It has been widely suggested that a government-engineered housebuilding boom may end the recession and bring electoral success to the Tories or LibDems in 2015 (depending on who gets the credit for it). Experts have been scrambling to answer the question of why there is such a shortage of housing, what the obstacles to housebuilding really are.
The Coalition government has so far focused on schemes to help first time buyers and provide housebuilders with finance. These approaches tend to assume that the major obstacle to expanded housebuilding is lack of loan finance due to a banking system still in crisis. In addition Tory policy has been to weight the planning system more in favour of large developers and remove the regional planning layer.
Labour party policy would have government embarking on a major subsidised social housing building programme, plus more stringent conditions on private housebuilders to require them to include subsidised social housing.
Liberal Democrats have been emphasizing the local planning obstacles in different ways. Centre Forum proposed a complex auction-type system for addressing objections to housing developments from local communities. The implication of this proposal is that public objections to housebuilding developments are believed to be the main obstacle to an expansion of housebuilding.
These analyses may be right – but a ‘dynamic’ systemic assessment may be more conducive to problem-solving.
First the supply side – the UK planning permission system is cumbersome, costly, excessively lengthy and time-consuming, as well as being ineffective at reflecting the public interest. In addition the ‘planning gain’ Section 106 demands are arbitrary and hard to predict. The net result is that only very large developers with the right contacts, financing, and admin resources can get through the system and deal with all the uncertainties, and the long time lags.
In addition, since every large developer may expect perhaps only one in five large-scale projects to succeed, they build low-budget schemes with poor amenities but very high profit margins.
The answer perhaps is not just to cave into large scale developers’ lobbying, as the Tories have done. It is better to streamline the whole system, with ‘negotiated public interest’ in mind, and permit better quality smaller developments …. and stop pretending that attaching social housing conditionality to developments has no cost !
The public objections to housing developments tend to relate to over-large, low quality developments with poor amenities, and inadequate responses in the additional provision of local schools, health facilities and transport. In any case they are usually faced with all-or-nothing choices. The public is not nearly as obsessively ‘NIMBY’ as they are painted.
Another problem is that building societies and banks now require large deposits in order to grant mortgages, suppressing demand. This largely a regulatory matter in the hands of government. Insurance against losses in the event of repossession (paid by the mortgagee, with an excess) would do a better job of safeguarding the banks’ assets, if prudential regulations would allow it.
A further problem hindering housebuilding is the set of housing demand assumptions which underpin the planning permission process. Although the regional planning guidance system is now delegated to each planning authority, and county/unitary authority, it is still assumed that the private sector will build dwellings where there is no demand, and government surveys can accurately second-guess demand.
The key problem is that such surveys are politicised and usually rigged in favour of the interests of those assigned to conduct the surveys – housing association board members or dominant developers. In particular, demand for private rented accommodation (the main form of tenure across Europe) is deliberately suppressed. ‘Rachman’ type landlords become a self-fulfilling prophecy.
Before any big decisions are taken, I would implore policymakers to look first at the dynamics of the housebuilding system as a whole, rather than fix the facts around traditional ideologies. After all, getting it right WILL have very major electoral effects !
* Paul Reynolds works with multilateral organisations as an independent adviser on international relations, economics, and senior governance.
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Have we lost the ability to build infrastructure?
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79 Comments
Housing needs infrastructure. Things like road connections to trunk roads are ludicrously complex to get as they are not under the control of county councils.
I’m less than enamoured by the horrific development which is now going – and focuses entirely on building the houses which will be most profitable for the builders on greenfield sites. The brownfield sites are lying empty and the low-cost housing which is actually needed is not being built.
Yes, here in Somerset in the city where I live, we have a social housing backlog of over 10,000 and rising. I know in London there is some mention of theirs being twice that. We are so short of good homes, and I feel that the Social Housing sector is the best way forward. I like green issues too, but I am not a member of Greenpeace, I just like to save money, and maybe have the understanding that fossil fuels will not last forever. I remember many years ago, the subject of Rachman, I thought that we had gained some education from this knowledge, in the past.
End the discrimination against those claiming housing benefit that exists in the private renting housing sector, and you will at least in part solve the housing crisis and live up to your liberal credentials.
It’s notable and frankly appalling how little has been said about the problem of ‘No DSS’ notices, especially given the coalition’s aim of moving tens of thousands of people on housing benefit into cheaper accommodation. Most of that ‘cheaper accommodation’ is only available to people who don’t claim housing benefit so this surely presents a problem for the government?
Some clear thinking is certainly needed on this issue. I’m sure that housebuilding is good for social reasons, but there are many houses in my street up for sale and no buyers. And Housebuilding, and the associated sub-prime mortgage disaster, is a major cause of what got us into this mess. It caused the problem, so why should it be the solution?
Getting people to spend money on houses means that their consumption of other goods goes down, which means that the overall macro-economic benefit is not nearly as large as the increased of production of houses. Getting people or government to go into debt to buy houses means that people or government must reduce their future consumption, since they have to pay off the debt. So this is kicking the present crisis into the short grass – making things worse in the coming years.
Keynes might help here. If investment is something that is expected to increase future productivity, then a house doesn’t seem to be that, bit a house is also not really a consumer good like a bar of chocolate or a car. So the familiar macro-economic equation might be better written as:
Y = C + H + I + G
Production (Y) is the sum of private consumption (C), net housebuilidng (H), Investment by companies for future production (I), and government consumption (G). If we want the country to solve its economic problems through growth, then our aim is to increase Y, but increasing H doesn’t do this.. An increase in H, without debt, will cause an equal reduction in C, if a houseowner only has a fixed income. If the householder goes into debt, the debt represents a reduction in future consumption, which has more or less the same effect of a reduction of investment I.
Keynes said: increase G when C goes down. But things are more complicated if H is included. Housebuilding sounds to me like the problem, not the solution. It’s not a leader – it won’t lead us out of depression. It’s a follower – it may help with a recovery once a recovery has gotten under way by some other means.
Really you need wages to go up pr house prices to fall further. Otherwise the result is more personal debt which reduces spending.. Reintroducing fair and fixed rents counter some of the problems as well as lowering the housing benefit bill.. Lack of available property is a much smaller issue than over-pricing. though social housing is certainly needed,. Personally, I prefer council housing over housing associations because they’re less subject to overpricing, although at present council tenancy is heavily stigmatised.
But just building should come with a government health warning. Both Ireland and Spain tried stimulating growth through housing and the results are a lot of empty properties. Another option is buying up existing empty properties.
As people who know me know, I support more house building, and have written about it here, there and everywhere. Paul makes some useful points, but we need to be careful on a few of them. First, there is strong evidence that people are NIMBY over small developments – look at the objections to infill in urban areas. Second, I am not sure what evidence there is that the assessments of need are politicised – the planners are a pretty objective bunch, and they use national criteria to make their assessments. Finally, although the private rented sector is larger in some other countries, it is not the primary tenure anywhere (Denmark is #1 at 33%). In fact the UK has a lower owner occupation level than the EU27 average. You can find the figures here: http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Population_by_tenure_status,_2009_(1)_(%25_of_population).png&filetimestamp=20120110104744
Finally, I am not sure what, in practical terms, Paul is proposing that we should do. What does it mean to say that we should look at a system as a whole? Terrie Alafat, head of housing in DCLG, will tell you that that is exactly what she does via the planning system.
How real is housing demand if those who want houses can’t afford them? (because their levels of personal debt are high, or they don’t have the savings for a deposit, or the cost of the mortgage is unaffordable.)
What we have seems more like apparent demand.
Building houses when real demand for houses is weak will cause house prices to fall.
With Spain and Ireland in mind, is anybody suggesting this is the way to go?
Better to maintain stable houseprices and stimulate real demand by investing in Government infrastructure projects to boost employment and allow personal finances to recover until real demand takes over from apparent demand. Then housebuilding can contribute to house price stability..
Is this one of those articles that has been ruined by the infamous LDV 500-word policy, I wonder? The author provides a very lucid diagnosis,but no prescription.
Author, if I am right, please can you post that second half of your posting which the editorial team made you cut out? We need to see it!
Stephen:
At peak, Ireland built about one house a year for every 50 people. At the same time we built one for every 325 people. They therefore have spare houses, and we don’t.
We should not build houses at the Irish rate (which would be 1.4million per year) but going from the current 100k to 200k+ is sensible. At the moment we are building houses slower than population growth!
Building slower that population growth is not necessarily a problem – it has to be seen in a context. Is there real hardship at present? Are there cultural misunderstandings going on? Social attitudes/expectations too rigid? Are occupancy rates low and able to absorb population increase? Where is the non-politicised, non-rigged, un-self-centered evidence ?
Interestingly, one of Terrie Alafat’s findings in 2007 was that homeless people were not moving out of hostels even though homes for them were available (http://homeless.org.uk/sites/default/files/moppletter.pdf). Was that a problem with suppliers, or with demand – do hostels have some advantages over private homes?
Richard – seems likely an aspect of problem described above, ie that demand is not “effective”. People can no longer afford property. When public sector housing was in its heyday – for the 20 or 30 years after the war, policy was to ensure that all could live in what was seen then as satisfactory housing. So it was also the objective to make sure everyone could afford a reasonably decent place, under some type of tenure. This idea, of course, didn’t always work, but in most cases it did. This is the element we are missing now, and with current Govt policies this is getting worse – we will have more people in hostels, many more sharing undersized accommodation, many more spending vast parts of their already inadequate incomes on housing, until the system is pitched out. When people talk about a return to pre 20th Century conditions, this is part of what they mean.
Here in Devon and Cornwall, Lib Dems have always fought for a maintenance of reasonable housing conditions – a battle we are not winning under current policy. Let me emphasise, we do not believe, and neither do many Labour supporters in this part of the world, that nuLabour handled this issue much better than Thatcher and Major, but we desperately need change – both to jack up incomes at low levels (the opposite of current policy), and to provide more, not less subsidised housing.
A large problem here in the Tees Valley is that the brownfield sites are ex-industrial, highly polluted sites which cost significant money to bring up to a suitable standard for house building. On the outskirts of the boroughs are greenfield sites which are easy to develop. Unless there is big public investment in remediation of the brownfield sites no builder, large or small, will tackle them. They know that they can sell houses with “desirable” areas in their address. They also know that they will struggle to sell houses with “undesirable” areas in their address. There was some money available to help with remediation under the dying days of Labour – there is almost nothing now. But in our Borough we have a need for more houses to cope with population growth.
The whole housing market and planning system needs to be looked at, not just tinkered with.
I don’t think current problems in housing are caused by a lack of supply of housing. The problems lie in high rents, inflated house prices, low wages and job insecurity.
“I don’t think current problems in housing are caused by a lack of supply of housing. The problems lie in high rents, inflated house prices, low wages and job insecurity.”
High rents and prices are becuase there are not enough housing. The UK ‘s poipulation has gobe up by 3m in a decade without a similar increase in the housing stock,Therefore prioces have risen. Its qute simple really. “
If high rents are caused by not enough housing, then there’d be opportunities for developers to make good profits by making new houses and charging slightly lower rents. If developers could make a profit with reasonable certainty, and if banks could be confident that mortgage payers would not default, there’d be no problem finding the loan finance.
So low wages and job insecurity look more likely candidates to me. Low wages mean people can’t afford houses anyway, so developers won’t have reasonable confidence of selling quickly and so of making a profit. Job insecurity means that banks can’t be confident that payers will pay, so won’t lend to buyers.
The main problem is the Banks and Building Societies who now need a very large deposit to offer mortgages thus as the article says suppressing the market. There are lots of empty houses waiting for purchasers! In addition Lloylds -Halifax (Govt backed with funding) raised the SVR mortgage in June by 1% when base rates had not moved, thus again suppressing demand. Get the Housing Market moving and the economy will move too!
Tim Leunig doesn’t go far enough in his critique of Paul Reynolds piece, and NO, David Allen we don’t need to see any more of it! The Article was right in its first and last paragraphs only, the rest is based on myths, like euro rules about bent bananas.
There is no shortage of project funding for developers, there is no difficulty getting a planning permission processed in the usual 8 weeks, (if the application is submitted in full, with all the information required), in the same way as there is no shortage of tradespeople to do the building work or any shortage of materials. Where Local Planning Authorities have their Local Plans or Core Strategies up to date then there is no doubt what the local rules are and what land is zoned for development(and from that you know where you would struggle to get a permission because local representation has already deemed it inappropriate). National Planning Policy has just gone through a wholesale change and update to make policy guidance more simple and more locally reflective. In point of fact, it is quite often the delays of architects, planning consultants and others, taking their time and blaming the council planners. (I can cite many examples, including those where they submit an obviously innappropriate application, knowing that it will get refused, then recommend going to appeal, and then have the gall to blame ‘difficulties with the coucil and the lengthy planning process’, and the client then has to pay for their bad advice)
The need for low-cost/affordable housing is understood, but currently the expectation that the developer should provide fails to recognise that buiders and developers are now running on minimal margins. Project viability is the biggest problem for the developer, with the uncertainty of being able to sell the finished units being a close second. The latter will get better as consumer confidence returns, but it isn’t happening yet.
The biggest concern to me is the vast numbers of vacant buildings, residential and commercial. The drive is all about ‘build new, build new’, when usable empty property could soak up the numbers on the waiting list, but the VAT on refurbishment encourages dereliction and demolition or characterful buildings. The imposition of VAT on a refurb proposal often makes it cheaper to demolish and build afresh.
There is a lot to this issue, and it is far from simple. Myths and red herrings don’t help the debate.
When we want advice on foreign policy and international matters then call Paul Reynolds….
@ Richard dean
“Building slower that population growth is not necessarily a problem – it has to be seen in a context. Is there real hardship at present?”
Yes there is, but it is localised. In the south east of England, and mroe so in London, living costs due to high rents r high mortgages are approaching 50% of income – way too high and much mroe than the accepted and historical norm of around 33%.
“If high rents are caused by not enough housing, then there’d be opportunities for developers to make good profits by making new houses and charging slightly lower rents”
Developers generally aren’t landlords, so your comment doesn’t make much sense. Developers aren’t building because they can’t access finance to fund construction, and homebuyers can’t access mortgage finance to buy the finished products. The LGA have done some research recently, as yet unpublished, which backs this up.
You should also note that the major developers have said in their business plans that they are more interested in creating margin (ie build a few high value executive homes to see to people with equity and good incomes) than volume (ie the rest of the market).
Paul Reynolds makes some assertions that aren’t backed up in fact. The planning system in the UK is actually pretty good – it has handled a massive increase in population in the last 50 years without spoiling the countryside with unfettered development, unlike Ireland or Spain. He asserts that it holds development back but in fact between 70-80% of all applications (and between 60-70% of major ones) get approved. Any higher proportion than that and i for one would question what the point of a system was if it just approved everything.
s106 is cumbersome, but it is being (effectively)replaced by CIL, which is much based on the Libdem roof tax pioneered in milton keynes, and which is a much easier, quicker and less cumbersome process.
The reason that we don’t have enough homes is that the state stopped building them about 20 years ago and the private sector didn’t pick up the reins cos it wasn’t interested in keeping house prices low or building homes for people who couldn’t afford, or didn’t want to, buy them.
Where are the facts? London Liberal says we haven’t been buiilding enough. But Peter writes that there’s a vast number of vacant buildings. Is it possible to find facts that haven’t been rigged to suit preconceived ideas?
Richard Dean – see London Liberal’s starting comment: “There is hardship but it is localised”.
In some parts of the country (outside the South East and zones where second homes are popular) there are large numbers of vacant buildings.
In others (the South East and areas with lots of second homes) there is insufficient housing and hence all the problems that people describe: enormously high rents for sub-standard housing, people having to live in multiple occupancy well into their thirties, people unable to save for deposits because housing absorbsup to 50% of income, people moving far out of town so that any rent saving is absorbed by transport, etc.
The statement that we have empty homes and the statement that in some areas we need to build more are thus not mutually contradictary.
Richard Dean
Getting people to spend money on houses means that their consumption of other goods goes down, which means that the overall macro-economic benefit is not nearly as large as the increased of production of houses.
But the money doesn’t vanish into a black hole. Every house bought is a house sold. With existing houses it gets channelled up the “housing ladder”, which is in this way a conveyor belt passing money from those who can hardly afford it to those who don’t really need it. Channel a big chunk of it back into housing again, as in grandparents pass a big chunk of the sale of the late great-grandparents house to the grandchildren to “help them get a foot on the ladder”, and you have a runaway feedback system.
People have been conned into thinking taking on a large mortgage debt is an “investment”, to this day house price rises tend to be written up in the media as a good thing and house price falls tend to be written down as a bad thing. Well, who’s doing the writing? Nearly all people who own houses and stand to get a big chunk from housing inheritance, hardly ever those squeezed out forever. See how there’s a huge fuss about young people having a debt of £27.000 dumped on them to get a degree, but no fuss at all about the much larger extra debt dumped on them to get a home of their own due to house price inflation over the past few years.
There is a problem that those at the end of the chain who benefit from house price rises are less likely to use their money in ways which is economically productive for the country. Mere consumption is not economically productive. What we need is small scale trading of goods and services so it stays in the economy here. I rather feel that money in the hands of poor people is more likely to do that than money in the hands of rich people.
Matthew, even without the investment issue it still makes sense, as a young person, to own a home, for two main reasons:
1. Mortgage repayments are currently generally significantly less than rent. Rent is rising whereas in real terms mortgage repayments tend to go down. Hence your housing gradually becomes more affordable, whereas rents in a lot of the country are rising rapidly so becoming less affordable.
2. Many of the same young people who can’t get on the housing ladder (me included) also have barely any pension prevision, which means that maintaining any kind of quality of life during retirement is going to be all but impossible. Buying a home while you’re working and can afford it is therefore a logical way to ensure that one of your largest expenses is reduced/eliminated when retirement arrives and your income falls off a cliff.
Not everyone buys a house as an investment – a lot of people buy them as a place to live. Buy-to-Let landlords, who generally ARE buying them as an investment, are one of the main factors that has been pushing demand for houses (and hence prices) up so fast.
An interesting and excellent article. I agree with most of what you say about the supply side problems, though I think you have underplayed the extent to which constraining supply has caused the current housing crisis. I wrote about this very topic on LDV in March: https://www.libdemvoice.org/opinion-the-ongoing-disaster-of-british-landuse-planning-27604.html
” Centre Forum proposed a complex auction-type system” – I don’t think it was particularly complex, actually. If anything, I would say that Tim’s proposal is elegantly simple.
“stop pretending that attaching social housing conditionality to developments has no cost !” – Absolutely! Requiring developers to subsidise a proportion of the development simply pushes the costs up for those who do not qualify. To take “Affordable Housing” rather than “Social Housing” for a moment, if one keeps 30% of a development “affordable” but pushing the price artificially low, the developers profit must come solely from the remaining 70%, which is therefore even more expensive. It’s a very blunt form of distribution that then leads to rent seeking behaviour by those who want to get into the “Affordable” bit.
“it is still assumed that the private sector will build dwellings where there is no demand, and government surveys can accurately second-guess demand” – a very typical problem, with politicians assuming that 1) the private sector is irrational, and 2) that government is omniscient.
Where I do disagree with you is in the belief that the public only objects to low quality development. I’m afraid that simply isn’t borne out by evidence or experience. The public really are nimbyish, and the reason for that is that being a nimby is rational economic behaviour. Until we create a system whereby local people (and I mean way more local than “Local Authority” local) gain from the development windfall – or are at least compensated in full for any loss of amenity – we will never win people over the supporting development.
@Richard Dean: “If high rents are caused by not enough housing, then there’d be opportunities for developers to make good profits by making new houses and charging slightly lower rents…[and] there’d be no problem…”
But that ignores the whole supply side. Developers can’t “make good profits by making new houses” because they are not able to meet demand, due to planning constraints.
Indeed, this is evidenced by the fact that, where they do get planning permission, the margins are very high. In a sense, housing is too profitable – a sign that demand is not being met.
“High rents and prices are because there are not enough housing. … Its quite simple really. “
Oh no it isn’t. High house and share prices five years ago were all part of the bubble economy and the disastrous “momentum”theory – that since the price of everything was rapidly rising, the thing to do was to borrow to the hilt, invest like crazy, and drive prices ever onwards and upwards.
It crashed, as it was bound to do. When shares started to slide, the obvious thing to do was to sell up, turn your shares into cash and avoid more losses. That in turn drove prices further down, and so the stock market achieved an effective, if painful, correction.
But the housing market does not work that way. When the value of your house falls, it does you little good to try moving elsewhere, and indeed you may well be trapped by negative equity. So you sit tight, refuse to cut your asking price, and slow down the price correction which is still gradually and slowly taking place.
Going on a building spree in response to faulty economic theories could cost us dear. Look at the Spanish and the Chinese, who have done just that. As Laura Gordon says, you have to look at objective reality to find out if there is a real building need or not. In some places there is, in others there surely is not.
@LondonLiberal. Yes, it does make sense. If high rents are caused by not enough housing, then there’d be opportunities for developers to make good profits by making new houses and … selling them to landlords who could make good profits by … charging slightly lower rents. I often miss a few words out of sentences!
@Laura Gordon
Why not move the jobs to where the vacant house are, rather than make new houses? Are there really no vacant houses in London and the South East? Isn’t this stuff about sub-standard and multiple occupancy rather a subjective, even culturally controlled, judgment? Everyone would like somewhere better.
@Tom Papworth
First the developers can’t make good profits, then they make excessive profits in the very next sentence! That looks like confused thinking to me.
@ Richard Dean
So your comment made sense in your head but not on the screen. A lesson there when leaving comments, i think!
The problem with your premise is that, as i said above, housebuilders don’t really want to build houses. They want to build their balance sheets, which were crippled by them buying overpriced land and the housing market then falling out from under it. So better for them to sit on that land until prices rise, and in other areas to focus on higher margin large family homes in the countryside rather than homes in areas where people really need them, as the former creates more margin than the latter.
You suggest ‘moving jobs’ to where there are houses – if you can crack this regaionl policy nut then you’re a greater mind than most. It’s easy to say but very hard to do. After all, a multinational law firm is not going to move to Stoke (for example) over London, is it? There is basic law of urban economics at work in london and the wider south east, and that is the benefit of clustering and agglomeration.
As for the number of empty homes in London, it is at its lowest level since the 1970’s, and most of the empty homes are held privately and are often held by the very rich. For example, Kensingtona nd Chelsea has the second highest proportion of empty homes of the 33 boroughs, and you can be sure that these are not dilapidated terraces, but rather very expensive second, third or fourth homes for international buyers. Enpty homes in area sof high demand is a distraction tot he real and onyl solution to the crisis – build a lot mooe homes in southern england.
