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November 21, 2017

Comments

From Arse To Elbow

Re "the builders of the Metropolitan didn’t intend to cut house prices". No, but what they did intend to do was secure a slice of the housing market and capitalise on increased land values. That's why they bought up so much land alongside the rail route, giving rise to Metro-land.

Cityeyrie

I'd be grateful for an opinion on this guy's research: https://medium.com/@ian.mulheirn/2-1-billion-square-metres-to-swing-a-cat-in-b1f13ee7ad6b

It seems to me that prices in London have nothing at all to do with 'real' supply - if this guy is to be believed, many more dwellings have been built than the actual increase in population. This certainly chimes with my experience of living in the building site hellscape of Central London. Of course since all new developments chase the 'luxury' buck, and since those luxury bucks are looking merely to park their money securely, it will take more than a commitment to any proportion of 'affordable' or 'social' rents on new builds to take the air out of this bubble. What's needed is for those luxury bucks to feel less secure in investing in more flats, and that would take a concerted programme of CPOs on both BTL RtB flats and new-builds to house people from Council waiting lists.

Mark Brinkley

There are 85 million bedrooms in the UK and only 65 million people trying to fit into them. There is no housing shortage, anymore than there is a shortage of money. It's just very unequally distributed and, as with money, the tax system could be used to sort it out.

But it won't be. The Tories are too wedded to their constituents hanging onto to their every last bean and would never really dare to challenge the high house price mantra. So whatever Philip Hammond says tomorrow, it will almost be guaranteed to be flannel.

Blissex

«Maybe we’re living through a time lag now, and telecommuting will eventually become more common. As it does so, London’s house prices should fall.
This, of course, is not really a story about house prices. It’s a story about technology.»


It should be instead a story about politics and buying the votes of property owning middle class voters in the south-east and London, because people buy property there in large part because for the past 38 years the political class have wrecked employment and let infrastructure decay elsewhere and heavily subsidized jobs and infrastructure in the south-east and London, precisely to drive up property prices there.

As to transport, places like St Albans and Tunbridge Wells, Maidenhead or Basildon, or even Chiswick and Barking are separated by hours of travel, as London has become big enough and congested enough that having offices or plants scattered around it is not better than having them scattered around the country given good train or air links.

The vast majority of economic activity in London most likely has stopped benefiting from agglomeration and proximity decades ago, despite the desperately expensive government schemes to improve transport in the region, purely to keep concentrating jobs in the London area and the south-east.

If the purpose of policy was not solely to increase property prices in the south-east and London by increasing congestion there, many middle size towns connected by a net of fast rail and air links would be far more productive and cheaper than the current situation.

MJW

I find Ian Mulheirn persuasive, the obsession over building unattainable numbers of new housing units seems geared around certain interests, instead we should look at total levels of stock and demand by area. We could the look at tax changes and other methods to persuade more efficient turnover of stock.

In areas of high demand private owners sit in family homes after children have flown; offer tax breaks to encourage downsizing. Similar situations exist in public subsidized housing, instead of bedroom tax give them incentive to downsize and make sure next tenant has a contract requiring them to downsize when they no longer need a family house (they can still have a long-term tenancy). Also, have a look at the 'later living'/retirement flats market, there are some dubious practices in there which are not helpful to turnover.

Andrew Dodds

I sometimes feel that there is a bit of motivated reasoning behind the 'more housebuilding won't help with house prices' argument - in any other area of economics, the idea of increased supply having no effect on prices would be very suspect.

This is especially true outside of the M25, where land is physically available but building is restrained by the planning system, as witnessed by the massive uplift in value when land is re-purposed. If an individual could get a building plot with permission for, say, £20k, then house prices would be effectively capped by the self-build option if nothing else.

Thejcbrowne

New infrastructure increases the value of land.

I suspect even with teleportation London would still be a desirable place to live. Even if it wasn't, land would simply become more valuable elsewhere.

High land value is of course good. High land cost is bad.

Whether we have an undersupply of housing or not, the solution is tax reform.

From Arse To Elbow

Ian Mulheirn makes a good point about space relative to population, but this ignores the secular change in household composition. Since the 1960s, household sizes have declined due to factors such as fewer births, increased divorce and longevity. If housing supply and population had remained static these last 50 years, we'd still have seen growing prices due to increased demand. Contrary to the media prominence of millenial and immigrant over-crowding, the reality in aggregate is more space per person, but this is less the product of individual selfishness than social change.

