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]

Part 3 of my Comments on Liam Halligan’s excellent book HOME TRUTHS

RESTORING THE FULL UTHWATT—

LIAM’S NOBLE ENDEVOUR

Once upon a time there was a gallant knight from Ballarat by the name of Sir Augustus UTHWATT. And lo! During the dark days of the War against the Nazis did he labour alongside his fellow grandees Sir William Beveridge (born in India) and Lord ‘Rab’ Butler. Later the more proletarian Welshman Aneurin Bevan  joined their deliberations.

Beveridge as we all know laid the foundations for Full Employment and the Welfare State. The second B—Butler introduced free secondary schooling for all (and Grammar schools too). The third B—Bevan is probably best loved and remembered of all, for he is beloved as founder of our wonderful National Health Service. Since 1945 these three great B’s have been revered as founders of the new era of a civilised, caring state that still persists, despite the ravages of time and the forces of evil.

  

                    

But who nowadays remembers Augustus Uthwatt? It was his Report that inspired the 1947 Town & Country Planning Act (TCPA). It was a conscious effort to improve on the (largely) failed promise at the end of the First World War, that there would be “Homes Fit For Heroes” as Lloyd George promised for the troops when they came back. http://socialhousinghistory.uk/wp/wp-content/uploads/2017/04/Homes_Fit_For_Heroes.pdf

Uthwatt recommended a system of Planning Control and Green Belts together with a tax to reclaim the windfall gains resulting from Planning Permission. 

‘SUPPLY’ IN THE HOUSING MARKET IS NOT JUST NEW-BUILD

MOST HOUSES-FOR-SALE ARE SECOND-HAND

Part 2 of my commentary on Liam Halligan’s excellent book HOME TRUTHS

           As I wearily had to point out to my students, time after time, Supply in the housing Market is not just or even mainly about new-built housing. Eighty per cent, four out of every five houses on the market are second hand, pre-owned, have a single owner-occupying vendor behind them. I’m afraid Liam falls into this trap throughout the book. He is not alone.

LIAM LOSES THE (P)LOT

In his excellent book, Home Truths, Liam Halligan lays out in ten graphs of  what’s wrong with the Housing Market (In Ch2), and very good it is too. But I think he missed out the ultimate 11^th graph which compares House Prices with Land Prices:  

Liam's missed a trick, and a blindingly obvious conclusion here. He should have explained that it is not HOUSE prices that are rising, it’s the price of the PLOT the house stands on that is rising much more sharply. 

 Read on

Do we need another book on the housing market?

A BIG-NAME AUTHOR of Irish origin who writes for the Telegraph.

Liam Halligan really ‘gets it’!

HOME TRUTHS:

The UK’s chronic housing shortage— how it happened, why it matters and how to solve it

(19 Nov 2019) London: Biteback Pub   £20 or less hb

As a journalist Liam writes well in an easy readable style. He position has enabled him to grill important insiders — government ministers, captains of industry, bankers, civil servants, and many more. For his recent Channel 4 documentary ‘Britain’s Newbuild Scandal’ (July 2019) programme he’s even got out on-(building)-site and talked to both builders and home-buyers. His academic credentials are excellent as well (Warwick, Oxford, IMF, LSE).

So this is a great book on the crisis of the housing market. It goes beyond the usual ‘poin-and-sigh’ — listing all the deep problems and their dire effect on homebuyers. 

He digs deeper to explain the underlying reasons WHY the housing market is in such a dreadful state. 

And best of all, is the raft of policy suggestions aimed at fixing the market, fixing the policy mistakes of the past, and really getting a grip on our dysfunctional housing supply.

Building Better, Building Beautiful Commission

—-] sounds a bit like what I am doing here. And who can quibble with homes that are better, homes that are beautiful? Here’s what they say about themselves:

 
The commission is an independent body that will advise government on how to promote and increase the use of high-quality design for new build homes and It will be responsible for developing practical measures that will help ensure new housing developments meet the needs and expectations of communities, making them more likely to be welcomed, rather than resisted, by existing communities.

WHEN FULL LVT HAS BEEN ACHIEVED, WILL WE STILL NEED SOCIAL HOUSING? 

  

 We don’t have ‘social food’ or ‘social clothing’ thanks goodness! Yet once there were Mao’s hordes of blue-denim clad Chinese. Not any more. We wear the clothes we fancy (very cheap because of the self-same hordes) and have such food choices that obesity is our main problem. I’d like to make the case that Social Housing should go the way of the blue denim uniform. In the post-LVT era, houses will be so cheap, so plentiful and yes, so good that state-organised house-building and renting will seem no more than an ancient curiosity. 

No more social housing? Everyone choosing and buying or renting their own preferred housing. That’s such an odd idea for us to take in now. So it’s not surprising that current wisdom can only conceive of a world where Big Brother in one form or another organises housing for the ‘less-well-off’. Consider these recent papers from wise and sensible commentators: