Friday, April 25, 2014

Danny Dorling on form again

To make housing affordable requires more than tinkering around the edges

"The answer is not tinkering around the edges with "affordable" housing or crackdowns on absentee foreign buyers in Knightsbridge – it is a combination of direct government action to build more houses; reforms to planning and regulation to let the market work; and higher taxes to redistribute the windfall gains that have benefited those who need it least."

Posted by pete green @ 10:40 AM (5674 views)
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29 thoughts on “Danny Dorling on form again

  • mark wadsworth says:

    “There is another argument. Danny Dorling suggests that the problem is not that we don’t have enough houses, but that they’re poorly distributed; we have more bedrooms per person than ever before, but the richest 10% have five times as many as the poorest.

    He argues for a land tax and an increased, much more progressive council tax, to encourage housing to be used more equitably and efficiently.”

    Exactly. Only it’s not so much bedrooms which need to be re-allocated, it is the rental value of land itself. A bedroom in London is worth twor ot three times as much as one in Birmingham etc etc.

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  • This guy has recently come around to joining the campaign to build a lot more housing. In this article he makes it clear that he thinks that building a lot more homes is the most important of the things he is suggesting. He would have said something different two months ago but I think he’s since realised that his urge to champion the environment was at odds with his urge to champion the need for cheaper/better housing for the less well off. Its also refreshing to see him finally admitting the obvious that building many more houses (when there’s shortage) will bring prices down.

    He still can’t quite let go of some of his old stuff about bedrooms but that’s probably because his publishers wouldn’t thank him for trashing his own published work. He was one of the environmentalist types who deliberately ignored population data after the 2011 census (along with the well accepted large increases in unregistered immigrants) to arrive at his conclusions. However I admire his courage in making this volte-face by now championing the campaign to build a lot more homes. Saying we have enough homes has become a bit of a ‘flat earth’ position and there are now very few holdouts. He has undoubtedly been recently confronted by some anger and even ridicule for his recent stance. The Nimby’s will never bend but they’ve finally been routed because the local councils are being threatened by central government to get out of the way or have control taken away from them.

    I have no interest in the political/tax stuff so I won’t comment on that. He’s come out strongly saying that building should be the first priority and that’s good enough for me. Well done Dorling. Better late than never.

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  • *If* it’s true that prices are being inflated by hot money with no place else to lurk, are we not, at some point, going to see a mass and pannicky liquidation as alternative opportunities begin to present themselves?

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  • Mainly the government need to STOP doing things, if FLS/HTB etc are anything to go by.
    A few years down the track they will probably commission an enquiry which will come up with all the stuff we already knew – low interest rates encourage runaway house prices which push up the overall cost of living and cause all kinds of population distortions, while forcing savers to subsidise the reckless.

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  • Building more houses due to their monopoly value is worth a lot of money. We should all share in the value of this bonanza and it should be re-invested in better housing, infrastructure and social policies that increase the competitiveness of the UK. Not just siphoned off to the Cayman island bank accounts of a parasitic ‘rent seeking’ class. That is why this article is advocating both building more housing and shifting the tax base of the productive and onto the ‘rent seekers’.

    I am all for building more houses and wide scale renovation of housing stock to improve the lives of us all, but I do question the motivations of those who are so narrowly focused just on releasing planning permission without looking at the banking and land monopoly underpinnings of the issue and want to obfuscate that side of the equation.

    I do wonder if those advocating more housing and a relaxed planning system are just looking to capture the difference in the value created by the new planning permissions and are positioning themselves in eager anticipation and use the fig leaf of compassion to hide their wanton ‘rent seeking’ greed. Dorling quite correctly is advocating that this windfall be used for the benefit or the country as a whole.

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  • A mass relaxing of planning regulation and the sudden supply of mass building plots will significantly reduce the value of planning uplift. This is what happens when scarsity of anything is suddenly met with ample supply. The big developers will lose much of the planning uplift they originally hoped for, from their land banks. The direct value of the land they hold will also fall.

    Dorling inherently recognises this with his obvious supply and demand driven assertion that “prices will fall”. In this article he makes it clear that building more should be the priority. He’s seen the light and repenting sinners should always be forgiven.

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  • mark wadsworth says:

    People tell me I’m a bit mad for imagining that LVT will ever happen. I never said it was likely to happen, of course, I just said I would be a good thing if it did

    But anybody who thinks that the government will suddenly rejig planning laws in favour of the little guys (be they the priced out generation or just construction workers or small local builders), or in such a way as to deflate house prices, or to endanger the tasty profits of the land bankers and the banks, or put the Home Counties NIMBYs’ noses out of joint is clearly living in cloud cukoo land.

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  • Fortunately house building starts have finally started to ramp up again and are now at a six year high (the house building trend starting falling in 2008 but the trend has very recently turned up again and we are now roughly back at 2008 levels and rising).

    The last three quarters have seen increases in planning permissions granted of:

    3%, 4%, and 6% respectively compared to last year. The trend here is also therefore showing a ramp up.