Re MJW's point: "In areas of high demand private owners sit in family homes after children have flown". The empty nests are disproportionately to be found in the suburbs and small towns, which are not areas of high demand. That, after all, is where the young tend move away from. The trope of the smug 60 year-olds occupying a multi-bedroom Islington townhouse is a myth peddled by those who want to limit building elsewhere, notably encroachment of the green belt (e.g. Simon Jenkins). Ironically, this echoes the old Tory myth (peddled to justify the Poll Tax) of the poor old widow in her family home being clobbered by rates.

Where critics like Jenkins have a point is in terms of density. London is notoriously inefficient in this regard compared to cities like Paris, essentially because our typical urban property is 2-3 stories high while theirs is 5-7 stories. The British urban vogue for loft conversions and garden extensions is a sign of planning failure. It's unlikely to happen (not least because the Tube would have to densify as well), but doubling the height of London terraces would go a long way to meeting demand and capping prices.

On Blissex's point about transport, the investment in London has not been done to "keep concentrating jobs" in the city but in response to job growth in the centre. A lot of that growth has seen formerly residential areas become increasingly dominated by offices and commerce (e.g. Shoreditch and Old Street), with working class populations pushed further out (e.g. to Tottenham and Enfield). Though national transport policy is often portrayed as a struggle over limited resources between London and the rest, this ignores the struggle in London between servicing the traditional Greater London area (buses, the Tube, the Overground) and the ex-urban commuter belt (HS2, Crossrail).

MJW

@ From Arse to Elbow

Greenbelt is primarily found on the edges of suburbs and dormitory towns where those empty nests are, yet there is intense pressure to lay concrete there. I don't doubt new build is part of the mix, but obsession with historically unrealistic levels of new build ignores the different pressures e.g. in real world concreting greenbelt in commuter belt doesn't deliver affordable housing for gig economy hipsters in Shoreditch, it's aimed squarely at upper middle class who want McMansions in Surrey!

As a former councilor I learned some general rules of thumb:
- Sympathetic, well designed, development is unstoppable.
- Greenbelt is coveted because it has abnormal profit potential (externalities and windfall bonus).
- Developers are more likely to slow down development than authorities as they squeeze as many externalities as they can.

I agree with point that in built-up urban areas height of dwellings should be increased (except for conservation areas), in London nobody will find extra floors on most buildings in zones 1 & 2 out of character. Where it becomes contentious is when somebody wants to put two floors on a terraced house in a genteel London suburb.

From Arse To Elbow

@MJW,

You appear to be suggesting that the Green Belt is an area of high demand, but if that were so, then prices would be higher there than in the city. They're not, which is why a family can sell a 3-bedroom terrace house in Clapham to a couple of hipsters (the Overground will get them to work in Shoreditch in 30 minutes) and buy a detached, 5-bedroom house in Epsom with the proceeds.

There may be "intense pressure to lay concrete" in the green belt, but, as you note, this is pressure for limited development (to maximise prices), not for mass-building. Unfortunately, the media representation of this suggests that large parts of the green belt might be concreted over. Given that the London belt is actually 3 times the size of the area it surrounds, this is nonsense. At 5,000 sq km, there is enough space to build as many homes as already exist in the entirety of the UK at current densities: around 27 million.

To return to the original point, under-utilisation of housing (as opposed to low densities) is not a major problem in cities, so tax-breaks to encourage downsizing are likely to be ineffective. It might actually make better sense to target tax-breaks in the green belt. It is estimated that developing half the golf courses in the London green belt could provide 1 million new homes. If we prioritised turning them into retirement villages, that might free up a lot of larger homes in the green belt (and with a multiplier effect), which would in turn attract growing families from the city, thereby freeing up more space for the hipsters.

D

@fromarsetoelbow

Houses near the green belt in London still cost loads and would cost less if there were more built on the green belt.

This would have some impact on houses in London proper. When considering living in London or commuting from outside, you consider house price/rent plus commute. More green belt houses would affect this calculation.

Blissex

Guys, most of the previous comments seem to be based on the assumption that people live in an area "because", not because they found a job there with the infrastructure to get to the job.

People move to the south-east and London and drive up house prices there because the government heavily subsidizes jobs and infrastructure there.

