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Friday, 29 May 2020

THE OWNER-OCCUPIERS’ VIEW
Why would they ever love losing their Wealth as a result of LVT ?
Here’s our proposition: We've decided that wrapping up all of the current taxes on property -- Council Tax, Stamp Duty, IHT, ga-ga Granny Tax, Housing Benefit etc. -- and  transform them into LVT. But how on earth are the politicians going to sell that idea to the 60% of the population who are owner-occupiers and their families? Think of the reactions:

"Watch the price of your house drop to one-third of its present value."

"Be forced to pay tax even if you don't earn a penny."

"Pay the State for something you thought you owned outright, or have the very land under your house nationalised, just like they did in Soviet Russia."

Sunday, 24 May 2020


A (THE?) POWER IN THE LAND? 
BANKS ‘Too Big to Fail, Too Big to Jail’ 
The Politics of BANKING and LVT:
During the Great Financial Crash of 2008, caused by the reckless behaviour of the bankers, our government rushed in with our money to rescue them. In the aftermath very little was done to change the way banks operate, and not a single banker went to jail for their crimes. (Big Short ref). A more stunning example of power over the political system is impossible to imagine (unless you include a virus like CV19!).

LVT would threaten to wipe out 75% of the banks favourite retail business – mortgage lending. To break another side of the Iron Triangle that is clamping the Housing Market, namely Banks and Finance, we are up against a formidably well-connected political force. Money power sometimes seems greater than political power, so can the banks be persuaded or compelled to go along with LVT?

Monday, 18 May 2020

POLITICS AND THE HOUSEBUILDERS
Can they change? Might they WELCOME LVT?
So the housebuilding industry, working to its current business model is a failure. It is certainly not producing enough houses. Those that are built are of poor quality. But the greatest criticism is the price of these new houses increases year-on-year. Who is to blame for this mess?
It would be wrong just to heap all the blame the builders, as Liam seems to do. They are compelled to follow this business model, which only politicians could fix.
But the builders are not completely blameless. Their lavish funding of the Tory Party reaps its rewards, and sways the actions of government ministers. (Liam seems to find it especially reprehensible that Tony Gallagher a successful property developer hosted the 50th birthday party for David Cameron).
THE HOUSE-BUILDING SPEC-DEVELOPERS
Not a normal industry

How would the housebuilders (one arm of the Iron Traingle locking down the housing market crisis )react to the imposition of LVT? 
 Before answering that I have to explain the strange beast that is the house-building industry.
We rely on the house-building industry for our supply of new houses, but we blame them for vastly under-supplying our needs. Perhaps if we understood the production methods which they are forced to follow we could see what is preventing the housebuilders from doing more. Understanding the peculiar characteristics of the spec-builders is essential if we are to find ways to help the housebuilders do better, build more and most of all get prices down.

Thursday, 16 April 2020


IN A NUTSHELL –

HOUSE-PRICE RISES ARE DRIVEN BY MORTGAGE AVAILABILITY

and very little else


Steve Keen, one of the very few economists who DID see the 2008 Great Financial Crash coming has posted the clear-cut evidence that it is Mortgage Lending that drives up house prices. Here's the graph for theUK followed by the explanation.
The impact of that increased debt for the household sector has been simply higher house prices. 

Putting it simply, most houses are bought primarily with mortgage debt, rather than out of income. 

So the monetary flow of demand for housing is primarily the flow of new mortgage debt. Divide this by the number of houses for sale, and you have a rough measure of the average demand price per house. 

Given how inflexible the supply of housing is, the change in this flow of demand is the primary determinant of the change in the house price level. 

So all this additional debt has done is simply drive up house prices by higher leverage.”



Monday, 30 March 2020

LIAM SAYS NO! TO LAND VALUE TAXATION
Another posting on Halligan’s excellent HOME TRUTHS book on rescuing the housing market
Why would he say a thing like this (page 248)

“A ‘Georgist’ land value tax requiring high annual payments from all landholders, whilst scrapping most other taxes, would not help to solve the UK’s housing shortage. Many landowners do a superb job of looking after our rural environment and are far from wealthy – caring for the land in part from a sense of obligation and duty. They should not be taxed simply for land ownership.”

Phew! A definite No! to LVT then. Obviously I’m disappointed with this. From the depth of his understanding of the Housing Crisis that Liam has shown, I hoped he would have leapt at the perfect ‘Golden Mean’ solution of LVT. But no.

I will examine this quotation in two parts: Firstly I will explain how silly his statement above is. Then I will try to fathom out why such a smart guy as Liam would say such a thing.

Wednesday, 11 March 2020

MY GENERAL THEORY
of drastically reducing all PLOT PRICES and
hence FIXING the housing market
as the only way to have cheaper, better and above all MORE dwellings

I've been thinking about Liam Halligan's excellent book Home TRUTHS. Has he produced a narrowly focussed special theory of why house prices are soaring, and I’ve got the GENERAL theory? [I know! This makes it sound like Einstein--but bear with me. I think I am on to something]  

Supply in the Housing Market isn’t just New Build. As I explained previously

Second-hand properties are the MAIN Supply to the Market. Using an iceberg metaphor, I’m going to explain why concentrating on new-build and the effect of Planning Permission on Land values, doesn't give a complete explanation of the workings housing market.

Imagine the value of all the housing plots aggregated into one huge mass. This is the total of land value. Next think of this plot-value mass as a bit like the proverbial iceberg. While most commentators obsess about the tiny fraction that is visible ABOVE the waterline, the huge un-noticed bulk BELOW remains unexamined. Big mistake, because it is the main bulk of the iceberg, the totality of plot (land) values that swings the market.


An iceberg — 10% above the waterline, 90% below — that’s comparable to the housing market. In normal times 10% of houses on the market are new build, 90% of the supply to the market comes from existing stock. 

[think of the Iceberg as all the plots of land on which homes are built, represented by their value/price as an ice crystal. So the whole iceberg is the total value of all the plots both for new-builds and existing dwellings]