@LondonLiberal.
Yes indeed, readers must always avoid rigidity in their interpretations. But now you really are getting confused … First the problem is high house prices, … next the problem is that it’s better for developers to sit on land until the prices rise! Excuse me while I re-attach my head! The regional policy nut has to be cracked sometime, It won’t be if people don’t try.
The data, as is now being revealed by Laura Gordon and LondonLiberal, seems to indicate that the pressure for new housebuilding is really just special pleading by London and the South East. As such, that pressure should be treated with the disinterest it deserves. Elsewhere, the problem is renovation, which might just be easier to resolve.
First, we are a national party, IMHO. We are not here solely to serve the relatively rich.
Second, solving the existing problem in London and the South East will simply create more pressure as more people flock in, which will increase the problem!
Third, having unpleasantly high prices in one region is a way of getting people to move somewhere else, and so is a good thing in this case – any government decsion, even a non-decision – is a piece of social engineering, and there is no reason why LibDems should not recognize that fact .
Fourth, housebuilding in London and the Soth East won’t do much, if anything at all, to help the economy. London and the South East is not where the economy is hurting most.
Richard – it’s not really that confusing. house prices are high relative to incomes, but not relative to the purchase price of land.
Richard – your post is a little under-informed, i fear.
You say we are a national party. Putting aside the fact that after the next election i suspect we will in fact be relegated back to the celtic fringes, i hope you do not mean that we should forget about devising a policy that helps southern england (high house prices are a problem in the south west as much as the south east), where half the population live, simply because it doesn’t also help the northern half of the country!
Secondly, you blithely ignore the benefit to the national economky of people paying taxes. Tax paid in the south helps fund public services in the north, so you shouldn’t be so dismissive of the positive national economic benefits of having more people in employment in a given english region (or three).
Third, having unpleasnatly high house prices has not stopped people moving to london, as that is where the jobs are. London has always had the highest living costs in england, and is also growing a lot. whilst superficially attrcative, your supply/demand graph doesn’t actually work here.
Finally, what about the people, like me, who are from London? Why should we be excluded from having a housing policy that helps us native londoners just because some chippy provincial types (who London subsidises, frankly) don’t think we should have the same opportunities to get on the ladder as those in the north?
My post is not under-informed at all … and is indeed amply supported by information provided on this thread! Clarity has been achieved in the face of obstinate selfishness: housebuilding is a policy aimed almost solely at helping London and the South East at the expense of just about everywhere else. “LondonLiberal” is a name that rather gives the game away, I fear! 🙂
@Laura Gordon
“1. Mortgage repayments are currently generally significantly less than rent. Rent is rising whereas in real terms mortgage repayments tend to go down. Hence your housing gradually becomes more affordable, whereas rents in a lot of the country are rising rapidly so becoming less affordable.”
Not at the moment. According to Nationwide house prices have fallen 2.6% in the last year, which means that renting is cheaper than buying in the long term (provided house prices continue falling at the same rate).
@Simon McGrath
“High rents and prices are becuase there are not enough housing. The UK ‘s poipulation has gobe up by 3m in a decade without a similar increase in the housing stock,Therefore prioces have risen. Its qute simple really. “”
No it isn’t. The overwhelming weight of evidence points to the fact that house prices rose so much over the last decade because of demand in the form of easy credit. Supply issues have had very little effect outside of the south-east. There are areas of the country where the population has gone down over the last decade but house prices have gone up. Explain that with your supply-side nonsense.
House prices went up with the credit bubble (look at the charts for lending and house prices – they are almost identical) and have partially deflated – only partially, because of the massive stimulus in the form of deficit spending and low interest rates. Rents did not go up during the bubble (any more than you would expect with inflation). It amazes me that so many people talk about high rents and house prices in the same breath, yet the evidence is there in black and white – house prices went up massively and rents did not – yields fell dramatically during the ‘boom’.
High houses resulted from demand issues (cheap and easy credit), not supply problems. Not that house building isn’t needed, but a lack of it didn’t cause house prices to go up so much. At least get your facts right about the cause of high house prices – politicians and policy makers spending the last few decades pandering to the 60+% that own their own home.
@Lond Liberal
“(who London subsidises, frankly)”
Given the massive bailout of the City of London and the disproportionate infrastructure spending in the South East, the amount the rest of the country subsidises London is far greater than the amount London subsidises the rest of the country. hence the reason why house prices are going up in London and down elsewhere. It’s called theft.
I agree with Richard Dean.
“Why not move the jobs to where the vacant house are, rather than make new houses?”
Any company with any sense would move away from the Souith East so they can become more competitive (as they don’t have to pay their staff as high a wage to attract them to the regions).
In my area of London, Brentford in Hounslow Borough, average property prices are circa £375k (quadrupling over 15 years). There have been large numbers of prime flats built near the waterside during the housing boom. Average flat rentals are £385 per week and average house price rentals are £500 per week. Average household gross income in Hounslow is around £38,800 a year. It is very difficult for young people to find any kind of affordable accommodation in the area.
When I first saw the details of a proposed development of 275 flats and houses on a former industrial site, on Windmill Road, in the town, I was hopeful that we might see some progress with affordable housing development – although the development is primarily targeted at well-heeled city professionals. However, there was an immediate backlash from residents who fear the plans would be out-of-scale, causing traffic congestion and pressure on services.
Hounslow planning officers rejected the application citing the density and size of the development as harmful to the outlook and character of the area. The application has now gone to appeal.
One resident, responding to a negative letter published by the Vicar in the local newspaper, took a contrary view.
“It was with great disappointment I read the Vicar’s piece on the website about the proposed Windmill Road development. It is astonishing how so many people can be whipped into action to try and stop new housing development when it is on their own doorstep. How many of these people who have these “No to Reynard Mills” stickers in their windows actually live anywhere near the development? I live in Windmill Road and my back garden looks out on a horrible brick wall that obliterates sunshine into my little back garden in the summer. It also shades all kinds of dodgy goings-on in the back alley behind my house. I would dearly love it to be replaced by people in houses.
The people who want to stop the new development quote the change to the skyline as a reason for stopping it. Has anyone looked at the skyline recently? We are surrounded by tall buildings that make the entrance to West London along the M4 look like a twenty first century city. Do you think one more is going to make that look bad? I don’t think so.
Another objection: queues for doctors’ surgeries. I work in the NHS and I know that the queue to get an appointment at a given practice is not because of the demand from new people coming in but because the doctors’ surgery is unable to properly manage its list and too greedy to say “No” to new patients. Only a few weeks ago we were leafleted by a new GP surgery at the Brentford health centre that is looking for new patients. There is choice.
The traffic flow along Windmill Road has long been a problem. Even with the zebra crossing put in a few years ago near the Globe pub, the traffic is still too fast out of rush hour. We have fatal accidents waiting to happen. Both Ealing and Hounslow Councils have done little to address this. Regulated traffic junctions in and out of the proposed development will certainly help control the traffic flow, a plus for the development.
As long as the new development provides enough car parking spaces for the homes proposed, the council considers improved traffic control, and Thames Water attends to the problems with sewerage and drainage, I welcome the new development and just wish that the perpetrators of all this nimbyism, xenophobia and hysteria would stop giving people invalid information about the management of GP practice lists, how planning permission is or is not obtained, blaming the greed of Thames Water on developers. It would be a better use of their time to lobby for Thames Water to attend to the rotten drainage problems in Brentford, surely, whether or not any new developments are proposed.
I would have thought the Vicar would welcome more people into her church.”
This local resident appears to be a lone voice. Local councillors, of all political stripes, (as might be expected) have rallied behind the local residents association calls to block the application.
Not enough is made here of the regional basis of this problem. London and the South-east is completely unaffordable for many people whilst the rest of the country has much more housing cost variety, but far less economic opportunity. That is due to decades of over-reliance on certain types of industry and over-centralisation of government and resources to Westminster (and I’m not talking about shifting civil servants to the provinces, I’m talking about centralised policy-making). So we should be tackling the factors that lead to the South-east being overpopulated and overpriced.
@ Steve
I’m afraid that several studies over the years have shown that london pays about £15bn more into the national coffers each year than it gets back, despite aving the second highest regional unemployment in england and 5 of the 20 most deprived local authorities It and the south east are also the only two regions to be net contributors to the public purse. (http://www2.lse.ac.uk/geographyAndEnvironment/research/London/pdf/BC_RS_LPUKfullreportforweb.pdf).
Yes the bailouts have cost us all dear, but however unpleasant it may be to read, the fact is that london is the engine of growth that is going to lead us out of recession. it ain’t gonna be newcastle, leeds or manchester, i’m afraid.
You are right to say that easy credit helped get us inot this mess, and was probably the primary cuase of the boom. However, with some 232,000 households forming each year, and with housing completions at around 75% falling to 50% of this figure for the past 20 years, you can see how lack of supply is a major issue too.
What an interesting glimpse of real, seemingly rather easy, life, Joe!
One cannot help noticing that adding people and traffic to an area, which is so nicely located relative to the centre of London, might be thought to reduce the price of some properties there. And more properties in the area would perhaps imply that existing residents would need to reduce their prices if they wanted to sell up and move out, or pay more for second mortgages or for loans with a house as collateral.
The lone voice sounds very reasonable but also fits with this, in that the view and ambience may improve as a result of the development, making the price of houses in the immediate vicinity actually go up.
How complicated people are! And how much easier it would be to let these rich people sort it out themselves, and focus our government’s efforts on improving the situation elsewhere – addressing the issues involved in renovation rather than housebuilding.
@ richard – you haven’t actually provided any evidence or reasoning for your assertions, you have simply asserted. that’s not an argument i’m afraid! the point about jobs being created an dtaxes paid, which would benefit the whole economy no matter where they are created (not to mention all the wider quantifiable social benefits of affordable housing), undermines your erronious assertion that housebuilding will just help the south east.
London an engine of growth? Hah hah hah!!!
I see no reason at all why it won’t be Newcastle, Leeds, Manchester, St.Helens, Liverpool, Cardiff, Pontefract, Exeter, Hereford, Carlisle, Birmingham, Hull, the countryside, the seaside towns, the fishing ports, Aberdeen, Belfast, ….
Richard,
Not so easy as you might think. See this article A shanty town has arisen in the London suburb of Hounslow” for a glimpse as to the impact of housing pressures in this area of West London.
I’d just like ti add that I used to work for private landlords and the mu brother is currently buying property to rent.
I don’t know the situation in London,
But the point is that property gives you equity and the more property you have the better your equity. Most tenants have little to no equity, so they are forced to rent, usually on short hold tenancies. How much they pay in rent is not an indicator of their ability to obtain a mortgage. High rents are actually can indicate lower wages, in much the same way that people who cannot guarantee their ability to pay for their utility bills end up paying more for those utilities. The root causes are over inflated house prices, low wages and job insecurity. Building the wrong kind of property will result in a short term boost before resulting in a lot of empty homes that property companies and private landlords will hoover up cheap.
Some shanty town! The Daily Mail says that some of the sheds come “with … kitchens and bathrooms complete with running hot water, gas central heating and … cookers., A few even have electric showers and flat-screen TVs with cable channels”.
So, how can we interpret this sensibly? I suggest this: Some of the rich people have cashed in by building nice sheds and renting them illegally. Other rich people find that this brings down the price they can ask for their homes, and so complain.
I lived for two years in a shanty town. To qualify, you need several open sewers, no running water, a high crime rate, and a reasonable chance of death by murder. Hounslow doesn’t look like it comes anywhere close.
Richard,
was your shanty town accommodation by any chance a beach hut in Trinidad and Tobago, of the kind frequented by backpackers travelling the world and depicted in those idyllic scenes in ‘Bounty’ adverts?
Ha ha Joe! No.
I am happy of course to have stimulated such a wide ranging debate – and some notable strong point by point criticisms from Tim Leunig and ‘Peter’ (see Mark Pack’s material on how people make decisions, ha ha). But people are of course entitled to strong views that defend their professional activities, or reports they have compiled.
This is an important field of domestic policy, so I will comment on some of the differences of view. My criticisms of the regional housing demand surveys… I have investigated two regions. In both cases I questioned the data in contributing surveys and how it was derived and was informed that there is no info available on ‘the computer model’ used, which in itself is a failing. Both surveys didn’t really make sense and there were no discussions in the published reports of methodology & assumptions, so they were not proper surveys. So I looked at the composition of those from the consortia involved (why are surveys done by consortia of consultant academics rather than established surveying firms ?). In both cases all but one of the individuals was associated with one or more housing associations and most I could see took income from them. The demand for private rented accommodation was rather summarily dismissed in both surveys, without a solid justification. The poor quality of private rented accommodation was commented upon, rightly, but this is somewhat self-fulfilling. In one East Midlands town I found the shortage of private rented accommodation is a problem for employment mobility, and the shortage, plus the use by local authorities of the private rented sector, contributes to exploitation of the shortage by smaller scale investors buying poor quality properties and failing to invest in their quality – there being almost zero new properties for rent (as a result of the skewed surveys I suspect). I have no reason to have an attachment to any housing sector, but this was not the only
On the question of the planning system, the official position, sure is that ‘correct’ planning applications and building controls are processed in 8 weeks. (Echoes of hospital targets). I have two friends who are architects designing domestic dwelling and one who has headed housing associations. The average time they tell me from submission of detailed plans to being able to break ground (that is the key time distance) is 5 to 8 months for a small development and 10 to 18 months for a large development, depending on planning authority.
I agree strongly with ‘Peter’ on the fact that large developers run on small profits – for that is the reason why so many developments are so depressingly austere. The ‘large margins’ I am referring to are the simple differences between build/land cost and selling price to the retail public. My key point is that large developers face very large costs due to planning and building permission processes, the finance cost due to time lags, high costs in dealing with utilities, and many other costs such as ‘failed applications’ unrelated to physical construction of the dwellings in the narrow sense, which squeeze the net margins. Planning system reform in the UK has a LONG way to go.
Finally the question of tenure in Europe. In Denmark, the Netherlands, Sweden and Austria for example more than one quarter of the population lived in rented dwellings with a market price rent, which is much higher than in the UK. If DSS is eliminated, the UK figure which is comparable is 17%. The EU 27 figure is skewed by the aftermath of the former Comecon countries, where the ‘communist apartments’ (I have lived in many) were effectively transferred to the ownership of tenants, en masse – resulting in the very high owner occupier figures and very low private-market-rented property.
I am not a lifelong housing expert, so my support for reforms is based on limited knowledge. I do however believe that several steps can be taken to streamline the system and support an increase in housebuilding to meet demand – first in the ‘stages of public approval’ so that less investment is wasted on applications which are not approved. Second, to introduce a bigger ‘negotiated’ element to the process, so developers and public can do better at getting win-win investments (much has been written about this). Third, the demand aspects of the planning system need major revision – proper independent and transparent research and the concept of refusing permission on the basis that there is no demand should be seriously questioned. Fourth, there is a lot of ‘gold plating’ in building control which need to be looked at. Fifth, local authority assessment of public service demand should be a legal obligation, rather then the tortuous system at the moment, with all the long time lags …. the public has gotten used to this and rightly object on the basis that local authorities generally do not track changes in demand tightly enough.
