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Monday, 18 September 2017

Conall Boyle, my life in houses and the housing market. 

I was born in Dublin a long time ago, 1942 to be precise.  My unusual first name is an acknowledgement of my ancestors' origins in County Donegal — Tir Chonaill 'Land of Conall' in the Irish. 

I got involved in the valuation of houses at a very early age, six or seven. This happened when I accompanied my father to many parts of Ireland (apart from the Six Counties of Northern Ireland). He was a District Valuer in the Irish Civil Service. His job was to inspect, measure up and value properties for Rating Valuations. My job was to hold the other end of the measuring tape.          

I sometimes had the chance to pay a visit to my Dad's office. This was in a row of fine Georgian houses in Ely Place, Dublin, close to other government buildings. Georgian terraces are a feature of Dublin and were built in abundance before 1800. They are still generally considered the most attractive style of domestic architecture ever built. 

When taken around the offices, hardly altered from their days as grand homes for the wealthy I was shown features such as the stucco ceilings, the wide doors and fan lights. There were arrangements for sedan chairs to be set down in the hallway, and a hatch for wigs to be passed through for re-powdering.

            I recall conversations in the 1950s between my Dad and the other Valuers about the ridiculous basis for their valuations — the annual rental value as it might have been in some year in the distant past. They all agreed that local taxes based on the value of the plot of land that the house stood on would be a far better basis for local tax.
            I remember, too, that in some part of the offices at Ely Place I was told that there were records of the Great Land Valuation Survey conducted for the whole of Ireland back in 1912.  Ireland, all 32 counties of it was then still part of the United Kingdom, and the Liberal Government had just passed two important Bills: Home Rule for Ireland but in in two parts; and the introduction of Land Value Taxation. This latter Bill was the brainchild of Lloyd George, the zealous reforming Chancellor of the Exchequer at the time. Both Bills were postponed at the outbreak of the World War in 1914. Land value taxation was forgotten; the cause of Irish 'freedom' is still not fully resolved!
            So after an early brush with house valuing and even getting close to land value taxation registers, my schooling continued, first with the Jesuits at Gonzaga in Dublin, then boarding school (we don't call it 'public school' in Ireland) with the Franciscans at Gormanston. My catholic faith has fallen away, but I retain the highest admiration for the Franciscans and their peaceful, at-one-with-nature attitudes. I was delighted when the present Pope chose the name of Francis, and hope that the Church can recover from the fascistic leanings of the last two popes.
            To University then — UCD to study Mechanical Engineering. Why? Because my Mammy told me so. She considered it a respectable profession with good prospects. I never really took to engineering, but I consider it a very useful grounding, far better than the airy-fairy Arts degrees that so many think it's clever to read. A good grounding in Science and Maths, and some practical applications in design and manufacturing engineering gives you a broad practical preparation. On graduating, I spent four years at a car components factory in Birmingham, but never really felt I had the hard shell to survive in Industry. This was the 1960s so finding alternative employment as a Lecturer in Maths for Engineers at Birmingham Polytechnic was not difficult.
            It was about this time I got married and at the unripe young age of 23, and bought us a new-build 3-bed semi in Harborne, a 'leafy' suburb of Brum. It cost us £3,450 in 1967, which the BoE ready reckoner[1] tells me is a mere £56,500 in 2016 money.[the other half of our semi went for £175,000 in 2013 !]
            Teaching, even teaching maths was something I found to be both congenial and rewarding. My sense of curiosity was renewed, and voracious reading from the college library and the council libraries filled out my education about the world, about politics and above all about the economy. I recalled Dr Drexler, one of the most interesting of my lecturers at UCD quoting the saying: "The engineer is the guy who makes for one dollar what any damn fool can make for two!". Learning Economics was to be my next challenge, and so I started studying for the University of London (External) Economics degree. I'm proud to say that I was entirely self-taught, or should that be I was too proud to sign up to classes or distant learning by post? I passed in 1972 with a 2.2. I imbibed conventional economic theory and became a paid-up reader of The Economist, the flag-bearer for the free market, especially in its neo-classical guise. Special options I studied for the Final Part included Demographics and Statistics, which gave me something to followed up.