    We have a lot of damage to undo but finally there is some momentum. The councils have been given strict (and encouragingly ambitious) targets for the release of building plots including the release of green belt. They will lose budget or relinquish control if they fail. We are about to see a big increase in private building over the next few years as a consequence of these new directives. A 6% increase in private building is forecast this year alone.

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  • sibley's b'stard child says:

    Enforcing use-it-or-lose-it planning permission would be a start.

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  • MW they are about as equally likely to happen in the current climate – but us LVT’ers should join those who genuinely want to see reduced barriers to acquiring planning permissions in a fair and equitable way out of genuine need and not make a speculative fast buck. This is what Dorling is trying do with this article.

    At the moment there are a lot of ex tory grandees(and a few new labour) running around trying to push large scale housing developments and a lot of companies trying to exploit a relaxation of the system, but I very much doubt out of a need to assist the average man – just their own bank balances from doing very little work except pulling strings to make sure the planning permission is granted.

    Flashman’s – I do not disagree with your post, but your argument is nullified by just the question of scale – I very much doubt enough planning permissions will be released to make a major impact on house prices and that is why we need a two pronged strategy that dorling is advocating: building & land taxes.

    What the UK needs is CHEAPER housing, not just ‘more’ housing.

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  • mark wadsworth says:

    “A 6% increase in private building is forecast this year alone.”

    Hooray! So we’re going to have about 130,000 more homes built this year instead of the 120,000 which they managed to keep it down to for the first three years of their government!

    All hail the Tories! It is a revolution at last! Those 10,000 homes might just be enough to burst the house price bubble.

    And what does your crystal ball tell you will be net population increase/net immigration this year?

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  • Mark Wadsworth says:

    @ Pete Green, it’s easy to do. Just give planning permission to individuals and not to landowners. That way the former have got the latter over a barrel not the other way round.

    AFAIAC, let’s pencil in 400,000 new homes a year, there are 40 million adults so each gets planning permission for 0.01 of a new home each year.

    So if landowner wants to build one house, he has to find 100 adults willing to sell him their “planning”. The market, via some sort of online auction system where each adult sets the minimum price he is prepared to sell his 0.01 PP units for and builders bid for them, will set a clearing price for the planning (each week or each month), so for most adults, that’s an extra £500 or £1,000 a year income. For life.

    If house prices go down, then so does this income, but so what? The beneficiaries are people buying houses. And vice versa. Over a lifetime, each adult will get his money back.

    The best bit is, the NIMBYs will of course be honour bound to refuse to sell their 0.01 PP units, they will tear them up instead, so they don’t get the extra £500 or £1,000.

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  • As Dorling says, more housing IS cheaper housing (when starting from a point of scarcity).

    Dorling has reversed the order of his priorities in favour of building because he realises that it’s realistically the only game in town to create more equality. He has joined a powerful political consensus that is probably the strongest since Churchill’s cross part war cabinet. The prospects for a consensus this strong can in no way be compared anything else on the table.

    Look, I know there is much to be done and even a doubling of construction will make little impact for 5 years but this ship is actually sailing now. The skills centres are very busy and mothballed brick factories are producing again. Construction has already ramped up a bit so this is no longer a maybe. Consider this to be 1941 in WW2.

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  • Its not my crystal ball. That particular forecast is actually uinstitution grade forecasting. In any case, as per above housing starts and permissions are already up. Why get so bitter about that? Its as if you would rather people suffered just so you can blame whichever party you hate most at the moment. Personally I couldn’t care less who it happened under. The same thing would have happened under any of them because politicians always eventually act once things get so dire that they are about to go down in infamy as having caused something bad. They of course never act early or even just a bit late.

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  • By the way the forecast you picked out was for private houses only which constitues a small part of the market and cannot therefore be applied to get an overall forecast. In Europe self build is much bigger part and that’s what is now being officially targeted here. You will all have picked up stories in the news about private plot schemes.

    Here’s something to consider: Housing starts (not completions) during the course of 2013 were up 24%. It’s from a low base but 24% is a very good indication that things are finally starting to move in the right direction.

    I’m not remotely interested in politicising this. There is a cross party consensus with everyone from Dorling to Tebitt ( he’s dead, right?) involved.

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  • The government might increase supply of houses, but at the rate it’s increasing supply of finance I don’t really think it will impact prices at all.

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  • Not sure the argument about more housing means cheaper housing always applies. If an arbitrarily large amount of money chases the houses, prices still rise, especially as building is slow. But eventually you get the situation of Ireland, Spain and the US: many empty and crumbling houses, collapsed prices. But I don’t expect that will happen here even with relaxed planning.

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  • That’s right it doesn’t always apply. However our planning system has restricted supply for decades resulting in prices that have at times defied gravity and logic.

    Prices in the likes of Spain rose for a while despite relative oversupply but at the first sign of trouble they tumbled. UK prices on the other hand did not respond to the exact same crisis with tumbling prices. In fact prices started to rise again in the midst of a credit drought. The moral of the story is that a wild credit binge or speculative mania can overcome oversupply for a while but eventually fundamentals will kick in. Spain had too many houses, we had too few so our markets responded very differently to the credit crunch.

