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Sunday 3 July 2022

The Spectator gets it half-right on fixing the broken housing market.

 “50-year mortgages won’t fix Britain’s broken housing market” is the headline. This is in response to the Government’s latest wheeze to pretend they are doing something about the Housing Market.

The author of the article rightly pours scorn on this idea. It is one of a series of gimmicks from this and previous governments, all of which just push prices up higher.


So far so good, but then comes the utterly conventional, but wildly wrong explanation:

 The problem with the British housing market is that there isn’t enough stock relative to the population, and where there is stock available, it’s in the wrong place.”

It’s all down to supply of new housing being deliberately limited says the author Sam Ashworth-Hayes (former director of studies at the Henry Jackson Society):

“British politicians have created an almighty mess. Restricting housing supply caused prices to rise, and meant people borrowed increasingly large sums of money to buy homes.”

(The author seems deeply incurious as to where the ‘increasingly large sums of money to buy homes’ comes from!)

Governments are deliberately restricting supply of new builds? That’s nonsense!

If the rate of housebuilding was in some fairly-tale land doubled, tripled or quadrupled would that bring down prices? No, because the 80-90% of the houses for sale are already there!

And the conclusion:

“And until a politician is brave enough to grab the nettle and risk a drop in property prices, we will be stuck with a housing market that ruins the lives of young people before – eventually – turning them into lobbyists for its maintenance.”

The author thinks that the ‘nettle’ it is the power of the Nimbys that must be ‘grabbed’, but the real force that is pushing up house prices is the ability of the financial system to create unlimited amounts of mortgage funds.

‘Rein in the power of the banks!’ Now that would be a brave new slogan for the freedom-loving Henry Jackson Society!


 Here’s The Spectator article

- - - - - - -

50-year mortgages won’t fix Britain’s broken housing market

2 July 2022, 8:30am


2 July 2022, 8:30am

Downing Street has come up with another cunning plan to fix the housing crisis: 50-year mortgages, passed from parent to child. No longer will your ability to afford a home be dependent on your earnings. Once the scheme is in place, you will be able to borrow against the incomes of your future children, in a heart-warming recreation of the age-old tradition of indentured labour.

The reasoning goes something like this: young people can’t afford to buy homes. Not only can they not afford to buy homes, they can’t afford to save for deposits. While accommodation has grown ever more cramped – with space per person dropping a quarter between 1996 and 2012 – rents have continued to eat into incomes. Record numbers have are stuck living with their parents, unable to start their lives as adults, let alone start families.

In order to help them, the government is going to make it easier to borrow money. This could mean smaller deposit requirements, or it could mean very long repayment periods. The latter would be enabled through mortgages that parents could pass onto their children, replicating policies introduced in Japan in the 1980s. It’s a simple idea, and one with no chance of working.

Mortgages let you borrow against your future earnings. The longer the period of earnings, the more you can borrow. At some point, it is somewhat optimistically assumed that you will retire, stop working, and stop earning. This caps the amount a lender will offer you. Making mortgages transferable allows you to borrow against the earnings of your children: you make payments until you die, and they inherit both the house and the remaining debt.

The main effect of 50-year mortgages will be to drive prices higher

Longer mortgages won’t do a thing to help young people onto the housing ladder. As with Help to Buy, Lifetime ISAs, and every other policy the government has trotted out over the past decade, No. 10 seems to think the fundamental problem with the British housing market is one of demand: people just aren’t spending enough.

This is wrong. The problem with the British housing market is that there isn’t enough stock relative to the population, and where there is stock available, it’s in the wrong place. It’s like a game of musical chairs. You aren’t going to get five people onto three seats, no matter how much financial engineering you engage in.

This lack of supply in the places people actually want to live is why buildings which used to be family homes have been turned into unsatisfactory house shares. It’s also why prices will continue to rise until people are actually permitted to build homes.

From this perspective, the main effect of 50-year mortgages will be to drive prices higher. Red tape in the planning system stops supply responding to demand. Increasing people’s ability to spend money just results in bidding wars over the properties already available.