On the housing front, in 1976-7 we traded up. As is customary we didn't move far, just from one end of the golf course (Harborne Municipal) to the other. Our initial £3,450 had become a sale price of £12,000, due to the first massive boom in house prices which peaked in 1972/3. It was said that Ted Heath's (UK Prime Minister 1970-74) dash-for-growth caused this house price boom, as well as a surge in general in prices generally to a near-record peak of 23% (see graph). The purchase price of our 4-bed detached was £16,000. [£103,000 in 2016 money]. Boy were we soon stretched financially! A new baby arrived, salaries were cut, and especially after 1980, interest rates soared, to 15% at their peak. Mortgage repayments caused misery. I saw grown men weep at the result of the Mad Monetarist Experiment conducted by the Thatcher government in the early 1980s.

Following re-organisation at work I found myself in new Department – Mathematics and Statistics. Thanks to the generous support of the Poly I had a day off to do an M.Sc. at Aston University, this time in Statistics.

For my thesis, dated 1979 I chose "Houses and the Housing Market, A Hedonic Study of the Birmingham Area". (You can read it in full on my website, as with all the other papers I refer to later). I had done a pilot study in 1973 which I was able to expand and improve on. This was a statistical study which drew on the widely available data in house-for-sale adverts. It was something of a pioneering investigation, where I made use of computers and newly available statistical packages – XDS3 and later SPSS. Many happy hours were spent preparing punched cards, one per house, which had to be fed into the mainframe computer – an ICT 1905s as I recall.

I was convinced, somewhat naively that the soaring house prices in the 1970s, peaking in 1972 were due to the observable fact that contemporary houses had better features than before — central heating, double glazing, picture windows, fitted kitchens etcetera. That's why I used the term 'hedonic' – an economist's (Zvi Griliches) term for the value of additional functionality built in to modern consumer goods like cars. These days I wouldn't call it a hedonic study, more of a multi-variate regression modelling study. The results were good: my Index of Determination was 80.3 %, and that is good in these sort of studies! It means the characteristics of the house gave a very good prediction of the price. But what about location? Isn't that the most important factor? Yes indeed, and what was novel in my study was the use of a 'Trend Surface Analysis' a technique borrowed from geologists, who, unlike economists are very pragmatic exploratory scientists, always relating their results back to reality on the ground (well, under it really) and not afraid to try different techniques[3].

Yes, indeed, location IS the most important variable in determining the price of a house, even within a single urban area like Birmingham. I was able to produce a contour map, again produced by the multi-variate regression analysis. After a bit of polishing I produced my first academic paper in a refereed journal — the Journal of Valuation: "An Expert System for Valuation of Residential Properties" 1984 ( paywall). First it's Hedonics, then it's Expert Systems, I do seem to climb on modish bandwagons! In reality this is all about Regression analysis on the data, fitting a predictive model. It works well, and it shows location matters.

What follows is the graphic version, drawn for me by our graphic technician. The map, which was a purely mechanical calculation corresponds very closely to the known property hotspots of Solihull and Sutton Coldfield, plus a smaller peak in Edgbaston. The low points too, are to the East of the CBD (Central Business District, an acronym beloved of US researchers). A version of this could form the basis for a land-value map or 'cadastre' as my students taught me to call it. From this Land Values could be deduced by formula.


The 1980s were a depressing time to be alive in the U.K. Margaret Thatcher was inflicting her monetarist dogma on the country and long-established industries were being thrown to the wolves. Unemployment was rising rapidly and exceeded three million by 1983. That was the year I fell in with a group who saw Basic Income as the solution to this terrible plague of joblessness. This group is still thriving, still promoting the idea. It is now known as Citizen's Income and can be found at . I have encountered many interesting people over the years when I have been involved with Citizen's Income and learned much. It is an idea which crops up from time to time, currently as a response to the robotisation of jobs creating mass unemployment (again!!). I have managed to insert some ideas about Citizen’s Income into my proposals for tax shift, for example from SDLT to LVT1.

Ironically, what turned out to be the most difficult problem with implementation of CI turned out to be Housing. If all or most of social security spending as well as tax allowances were to be converted to a single weekly payment to every citizen, then payments like Housing Benefit present a huge problem. Because house prices vary so much across the country, so Housing Benefits vary too. However far I strayed the housing market always seemed to intrude!

