. So the real solution is to end the government intervention and an end to central economic planning rather than seek a new form of taxation to tinker at the edges, creating additional problems whilst you are at it.

    Housing is less productive than farm land and factories, and it is this issue of excess liquidity, caused by government intervention, which shortens time preferences, forcing capital from productive activities into non-productive activities which provide instant gratification such as housing.

    Prior to World War II we had a gold standard, tax was about 10% and interest rates were dictated by the market to a greater extent and as a result high quality farm land tended to yield more than housing as did manufacturing, so they did not need to be protected by a planning system, and we did not have one until 1948. As a result, development was constrained by economic fundamentals. The economy, prior to major government intervention was, GASP, Marx won’t want to hear this. It was self organizing.

    The only role of the planning system is to rectify market distortions caused by prior government intervention. We only required a planning system and Soviet style central planning of the economy once we adopted the policies of National Socialism during and after World War II when ironically, we fought the Nazi’s, who were National Socialists. But of course, both sides of the war were funded by the same financiers, but I digress.

    The farmer who sells his fields is, in desperation, seeking to maintain capital values which the government’s intervention in the market are destroying. The uneducated man will blame the farmer. The savvy individual, in the minority, will blame socialism and central planning of the economy.

    Of course, there is another factor. This loose monetary policy floods the corporations with cash, allowing them to form monopoly cartel systems at the expense, and contrary to the ambitions of consumers and small family businesses. This allows corporations to put a stranglehold on wholesale markets and they can drive down the price of commodities to where production is no longer profitable. Another reason why farmers wish to sell up. You had better believe that if they got enough money for their crops, that they would be seeking to expand rather than sell up.

    Of course, Marxists will then say that it is the farmers fault and call for nationalization of all industry, at which point we enter a death spiral. Production plummets and the economy can no longer sustain the population. In a desperate bid to maintain power, the now dictator or oligarchy will blame the common man, often beginning with minorities, and then go about the business of genocide. Of course, now they don’t pick out minorities, but just kill everybody with all the carcinogens and toxic foods and pharmaceuticals to name a few of the indignities we must suffer. If all else fails create a war to mop up the unemployed and kill some more people.

    Technological advancement today, is the only thing holding us back from overt genocide and hyperinflation, but we may yet reach a cross-roads.

    But you will probably defend the system right to the endgame:

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  • mark wadsworth says:

    Quiet Guy, ta for back up.

    Re my point 5 at comment 7. Unlike some people, I start off with actual facts and evidence. HMRC carried out research that shows quite clearly that Business Rates does not push up rents for actual productive businesses, it is borne entirely by the landowner, i.e. for every £1 Business Rates, rents go down by £1 and so the cost to the actual productive business remains the same

    Link here http://www.hmrc.gov.uk/research/report42-executive-summary.pdf

    I’ve seen this bit of drivel plenty of times:

    “1) If you tax land, less people will be able to purchase it.”

    For a start, it’s “fewer” not “less”.

    Secondly, as we have established beyond any doubt that a tax on land (or indeed higher interest rates on mortgages – in the long run) push down rents (or the purchase price), it must be clear that the tax has no negative impact on those wishing to buy, rent or occupy it.

    Clearly, there is a fixed amount of land and a fixed amount of people, and some people ‘over occupy’, the result of which is that others have to ‘under occupy’ – and the state backs this up with the legal system. If somebody spreads himself out over the front row at the theatre, then everybody else has to sit further back.

    Yes, it is quite clear that if we had full on LVT, a lot of people would sell their second homes in e.g. Cornwall. As a result of which, Cornish people would find it easier to buy a house as there’d be more up for sale. And the people wishing to sell can’t sell for more than people wishing to buy can afford – which would be rather more than now, because people wouldn’t have to pay income tax etc. So the price would level out at what people living locally can afford, after deducting the LVT. As a result of this, there would be more owner-occupiers, that is an inescapable fact, and I thought that in this country, we thought that having a wide spread of owner-occupation was A Good Thing?

    Finally, most goods and services have costs associated with their production – cars or TVs or hair cuts down just happen. If you tax car manufacturers, that drives a wedge between what customer pays and what the manufacturer gets, so the number of cars manufactured goes down and fewer people can afford cars (or indeed work in car factories). But land has no cost of production, it is just there. If you start taxing land in Norwich, it will not crumble and disappear into the sea.

    So even if you tax the land rent at 100%, there will be people willing to pay it, because by definition, rent is what they are willing to pay, no more and no less. Or else, how do landlords make money? Why are so many people (45% of under 35 year olds at the last count) prepared to pay rent? Because they have to live somewhere and they find somewhere within their budget. Whether they pay rent to a private landlord and income tax to the government, or just LVT to the government makes not the blindest bit of difference.

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