It’s not even particularly true that longer mortgages are more affordable. Monthly repayments for a given sum work out as practically identical whether you stretch them over 29 years – the current average duration – or 50. Borrowing a larger amount would actually drive them higher. If 50-year mortgages become the standard, people will end up with more debt, the headache of making mortgage repayments in retirement, and they’ll end up in the house they would have bought anyway.

What’s deeply frustrating is that the government almost certainly knows it won’t work. The reason Downing Street keeps tinkering with demand is very simple: it thinks doing anything to fix supply will lose it the next election.

British politicians have created an almighty mess. Restricting housing supply caused prices to rise, and meant people borrowed increasingly large sums of money to buy homes. As prices continued to rise, each new group of homeowners was increasingly locked into the system: with their net worth tied up in a single asset. A market correction would see their savings wiped out and trap them in the misery of negative equity.

Combine this with Britain’s ageing population, and you have a perfectly self-perpetuating form of political dysfunction. Any attempt to liberalise planning mobilises masses of Nimby voters concerned about falling property values. And until a politician is brave enough to grab the nettle and risk a drop in property prices, we will be stuck with a housing market that ruins the lives of young people before – eventually – turning them into lobbyists for its maintenance.



WRITTEN BYSam Ashworth-Hayes

Sam Ashworth-Hayes is a former director of studies at the Henry Jackson Society.



Wednesday 6 April 2022


 What is driving the housing affordability crisis and how to solve it

is an important new report (31Mar2022) from Positive Money, a research and campaigning group, which advocates a form of MMT — Modern Monetary Theory.

[disclosure: I have been involved from its founding in , and also made large (for me) contributions to them in the early days]

You can read the Report in full here:

 ‘Banking on Property’ is the punning, obscure title of the report. Even the subtitle doesn’t explain much! Still, PM are keen to be seen as respectable and credible in any academic forum, hence the obscurity!

A better title? 

Incontinent Mortgage Lending by Banks Driving Up House Prices

How financial liberalisation lets banks create unlimited money for house purchasing. The result? Houses far too expensive for many of the rising generation to afford.’

It’s all explained in our book[1]

To return to Positive Money’s Report:

—Banks (financial institutions) provide the ‘purchasing power’ for home-buyers.

After a brief history of banking liberalisation in the UK, starting in 1971 (bingo! They’ve spotted it, as I tried to explain), that  

“The [virtually unlimited] power of credit creation [by the banks] means that households are able to purchase property even as house prices increase significantly faster than their incomes.” (p25), and

“A major driving force in the increase of UK house prices over the last thirty [shouldn’t that be fifty?] years has therefore been a relatively elastic supply of credit meeting a relatively fixed supply of housing, combined with increased speculative demand for homeownership and BTL landlordism. Such a rapid growth in house prices would not have been possible without a credit-creating banking system, given the much slower growth of household incomes.” (p27)

So, yes, full agreement and support for my explanation: The proximate cause for house prices rising so fast is freely available credit-mortgage lending.

(Although PM ignores what happened before 1970, when house prices were NOT a problem. IMHO what they did then gives us pointers for what we might do today.)

So far, so impressive. Sadly the Positive Money Report then becomes very dull, heavy going overloaded with analysis of what is frankly peripheral to the main argument. I suppose the felt they had to protect themselves from the conventional thinking of the majority of self-styled ‘experts’!

The Report wanders off into more irrelevance by discussing social themes in the housing of Londoners (OK need to satisfy the sponsor)

Additionally, and these are very  expensive, they commissioned a large public opinion survey. I’ve dealt with this in my previous blog. Tricking people to accept the unacceptable (welcome a house-price freeze) will soon fall apart on first encounter with reality! Casual answers to loaded questions prove nothing.



“Stabilise house prices” they say, but hedged in by lots of waffle:

“The primary recommendation of this report is that the UK Government launches a new longterm housing affordability strategy focused on tackling the root causes of the affordability crisis. The overarching goal of the strategy should be to embark on a long-term transition to stabilise house prices and allow wages and inflation to catch up, bringing real house prices and the house-price-toincome ratio down to more affordable levels over time.”