Meanwhile at the Polytechnic still more re-organisations found me in 1986 in the Department of Building and Surveying, mainly teaching Statistics to Builders and Surveyors. An opportunity arose for me to take on the Introductory Economics (Economics 101 is the US buzzword for this nowadays). There is no better way to learn a subject than to teach it, so I soon became well versed in the text-book version (Begg, Fisher and Dornbusch was what we used) of Economics. This has an internal logical consistency and a magisterial presentation which you wouldn't want to argue with! Challenge!

1986 was also the year I published my first book with Macmillan "Mastering Statistics with your micro-computer". As a practical exercise, I had the students collect a random sample of 100 houses for sale. This data set formed the basis for the analysis. Housing is ideal because it is interesting, but also varies with the location, hence ideal for my students from different parts of the UK and farther afield. The statistics used was the non-conventional Exploratory Data Analysis popularised by Tukey. Statistics, just like Economics is bedevilled by clever academics trying to make the subject rigorous and mathematical forgetting that it should be practical and useful[4]. I tried to present statistics for those who want to understand and interpret the data they encounter, using practical, simple yet insightful techniques. The need for this still exists, but my book was soon overtaken by VisiCalc and other versions of spreadsheets such as Microsoft XL these days.

I continued with my builders and surveyors until I retired, but added further 'applied' economics topics to my 'portfolio'. I was soon teaching The Economics of The Construction Industry to day-release students from the building industry. (They were studying to become members of CIOB Chartered Inst. of Building). But my main 'new' subject was Urban Economics which I taught on the Estate Management course. These students were aiming to become members of the RICS Royal Institution of Chartered Surveyors, many in the Estate Agency side of the business. A large contingent of part-time students had day release from local firms of estate agents, so the practical input from the housing market was palpable. In such a hands-on environment one learns so much more about the workings of real markets, and how far removed they are from the artificial textbook models. I was surprised when I asked a colleague who both taught techniques of valuation and who did a bit of practice work as well a simple question: Referring to a piece of land familiar to us both I asked "What would price would you have to pay to acquire it?" His response was "Yes I could tell you, but first is this for yourself or is it for a developer?" This is complete heresy for the free-market economists! There is only one price – it's a Law, and that's the price in the market.

Perhaps the best aspect of teaching Urban Economics was that it allowed me to introduce an element of principles of taxation. Surveyors often earn their crust by helping clients to minimise tax liabilities. So it was obvious that I should introduce them to the subject of Land Value Taxation, and the overwhelming case for its introduction. As I've said already: there is no better way to learn a subject than teach it! Happy days filling the minds of the young with subversive ideas!

Builders, both of the Building Surveying variety, as well as Institute of Builders day-release students were also on the receiving end of my lectures on the building industry. Again the practical experiences they fed in showed a radically different picture compared to the conventional free-market view. This time the textbook was Michael Ball (1988) Rebuilding Construction. To enhance my understanding it was back to studying and researching again, this time for an M.Soc.Sci. at Birmingham University. The thesis title was House building Quality: To explore the questions: What mechanisms exist for ensuring Quality in house-building, and how effective are they? I had great fun getting out and about, talking to various professionals engaged in house-building. I learned much about the structure of the industry and the processes employed. I reached the somewhat depressing conclusion "that house-building is not an industry that can organise itself to make sufficient improvements to its quality; that houses will continue to cost more and deliver less." This book is an attempt to atone for that condemnation of a whole industry, and the diligent and dedicated people who work in it. The can do better, but wider considerations beyond their control prevent them from producing the better, cheaper more plentiful housing that we need!

One fact I discovered is that the housebuilding industry was not always such a failure. I read a paper "The Housebuilding Boom in England during the 1930s: Lessons for the 1990s?" in Proceedings of IAHS meeting at Birmingham. (By this time I see that the polytechnic had been transformed into the grandly titled University of Central England. Thanks John Major!). The aftermath of the first Great Financial Crash of 1929 was not all bad. Throughout England, Wales and Scotland too, millions of the now ubiquitous semi-detached houses were built. The prices were reasonable: £22,000 or so in today's money (see the Chapter on the Housebuilders for more detail on this). But were they any good? Well, they're still here and they still sell well. So, no, a failing building industry is not a permanent affliction. I do a lovely illustrated talk about this, which I have repeated several times. I'll do it again for you or your Society so long as it is not too far from South Wales. (hint!)