The other thing I found was the connection between local authorities and local landowners. In one local district council the leader and the No2 were both in the housing/property business. One was a landowner with a major role in a big housebuilding company, also involved in housing associations in receipt of government funding, and contracting with housing associations, and the other an urban developer who owned the building in which the local council was housed. Feudal system anyone ?
On the demand side I agree that demand has been suppressed by the banking sector problems. One proposal I made was based on the idea of insurance against losses in reposessions (much more can be said on this). There are other ways – such as the treatment of (notional ?) losses in the case of subsidised/affordable/shared ownership housing construction and rental. But its a big topic and I’m an not an expert – but I do have a view of the problems based on ‘normal interactions with folk, from some investigations, and some info from when I was a PPC.
In general I have been trying to make a contribution to thinking, in support of the idea that housebuilding DOES have the scope to help to pull us out of recession. But first we have to try and be clear (not easy) on the causes of the mismatch between supply and demand. After all, reforming systems is much cheaper than throwing money at the problem, if it can do the trick of getting investment going !
I am not surprised that local people object to the building of new houses. It results in the loss of parks and green spaces. Places for children to play, to watch birds and to walk the dog are every bit as valuable to people as more housing. Some people might say that open spaces are more valuable to them than more housing.
@London Liberal
“the fact is that london is the engine of growth that is going to lead us out of recession. it ain’t gonna be newcastle, leeds or manchester, i’m afraid.”
I’m not quite sure why you think it will be London that will be the engine of growth that will lead us out of recession. It’s a very counter-intuitive argument, given that it was London that gave us the depression. You haven’t given a single reason why you think it will be London that will provide the engine of growth. From where I’m looking, London is the capital of rent-seeking and I can’t see how more rent seeking is going to get us out of this hole. There are of course, as you pointed out, large areas of deprivation in London, but it is the rent-seekers that are responsible for high house prices and the low wages for immigrants living in sheds. Increased house building would be useful, but not as useful as companies relocating elsewhere.
Besides, if we’re going to go off historical prejudices to assume a particular region of the UK is going to be responsible for growth then it is surely the North, the Midlands and Scotland that are going to lead the way, given that those regions created the original wealth of the country in the industrial revolution. The fact that so many companies currently locate themselves in the uncompetitive South East just shows the scale of the rent-seeking problem that has made the country so uncompetitive.
This is the scale of the problem the UK is facing: http://www.bbc.co.uk/news/uk-england-16235349
@Paul Reynolds
“On the demand side I agree that demand has been suppressed by the banking sector problems. ”
What caused the banking sector problems? It was the fact that they created excessive demand for property through unsustainable and reckless lending. Demand hasn’t been suppressed. The demand IS how much banks are willing to lend. Why would you want to return to reckless lending? The problem is that house prices (and in particular, land prices) rose too high as a result of that lending.
I live next to a building site that has been empty for five years. The developers bought it at the grossly inflated price in 2007 and haven’t been willing to build anything on it because they know they won’t be able to sell the houses at the grossly inflated 2007 price. What would be best is if the company goes bust and the stupid bank that lent them the money takes a hit for their stupidity. The stupid people would then lose their livelihood and someone with more business sense can step in and buy the land at its correct market price and build some houses, Unfortunately that’s not going to happen at the moment because we keep bailing out the idiots. Hence the depression.
Does it really matter where the engines of growth are? For the time being, people are moving to London and the South East (note South East = not the same as London) because that’s where the jobs are. If there is suddenly a boom in Newcastle, I would expect a) wages to rise in Newcastle and b) people to gradually shift north until it all evens out.
In the mean time, we have policies that will benefit some areas more than others (e.g. the whole of agricultural policy!) or some groups more than others (e.g. tuition fees, pension) so why shouldn’t we work on issues that affect c. 25 million people just because they don’t affect the other 40 million? It’s pretty galling as a young person in the South East to be told that you don’t deserve help because your problems aren’t in the whole country.
Is our economy too geared to the South East? Yes. Can the government do anything about it? Maybe – but it’ll take time, might not work, and in the mean time that shouldn’t be an excuse not to address overcrowding in the South East.
As for all this stuff about how a shantytown isn’t a shantytown – we are a developed country. Do we really need people living in sub-Saharan levels of deprivation before we acknowledge that there’s a problem?
@ Steve
“I’m not quite sure why you think it will be London that will be the engine of growth that will lead us out of recession. It’s a very counter-intuitive argument, given that it was London that gave us the depression.” Even now, the City of London contributes some 20% of total tax revenues, as it has done for decades now. That’s a lot of cash for northern hospitals and schools. Yes, the depression was partly created in the City, but whether you like it or not, if we sacked every banker now we would be worse off and would take longer to get out of this pit.
You need evidence as to why London is the engine of the Uk economy (such as it is)? Even though it has the sixth largest city GDP on the planet? I’m surprised that you weren’t aware of the economic importance of London, but since you ask:
on the size of the London economy in the UK:
http://www.guardian.co.uk/uk/datablog/2012/apr/12/london-gdp-economy-data
On the net contribution that London makes to the economy each year:(http://www2.lse.ac.uk/geographyAndEnvironment/research/London/pdf/BC_RS_LPUKfullreportforweb.pdf
on London’s bigger growth than other areas:
http://www.grovelands.co.uk/london-and-the-west-midlands-lead-uk-growth/
Yes I agree that Tim Leunig’s proposal for local authority land auctions is elegant, and simple in concept. I certainly thought so when first published. Well done Tim. The complexity I fear comes in implementation and some of the potential unintended consequences, since I would worry about how civil servants would run it, and the scope for them to misinterpret its aims, perhaps gratuitously. But some Tories have picked up on it as a good way to stimulate housebuilding and, for example, overcome the problem of land languishing on the balance sheets of large developers (awaiting revaluation, in a sense).
The problems with property in Spain is the economy, as you will understand, there are some serious problems with the euro. I go to Spain very often as I have close ties, even the bus fares in some cases have doubled in price. Jobs are hard to come by. It is not the fact that those properties would not like to be bought and lived in, it is the cost of simply doing that. As with the subject of Social Housing, if this does not come into line , with not being supported by Housing Benefit, we again start a downward spiral. Housing to rent or buy gets more expensive and this includes Social Housing too. Also, in some areas planning is a problem, I live in a city where this is the case.
@London Liberal
From the LSE report you linked to:
“Overall, London’s public expenditure per head is higher than that of every
other country or region except Northern Ireland”
So in 2007 the public spending per capita was greater in London than the national average. However, the London subsidies have increased massively since then as a result of the bail-out of the City and increased proportion of infrastructure spending (as well as the absolute disgrace that is London Weighting – why should people get paid more for the same job just because they work in London?! – all it does is push up property prices in London, again, at the expense of everyone else) – did you read the truly shocking IPPR report I linked to?
It doesn’t matter how much money flows to London. What matters is the quality and quantity of goods and services produced by London in return for the money it takes from everyone else. Does it deliver value for money? Does the City really make a better use of all those highly educated scientists and engineers than if they went into science and engineering? Does it really make us more competitive with other countries to use so many highly educated people to invent dodgy derivatives? I rather suspect that London is a drag on our economy as a result of the City. The City is also a drag on people with normal, productive jobs in London who are unable to compete for housing with City employees and those that feed from the crumbs from the City’s table.