Hear! Hear! That’s exactly what we advocate in Stop House Prices Rising!

But can I hear Dr Deming’s oft repeated mantra “By What Means?” ringing in my ears.

What ‘means’ does this Positive Money Report suggest to stabilise prices?

1. Update the Bank of England’s Mandate to include stabilising house prices.

And that’s more or less, it. This it seems, is the best that this fine organisation (Positive Money) that I supported to the hilt at inception can come up. Tell the BoE to do it! Waffle about ‘credit guidance’ and ‘improved frameworks’ won’t cut it. Do they think the BoE can re-impose The Corset of the 1960s? No chance!

This really is a case of ‘kicking the ball into the long grass’

Instead the Report should have specific targets for taxing the banks, like Osborne’s Permanent Bank Levy. Make the banks pay more when house prices start climbing.


2. Reform property taxes (yawn, yawn)

This is just filler, and beyond the remit of this Report, which is about the Banks contribution to house price rises. So, out come the usual suspects:

  Make Council Tax fairer, PM says. Have they any clue what political turmoil lies around Rates/Poll Tax/Council Tax? Dammit the system can’t even organise an updating of property values. All the commentators go for this, little realising how toxic (politically) it is. Changing tax regimes requires much more subtlety than this!

There are a few other suggestions on CGT and IHR, but no explanation of how they would work to stop house prices rising, why politicians would want to implement them, or how soon they would work.


3. Rent controls and security of tenure like they have in Germany

Good point, would have all sorts of knock-on effects, but really has little to do with stabilising house prices.


This Report had a very high profile launch with at least two MPs in attendance on Zoom. It generated zero press coverage, apart from a puff piece in the New Statesman about their survey. “Oh look! Homeowners have changed, the really don’t care about building unearned wealth from their home. Fairness and equity is now their thing” [My Ar*e, says I]




[1] Stop House Prices Rising!: The Essential First Fix For the Broken Housing Market

by Conall Boyle & Steve McCabe Bitesized Books Feb 2022


Sunday 3 April 2022


     So I’m right!? The majority of voters (two-thirds) who own their home will accept it if somebody (the government usually) does what it takes to

        STOP HOUSE PRICES RISING! (that’s the title of my new book)

Here’s how Positive Money, the organisation that commissioned the survey explains it:

-      - - -

 “London, 31 March 2022 – A majority (54%) of British homeowners would be happy if their own home did not rise in value in the next ten years if it meant houses were more affordable for those who don’t own property, according to YouGov polling commissioned by research and campaign group Positive Money.

Positive Money’s YouGov polling indicates that the majority of the British public – including a majority of homeowners — being happy for house prices not to increase:

  • Nearly two-thirds (62%) of the public also believe that the “purpose of a house should be mainly a home,”as opposed to “mainly a financial investment” (1%)

There is popular support across all regions of Britain, and among voters of all the main political parties, indicating a strong appetite for a bold new approach to tackling the housing affordability crisis.


·        All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 1,751 adults. Fieldwork was undertaken between 9th – 10th March 2022.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). “

·        Source

-      - - - end of (edited) Positive Money Press Release. More about this in my next blog

My Comment: The devil, as always, is in the detail.

Threatening home-owners with a price-freeze, let alone a price-crash, has always looked like political suicide.

Any hint of that, and the Daily Mail will go nuts!

And here comes a survey which claims homeowners would be happy with a house-price freeze, but the question had a rider…

Would you be happy or unhappy if your own home didn’t rise in value in the next 10 years, but it meant houses were more affordable for those who don’t own property? [Asked to those who own or part-own their home]”.

Only 54% agreed. The rest didn’t care or maybe thought ‘sod making houses affordable for the youngsters; I want to keep my capital appreciation’.

It is NOT going to be easy, politically, to get homeowners to sign up to a price-freeze (as I suggest in the title of my book). This will have to be approached gingerly, incrementally, and maybe even surreptitiously!

Nice try by Positive Money, though.