Where there are fewer jobs housing is cheap and falling in price, down to "1 pound houses", check this f*ckingly clear map and article:

http://loveincstatic.blob.core.windows.net/lovemoney/House_prices_real_terms_lovemoney.jpg
http://www.lovemoney.com/news/53528/property-house-price-value-real-terms-2005-2015-uk-regions

MJW

@ From Arse to Elbow

I'm against urban sprawl into greenbelt, the justification is the housing crisis, but as you say it's solution to wrong problem, and as I say greenbelt development driven not by housing demand but windfall value. There are several golf courses in my area, most were farmland in living memory. Developers covet them; McMansions on greenbelt hold a premium, but lack supporting infrastructure, they're former farms on edge of villages. No CIL or S106 will cover costs of hundreds of McMansions and their Chelsea tractors: roads cannot cope, nearest train stations don't have parking, trains already standing room, there are few buses, GPs and schools are already full etc...

Referring back to original post, pushing into greenbelt just causes another set of problems unless you spend vast sums on the infrastructure, and unlike during the Victorian railway boom, it's not so cheap or straightforward to cut new major routes through miles of contiguous development.

As for retirement villages, I hear much consternation about the march of 'Granny Alleys' changing demographics of my area. Fiercest opposition comes from older residents who fear they will be most inconvenienced by younger residents being pushed out and having to compete for remaining services with incoming older people. But business model of the retirement homes means they can run profitably with significant overcapacity.

From Arse To Elbow

@MJW,

The green belt is clearly not an impediment to sprawl. After all, if it were, this would have led to steadily increasing densification within cities during the postwar era. In fact, the reverse happened as cities lost populuation to new towns, many of which were created as reservations within the growing green belt area.

The high price of London housing has less to do with limited supply than most people imagine. Though the population increased from a low of 6.6m in 1981 to 8.2m in 2011, this merely returned it to its postwar peak of 1951. During the 70s and early-80s, London had loads of squats because there was a lot of empty property. Smaller household sizes have raised the demand for dwellings over the last 30 years, but this was largely offset by brownfield development as old industries moved out (e.g. along the banks of the Thames).

Growing current demand for both dwellings and commercial space is now encouraging densification in the capital (the population is expected to hit 9m by 2021), but a lot of that is being achieved by replacing older council estates with newer developments in which social and affordable housing gets squeezed. Londoners in need of social housing can now find themselves offered homes in places as far afield as Hastings. That's not a malign policy of "social cleansing" but a result of the green belt stretching as far as Tunbridge Wells.

I don't seriously expect golf courses to be turned into retirement villages. My point was simply that such an improbable strategy had more chance of making a difference than trying to tackle the myth of urban under-utilisation (my serious proposal would be to abolish the green belt along the axial transport corridors to Reading, Luton, Southend and Crawley, where much of the necessary infrastructure is already in place).

The emergence of that myth is indicative of a tendency to see the housing problem as the responsibility of urban areas, rather than a collective challenge. The original intent of the green belt was to provide an amenity (a green lung) for city-dwellers, not a cordon sanitaire for the countryside (let alone the actually existing exurbs). Over time, the green belt has become simply a way of creating an artificial boundary between planning regimes, largely to the advantage of landowners.

Blissex

«a tendency to see the housing problem as the responsibility of urban areas»

The "housing problem" that many voters see is that property prices are too low and are not zooming fast enough, and that a lot whiners and communists wants to make house prices fall. A commenter on "The Guardian" wrote a good summary of the "housing problem":

“To be fair the house owning majority will never vote for it either. Any solution that improves the housing situation for those who don't own them will screw those who already do.
I will put it bluntly I don't want to see my home lose £100 000 in value just so someone else can afford to have a home and neither will most other people if they are honest with themselves”

Blissex

Double proof that arguing the toss about the wrong "housing problem" is pointless: is there a "housing problem" in the whole country? Surely not, south-east/London and the rest have very different housing problems.

Again, consider this map:

http://loveincstatic.blob.core.windows.net/lovemoney/House_prices_real_terms_lovemoney.jpg

Is there a "housing problem" in the red areas, the green areas or both?

David Friedman

Both social networks and job opportunities can be produced online, so it isn't clear if that is an argument against telecommuting. It might go the other way. Two examples, not exactly fitting those cases but related, from my experience.

Some time back I needed a cover for the third edition of my first book. I got it by announcing on my blog a contest--whoever designed the best cover would get signed copies of all of my books. The result was the best cover I've ever had.

More recently, I was in a debate at a libertarian gathering. Neither I nor the hosts thought to record it, so I put up a query on my blog as to whether anyone else had. In about two days I got a response pointing me at a webbed video of the debate, presumably produced by someone in the audience with a self phone camera.

Both of those suggest that an online social network may be superior to a realspace one, and I have seen other examples involving other people.

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