    If we ever approached oversupply no amount of mania or credit could permanently maintain prices at today’s crazy levels. It would always be just an amount of time

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  • When you consider how much cash there is around (globally), it’s actually quite surprising that prices haven’t risen more. Liquidity has to go somewhere and quite a bit has made it into UK housing, largely because govt policy ensured it was a pretty safe bet with pretty good returns.

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  • UK prices on the other hand did not respond to the exact same crisis with tumbling prices. In fact prices started to rise again in the midst of a credit drought.

    UK prices did not rise in the midst of a credit drought – it took FLS, and then HTB to end that.

    But don’t forget though, Spain were not able to offer the same level of support to their housing as UK government i.e. QE, FLS, HTB and the like.

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  • could permanently maintain prices at today’s crazy levels

    Hahhhahahahahahahh.

    So you admit that house prices are crazy?

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  • @18: Wrong. House prices started rising again in 2009. FLS didn’t start until July 2012. HTB didn’t start until April 2013

    Do I admit that house prices are crazy? Yes, it’s crazy that they are not quadruple the current price. I also think that we should severely restrict planning permission and cut down on building. Anyone who’s read any of the recent threads would know that I believe in higher house prices, less building and free marmalade for midgets

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  • @18: Wrong. House prices started rising again in 2009. FLS didn’t start until July 2012. HTB didn’t start until April 2013

    Absolutely not, prices were through the floor at that point.

    Do I admit that house prices are crazy? Yes, it’s crazy that they are not quadruple the current price. I also think that we should severely restrict planning permission and cut down on building. Anyone who’s read any of the recent threads would know that I believe in higher house prices, less building and free marmalade for midgets.

    That’s exactly the impression you give.

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  • Flashman @20. House prices in Surrey also made a sudden lurch upwards the week Cyprus went bust. there was a sudden burst of Europeans looking to buy properties as quickly as possible

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  • britishblue, house prices in Surrey only went up 5.3 percent in the whole year after the Cyprus bailout, so it occurred to me that you may have meant the much earlier bailout of Greece?

    House prices started rising again in 2009 (which roughly coincided with the Greek crisis) but the rate of rise was slow and steady for quite some time, so I can’t find any evidence of a ‘lurch upwards’ there either. However there is no doubt that the UK started to be regarded as a safe haven some time around the time of the Greek crisis. This safe haven status must have had some effect on London and Home Counties prices but there is no evidence of any dramatic inflection points around the time of the Greece and Cyprus bailouts.

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  • House prices started rising again in 2009

    They may have held, but I don’t recall them rising – maybe the 0.1% or 0.01%, but nothing significant. Just makes the case that far bigger drops are on the way. No asset can increase in price FOREVER. At the very least that those supporting prices become exhausted by the larger amounts needed….that’s where we are now….

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  • Meh. HPs started rising in 2009, then flatlined for 3 years. They never really stopped rising in London/SE, probably because of foreign investment, but nationally 2010-2012 were stagnant.

    FLS saw the SE gains gather pace and HTB saw the trend go nationwide.

    This is all on the graphs page, altho I admit they’re not very well presented.

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  • http://www.theguardian.com/money/interactive/2013/aug/06/uk-house-prices-since-1996

    The above is one of the better house price charts. It shows monthly percentage changes. As per reticent and my comment above, prices rose relatively steeply in 2009 and then didn’t do much until 2013. As you will see even the 2013 rises look remarkably tame which makes you wonder what all the fuss is about. There is certainly no sign on the 2012 chart that FLS had any effect and the shallow rise in 2013 doesn’t suggest that HTB had a particularly explosive effect either.

    Of course a Spanish property chart would look very different and they had some serious economic interventions like FAAF, State Stimulus Package and various ICO schemes totalling hundreds of billion of Euros. On top of all that they had the European version of QE. None of these things saved their property market mostly because they had an oversupply that trumped everything else, once the mania period expired.

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  • That’s an awesome chart. Most of what you’re all disagreeing on is regional. Pity it doesn’t offer you to look at London and ex-London separately. Prices were mostly rising 5-8% in London during the period that they were stagnant nationally. They’re now rising 18%.

    BTL as a share of purchases was contracting before FLS. There was an article on a property investment site posted here about 6 months ago that attributed the u-turn to FLS. BTL is now pretty much at par with FTB as a share of purchases.

    I think it’s pretty obvious HTB had a massive impact on market sentiment. You can say it was the recovery, but all the people I spoke to, particularly friend’s 60-something parents, were urging everyone to buy before January, because once 95% mortgages were back in earnest, they expected there to be a massive housing boom. It ended up being a self-fulfilling prophecy that materialised months before HTB2 came in around October. Hardly any HTB2 mortgages have been issued, but the govt. achieved their unofficial aim to reinflate the bubble.

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