My book (with co-author)

Stop House Prices Rising!: The Essential First Fix For the Broken Housing Market

by Conall Boyle & Steve McCabe Bitesized Books Feb 2022

---EXTRA: NEW STATESMAN PICKS UP ON THIS STORY -- but I think they're over-egging it!

Britain has fallen out of love with its housing market

Long-held assumptions about rising house prices are being shattered by the affordability crisis.

By Polly Bindman


When Nigel Lawson described the NHS as “the closest thing the English people have to a religion”, his party was in the process of substituting it with another: the housing market. Policy changes such as tax incentives, the right to buy and the deregulation of the private rental market had formed the basis of Thatcher’s goal for a “property-owning democracy”, and for decades the narrative has held that rising house prices translate into general wealth.

Polling released yesterday (31 March) indicates that the British public no longer believe this story. Confronted by low levels of home ownership and an affordability crisis, the British public would now prefer house price growth to remain low or to stop entirely, and homeowners are in favour of bold reforms to make housing more affordable at the expense of their own properties increasing in price.

The polling, carried out by YouGov on behalf of the research and campaign group Positive Money, found that more than half (54 per cent) of British homeowners would be happy if their own home did not rise in value in the next ten years, if that meant houses were more affordable for those who don’t own property. Since 2000, average wages have grown by 94 per cent while house prices have grown by 224 per cent.

“I think people realise that the system is broken when you can’t really own a home just from having a job,” said Danisha Kazi, senior economist at Positive Money. “Soaring house prices are locking the younger generation out of home ownership. Most people that own homes are older, they’ve got children or grandchildren and they recognise there isn’t an easy way to get them on the ladder other than for them to give them equity that they have in their own housing.

“At the same time, many homeowners are also banking on their own house paying for their retirement or care — the costs of which are also rising — and many are not wealthy enough to pass housing wealth on to their children.”

The realisation that rising house prices do not create prosperity even for wealthier homeowners means that support for reform comes from a broad range of demographics. A majority of Conservative voters would be happy if their home didn’t rise in value if it meant others could buy, and would support the Bank of England being given a target to keep house price inflation low and stable. Similarly, 44 per cent of Conservative voters (and 51 per cent overall) would support a rise in council tax for owners of homes above the national average house price, and a decrease for those with homes that are lower.


The poll found that older voters were actually more prepared than any other age group to sacrifice rising value on their homes in favour of affordability, perhaps because they are less exposed to the risk of falling prices, having built up more equity. The Conservatives had a 62 per cent share of the over-60 vote in the 2019 general election.

The report also counters the common assumption that the housing crisis is primarily the result of a shortage of homes. It reveals that new supply has in fact exceeded the formation of new households in recent decades. In 2020 there were 7.5 per cent more dwellings than households in London and 4.8 per cent more in the south-east.

Home ownership in England peaked at 71 per cent in 2003, and has since fallen to 65 per cent. For young adults it has fallen more sharply, to 47 per cent, while home ownership among ethnic minorities is lower still, at 35 per cent.

High rents and the change in working patterns caused by the pandemic have exacerbated the problem: 42 per cent of private renters say that the pandemic has made home ownership a more important aspiration for them, while 68 per cent of all renters don’t believe they will ever be able to afford a home of their own, according to Ipsos Mori polling. 

Years of policies such as help to buy, changes to stamp duty, the shared ownership scheme and extended mortgage terms have only served to financialise Britain's housing market, a problem most voters now apparently recognise: a large majority believes that the purpose of a house “should be mainly a home, not a financial asset”. 

While the UK's housing affordability crisis is particularly severe, rapidly changing attitudes on housing have already proved electorally significant in Sweden, where rent control policy led to a government crisis; in Ireland, where housing has been a key issue in the resurgence of Sinn Fein; and in Canada and New Zealand, where governments have taxed or restricted foreign buyers. British voters, too, seem hungry for new ideas.




Thursday 24 March 2022

OBR Forecasts 2022 Housing Market Mayhem — 7.4% rise this year!