And then, having reached the full qualifying age of 60 in 2002 — retirement! To be paid, without needing to turn up to work. To be able to follow one's own agenda. A private income, a basic income. Precious! As with many retirees, the dream of moving out of the big city (Birmingham) to a nice place near the sea was too tempting to miss out on. So in 2002 we sold our 4-bed detached for £280,000 [£410,000 in 2016] and moved to near Porthcawl in South Wales, to a, wait for it, — a 4-bed detached new house, the show house actually at a cost of £145,750 (no Stamp Duty to pay either because of a scheme from Gordon Brown to stimulate the economy in poorer areas). It wasn't difficult because my wife comes from these parts, and oh boy! The scenery, the cyclepaths, the open spaces, the welcoming people! What was most delightful was making such a whopping great pile of money ~£130,000 out of the move. Real money. In the Bank (unlike all the Equity Release scams schemes you hear about).

It didn't last. Like so many other Mums & Dads most of it went to help our boys get onto their first step of the housing ladder. That was 2014, but the precious grandchildren are worth far more. And the trouble with money in later life is that a lifetime of frugality makes it hard to spend. No we don't fine dine, nor do we go on cruises. Our car is fine for now, what would we want with a low-slung sports car? We couldn't even get down to get in it! Who needs a second home by the sea when we have that already (although we do have a part-share in an apartment in Tenerife)

Apart from keeping up with LVT through ALTER – the LibDems LVT campaigning group, and following the debates on Basic Income, my main interest in the later 1990s was the exotic topic of lotteries, not how to win them, rather how to use them to share things out. This really is off-topic and has largely kept me busy until now. If you want to find out more on this fascinating topic read my paper in The Statistician 47, 2, 1998 Organizations selecting people: How the process could be made fairer by the appropriate use of lotteries. Later in 2006 an M.Phil. thesis at the Economics Department of Swansea University eventuated:

Who gets the prize: the case for random distribution in non-market allocation.

It's a cracking read, but again off-topic here, although there is a bit about the bizarre student housing lotteries that can be found at many US universities as well as a curious lottery in Australia for 'Star-Bowcott' social housing. But both Basic Income and LVT seemed to lead inexorably to one thing — Money, how it is created, by whom, how it gets into circulation. The seminal work on this was, for me The Grip Of Death: A study of Modern Money, Debt Slavery, and Destructive Economics by Michael Rowbotham (1998). (In case you hadn’t spotted, ‘grip of death’ is a rough translation of the French word mortgage. Yes, the mechanism by which our money is brought into existence is highly dependent on mortgages!) During the 2000s and right up to today, I have been engaged with the money reform idea, firstly through Prosperity at their annual Bromsgrove meetings. But it is the hyper-active Positive-Money organisation under the leadership of Ben Dyson which now commands most influence. I have given as much support as I can, attended meetings, written blog pieces for example:
[ ].
One major idea for reform of money is to take back the power to issue new money and let a government agency print and spend it into existence, perhaps as a form of Basic Income or People's QE. Another way of curbing banking excess is to take away their massive unearned income stream created by inflating house prices — in reality land prices. That's what LVT does. I am amazed that whatever I touch always seems to turn back onto the housing market! Which brings me up-to-date in 2016, and this book which I feel I must try to write as my Final Testament. I have done other things of course, like local and family history[5], lotteries, geology too, but it seems all my life been leading up to this point: How to rescue the Housing Market.

[3] I’ve always been fascinated by rocks, which has led me to undertake an Open University course on geology (2015). Highly recommended! The OU student geology group has more members than for any other subject. They run outings and lectures. It is wonderful to view familiar landscapes with an entirely new insight. The way the science of geology adapted to the Tectonic Plate revolution is the classic paradigm shift. Geology is an ‘interpretive science’ (experiments are mostly impossible), yet manages to develop credible and useful explanations. If only the ‘science’ of Economics could do the same! 
[4] See for example Deirdre N. McCloskey (2008) The Cult of Statistical Significance: How the Standard Error Costs Us Jobs, Justice, and Lives.
[5] Beulah, the Round Chapel, Margam: 1838 An architectural conundrum Morgannwg 2014

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