@ Steve
London may recieve more than any other region in public spending but the report also states that it contributes about £15bn more per year in tax revenue than it gets back, so it more than pays its way, unlike those regions that always whinge about London whilst taking it’s shilling.
London weighting exists becuase everything costs more here, from beer to childcare to transport and housing. One could have a debate about whether having London weighting simply adds to this (in my opinion it is a marginal effect, more than outweighed by the value to the indvidual of greater equity in spending power with regional colleagues).
To answer your question, the linked report also states that London is the most productive part of the UK, and has become more since in the last three decades. So, yes, it does make use of ‘all those highly educated scientists’.
Last time I was in the sub-sahara they didn’t have many flat screen TV’s, at least not the ordinary folks. But yes, there does seem to be a hint in the air (and in Channel 4’s expose some time ago) that issues of race and immigration are involved in Hounslow, as well as issues of poverty and lifestyle. Can high house prices be a conciously managed strategy to try to prevent the movement of people into an area?
LondonLiberal seems to be saying that things are one way and so they should stay that way. What is being missed is an idea of what OUGHT TO BE, rather than what IS. As Barack Obama would likely agree, politics is basically about changing what IS into what OUGHT TO BE.
So, if London is producing more efficiently that other parts of the UK, we need to work out how to correct this imbalance. Part of the answer may be to deploy a concept of FAIRNESS, so that for example decisions about investment and subsidies and housebuilding assistance are more fair, and do not unduly favour London.
@ Richard Dean
“So, if London is producing more efficiently that other parts of the UK, we need to work out how to correct this imbalance. Part of the answer may be to deploy a concept of FAIRNESS, so that for example decisions about investment and subsidies and housebuilding assistance are more fair, and do not unduly favour London.”
How about looking at meeting need within the concept of fairness? If a school was full and with lojng waiting lists to get in wouldn’t you want it to expand, if it reasonably could do so, rather than saying ‘no, we want to build another school on the other side of town to tempt people there, even though it’s hard to get to and could take years to be up and running?”
The thing is, people have this funny idea about wanting to move where there are jobs and high quality of life (as they, not others, interpret it), and are often resistant to being told where to move by government. The state tried to make people move out of crowded areas after the war into estates in the middle of nowhere and new towns. Mostly those failed (MK being an honourable exception), not least as there were’t the jobs to support them. It will take decades to get a regional balance that distributes jobs more evenly across the nation (even if it were possible, which is far from certain given its conspicious failure in the 20th century) – do you really want people to languish in sub-standard and overpriced homes till then?
You seem obsessed about not wanting to ‘favour london’. I simply want to address the problems where they exist. Oxford and Cambridge also have housing crises, and i support more building there. Why are you so against helping London respond to the issues of a rising population?
Richard Dean:
I live in the Sub Sahara at the moment (though only just sub-) and in my fairly ordinary suburb there aren’t any flat screen TVs, but the street is full of little flickering TV sets. The point isn’t the level of deprivation in developing countries – the point is that we ought to be holding UK housing to a higher standard because we are a rich country that can afford to house people decently.
On the regional development and fairness. Fine – but at the moment we have regional development grants. If we are to be fair in all things, shouldn’t some of those go to London and the rest of the South East? (btw, note that the South East doesn’t equal London, nor is it full of people commuting to London, it also has a lot of normal towns in it). If we accept that we’re investing in developing some areas of the country more than others on the basis of need, why can’t we also invest more in housing in some areas than others on the basis of need. i.e. we have some policies to benefit some groups (e.g. regional development) and others to benefit other groups (e.g. housing in the South East).
Your statement also implies that you think our current funding/investment system favours London. I am not sure why you think this is the case.
You also haven’t addressed my central point, which is that rebalancing our economy, even if it is possible (which it might not be), will take time – and in the mean time the south east housing crisis affects twenty five million-odd people. Statements about how the economy is overly geared towards London and we need to reddress that in the long term aren’t much comfort for the poor bastards struggling with inadequate housing right now.
This isn’t, or shouldn’t be, a massive debate about London vs the rest of the UK, although that comes into it as the longer term solution. It’s a debate about how real people can’t afford adequate housing, with all sorts of effects on health, family life, relationships, and so on. In my book this constitutes being enslaved by (relative) poverty. We shouldn’t think this is OK just because many of them live in London and other parts of the South East.
Well I lived and worked in London 40 years ago, and there was a housing crisis then too. The whole point is that you cannot address a housing crisis in a rich area by proividing more houses, because that just means more people come in. The ONLY way to address London’s housing crisis is to move people away.
One way to do that is to make the regions more attractive. One way NOT to do it is to provide more subsidized houses in London. That simply moves one set of people into slightly better accommodation and moves another set of people into the “sub-standard” accommodation they have vacated..
“To answer your question, the linked report also states that London is the most productive part of the UK,”
The report was in 2007 and didn’t take into account the biggest financial fraud in history. Following your argument, the economic productivity of my region would be improved if I get the train to London, hold up a bank with a shotgun, and take the loot back home with me. Alternatively, I could just set up a printing press and give myself money for doing nothing, in a similar manner to which QE and bail outs fund the City and, hence, increase living costs in London (in addition to London weighting).
@ Steve
The date of the report doesn’t change the fact that London is still the most productive region of the UK.
By the way, you haven’t followed my argument really. You’ve rather stalked it into the woods, lost it among all the trees and then got dizzy and fainted.
@ Richard
“The ONLY way to address London’s housing crisis is to move people away. ”
Hmmm, forcible re-patriation (to the regions)? Not veyr Liberal, is it? And a failure when done previously (Romford anyone?). Who would you move, Richard? people like me, born in London to a family based in London? Where would you have me live, and would you make space on the train for my whole family? You’re quite right of course, the last thing you want a growing city to have is the infrastructure to support it. If only those visionary victorians had had the foresight to constrain London’s growth we could all be living in a town the size of the congestion charge zone in a quasi-rural idyll.
@LondonLiberal. It’s a simple fact of life. Make more room, more people come to create the same problem all over again. Sooner or later someone needs to say Stop to this madness. Liberate the natural proceses of pressure, allow them to build up to wherever they want to go. In the meantime, work hard at making other options more attractive.
And yes, LondonLiberals, it is you who seem to be creating the problem, or at least encouraging the problem to create itself over and over again. I see no reason why the rest of the UK should compensate the children of parents whose behaviour caused the high house prices that their children are complaining of.
Maybe a better answer to Londons housing problems is making it more attractive to commute, rather than building more properties that will end up over priced very quickly.
As far as I can tell the situation seems to be that the higher earners live in £200 grand terraced houses or flats, and the people working for them are out in the sticks. Mind you I only know central London.
@ Richard
” I see no reason why the rest of the UK should compensate the children of parents whose behaviour caused the high house prices that their children are complaining of.”
OK, well in that case i see no reason why London should continue being a net contributor to the rest of the UK’s finances. Can we have our annual £15bn back, please?
“The date of the report doesn’t change the fact that London is still the most productive region of the UK.”
Productive is not the same thing as taking lots of money. The only thing London is productive at is taking lots of money off the rest of the country and in return giving is sub-standard banking services.
“OK, well in that case i see no reason why London should continue being a net contributor to the rest of the UK’s finances. Can we have our annual £15bn back, please?”
Fine, as long as you give us back the £850 billion bail out (plus the rest – the infrastructure subsidies, London weighting, etc).
Your argument seems to be this – Londoners deserve their higher wages as they’re more productive and Londoners also deserve to have cheap housing paid for by the rest of the country as well.
LondonLiberal
“London …contributes about £15bn more per year in tax revenue than it gets back, so it more than pays its way, unlike those regions that always whinge about London whilst taking it’s shilling.”
It probably isn’t paying enough to compensate the rest of Britain for sucking the life out of it, taking all the jobs and growth, establishing a successful hub, and letting the periphery go hang. All markets create imbalances between rich and poor areas which, if left unchecked, naturally get worse and worse. Sanity will be restored when the rest of Britain is made more attractive, and London consequently less attractive, to commercial growth. That can only be done by, yes, taxing in London and spending in the provinces. Don’t whinge about it.
“It will take decades to get a regional balance that distributes jobs more evenly across the nation (even if it were possible, which is far from certain given its conspicious failure in the 20th century) – do you really want people to languish in sub-standard and overpriced homes till then?”
That’s a little bit like saying that the last car you bought for fifty quid was rubbish, so next time you will only spend twenty. We never did do enough to distribute jobs more evenly across the nation, and we are now doing less. So it won’t just “take decades” to get a regional balance. On the current policies, which you support, we are heading in the opposite direction.
Laura Gordon:
“rebalancing our economy, even if it is possible (which it might not be), will take time – and in the mean time the south east housing crisis affects twenty five million-odd people. Statements about how the economy is overly geared towards London … aren’t much comfort for the poor bastards struggling with inadequate housing right now.
This isn’t, or shouldn’t be, a massive debate about London vs the rest of the UK … It’s a debate about how real people can’t afford adequate housing … We shouldn’t think this is OK just because many of them live in London”
No, it’s not OK, and of course something should be done about it. As a political campaigner, you have two choices. You can bang the drum for more building in the London and south-east area, and thereby attracting more jobs to the area, which in turn demands more building, a self-defeating spiral of imbalance, while we quietly knock down houses in the north and let places like Tyneside go derelict. Or, you can campaign for policies which will take the pressure off London, help some people move away, slow down the rise of house prices and rents, and free up some better and more affordable accommodation for yourself. Which is the better way to go?
@David Allen – You’re a saviour! That is what I have been trying to say, in my peculiar, un-necessarily antagonistic, and somewhat anti-social way. Thank you very much.
@ David Allen
You have managed to both misunderstand and misquote me in one post – impressive! I am not ‘whinging’ about London subsidising the rest of the country. I am merely saying that we should focus housing spending where it is needed, which in my view (and that of pretty much the whole housing sector) is London and the wider south east. If others think that that is horribly unfair to the regions, then let’s take fairness to its logical conclusion and keep the money that is earned in a particular region within that particular region in order to help the communities who have earned it and also to keep them being economically productive. Sadly, Richard Dean, in his peculiar, antagonistic and anti-social way appears to be the only person i’ve ever encountered who thinks that successful cities growing is a good thing and that we can reverse the tide of urbanisation. I do wonder what his perfect utterly arbitrary number of people to live in London is, if he thinks its too many now?
I’m not against a regional policy that seeks to rebalance the nations economic geography. in fact i think it’s a Good Thing. I just have not yet ever heard of one that works, and that, even if we did find the magic formula, it would take years, and I m not prepared to let so many people suffer impossibly high housing costs in the meantime. This is of course not to mention the economic benefits of building housing, which would flow from the south-east tot he whole country via the tax system.
You know i find it funny that those who moan about London hurting the rest of the country are willing to see it hurt so that, maybe in twenty years, the other regions might be a bit better off. It’s a curiously zero-sum and slightly chippy approach.
@ Steve
“Fine, as long as you give us back the £850 billion bail out (plus the rest – the infrastructure subsidies, London weighting, etc).”
The financial sector alone, even today, contributes 11% of total tax take (about £53bn in 2010, down from £61bn in 2009). It has more than paid for the credit crunch costs over time. That’s without even looking at the contribution paid by all the other sectors in London. I say again, however much you may not like it, the truth is that the rest of the UK economy would be much, much worse off if it were not for the tax contribution made by London, even accounting for the recession of the last four years.
Life is not a zero-sum game. London benefits from the regions – it couldn’t eat without them, and many of the stocks and shares that are bought and sold in London are stocks and shares in companies that operate in the regions. I suspect that the regions also benefit from London, though I’ve yet to work out how.
Housing needs can often be identified at a rather local levels – particularly in major cities where there can be huge disparities of housing access and quality over short distances. Regional policy ought to come into the pictire as a way of supporting local areas, rather than regulating them or driving them to fight each other.
“The financial sector alone, even today, contributes 11% of total tax take (about £53bn in 2010, down from £61bn in 2009). It has more than paid for the credit crunch costs over time.”
I’m sorry but I find it astonishing that after all that has happened in the last few years that people still swallow banking propoganda. Even in a normal year the effective underwriting of the banking sector by the public is worth tens of billions, quite probably more than they pay in tax, and that is not to the mention the myriad of other ways the banks get to feed off the taxpayer or the support they received in the credit crunch or the numerous systematic frauds of which they are guilty.
“The financial sector alone, even today, contributes 11% of total tax take (about £53bn in 2010, down from £61bn in 2009). It has more than paid for the credit crunch costs over time.”
The reason they have paid quite a lot of tax is because they made a much larger lot of money. At everyone else’s expense. If we still had an income tax top rate of 60% (which is where Thatcher left it), and effective taxes on capital gains, then the State might at least have managed to recoup a substantial part of the bankers’ ill-gotten gains. But we don’t, so they didn’t.
Factcheck service: Top rate of income tax was cut to 40% in 1988, 2 years before Thatcher left office.
However, I believe capital gains was also put on a par with income for tax purposes at that time. Blair’s government did away with that and created the low-tax regime for capital gains that has been partly unwound since.
Laura Gordon
Matthew, even without the investment issue it still makes sense, as a young person, to own a home, for two main reasons
Yes, I’m not saying it doesn’t make sense, what I am saying is that the “housing ladder” rhetoric had tended to lead to an acceptance of house price inflation, and a blindness to the huge social damage it is causing. There are many things which are damaging to society as a whole even if they are individually advantageous to those who can manage to get involved with them.
You say you can’t get on to the housing ladder, so wouldn’t it be of some advantage to you to get angry about it rather than write in support of it? The big problem, in some ways one of the biggest of today’s society, is that those who benefit from the housing ladder have all the voices, and those who lose out have none. It is politically impossible to advance the sort of policies that would halt the way the housing system channels money from the poor to the rich, because the slightest attempt at it (e.g. the talk in our own party of a “mansion tax”) brings howls of anger from those who would lose from it, but there is only silence from those who would win.
If there was a huge call from those cut out of home ownership like yourself for taxes to be switched from income to the various ways in which profit can be made from home ownership (capital gains, inheritance) a balance might be obtained. I don’t myself think “build out of the housing shortage” will work, because so long as it is so advantageous financially to own housing, those who can afford will buy up what can be built and keep prices high.
It’s a hard choice, but why do we seem so happy for all the hard choices to be pushed into the young? Why tuition fees rather than inheritance tax at a high enough level to pay for higher education for all who can benefit for it? Why are house price rises generally written up as “good” rather than “bad” when those they are good for are mainly the old and those they are bad for are mainly the young? Why do people moan about family breakdown, yet accept a housing system which seems almost designed to cause it? Why can’t those who enjoy nice green views and pleasant surroundings accept that the cost of keeping this and restricting new build is either complete social breakdown as the bottom half of society cannot get housing, or it is some sort of taxation system which would siscourage people from holding onto housing which is beyond what they need?
Redistribute the inheritance of wealth so that fewer people own fewer houses they do not live in and more people live in houses they own.
Tax the luxury spending on buying second homes in order to encourage more single home families at the expense of two home families.
Or is that too radical for Liberal Dmocrats these days?