Property prices are set to leap 7.4% before cooling dramatically as incomes fall and interest rates rise, watchdog says

  • UK house prices are predicted to continue rising quickly for the rest of this year
  • The growth however could slow down notably by the end of 2023, to about 1%
  • Currently the average house is set to be worth an  extra £20k by the end of 2022

From the Daily Mail PUBLISHED: 23:16, 23 March 2022 | UPDATED: 23:16, 23 March 2022

House prices will continue to soar for another year before rapidly slowing down, the Government’s fiscal watchdog has predicted.

The average home could be worth £20,000 – or 7.4 per cent – more by the end of 2022 due to high demand and strong household savings, according to forecasts released yesterday. The Office for Budget Responsibility said the figures far exceeded its forecasts last October.

However, a fall in incomes and a predicted rise in interest rates over the next year means that annual price inflation will then dramatically slow to about 1 per cent by the end of 2023.

More from OBR at


Tuesday 1 February 2022

The Classical Economists’ Fantasy – BATAW, Build Any Thing Any Where

 If you have been trained in Economics (like me) and still cling to the conventional (neo-classical) version (I’ve learned better), then you would be one with the many voices proclaiming
“House prices soaring away?  That can only mean a shortage, so a huge new supply is needed.”
This is the ‘commonsense’ view of many politicians. Cut red tape, speed up the planning applications, kick the builders into building more, more, more! are the watchwords. But as Keynes sharply put it, they are no more than echoes of the ravings of the Defunct Economists (DE) – you know, they ones who didn’t see it (GFC2008) coming.
Yet some of these conventional economists are quite prepared to look reality in the face. In a very interesting paper by Bowman, Myers and Southwood in September 2021 on the obscure but interesting blog workinprogress. Their intriguing title The Housing Theory of Everything[1] has very broad ambitions. The housing problem isn’t just the withering of the great home-owning democracy and the injustice of staggeringly high prices faced by the youngsters. No, the broken housing market is responsible for lowering the birthrate, obesity, and bloating the carbon footprint of suburban dwellers. It’s a most entertaining read!
The authors graphically illustrate my point that it’s not the house builders’ fault. House prices may have tripled since 1970, but the builders have managed to keep build costs under control. It costs about the same today per square metre[2] to build as it did 20 or 50 years ago (all figures inflation adjusted obviously).  The authors give a telling example why this is not good enough, though. As customers we expect more progress, with cheaper better products becoming available. Take the automobile – today’s model is quarter the price, more reliable, comfortable and much better equipped. I loved my old 1970 Ford Cortina, but my 2020 Mazda SUV is a great comfort in my old age!
So build cost is not to blame for houses tripling in cost. I’ve tried to explain the mechanism for the staggering real rises in house prices. For these authors, neo-classical economist to a man, the explanation is quite simple:
The main cause of this is regulations that ban buildings that make better use of the land.” And
“This wedge, between build costs and house prices, is a rough proxy for how much extra cost is being driven by restrictions on new building.”  
This of course is even more defunct economics, but of course they have the mathematical models. Of course, based on their assumptions they can logically, algebraically prove that remove all ‘restrictions’, their weasel-word for the planning laws. The Building Regulations (regs) are rules to ensure the houses are strong and stable, healthy and heat-insulated, fire-resistant and escapable (as Grenfell Tower clearly wasn’t)(but as generally thought to be a result of the defunct-economists approval of the ‘bonfire of red tape’). They take the strong individualistic libertarian nay Ayn-Randian view that all these restraints on freedom result, in this case, in horribly expensive housing, badly designed and built and too few of them
It is commonplace for these economists, often imbued with the Economics of Public Choice Theory (you’ll have to look that one up) to assume ALL public action is corrupt, self-serving vested interests, based on faulty analysis. But behind this conclusion lies a deeper form of deception. It was Mason Gaffney[3] who identified the great failure of economics in the US in Victorian times. At the behest of hugely wealthy industrialist donors, leading economics departments elided Land as a factor of production into Capital. [See Ryan-Collins video on Youtube explain this fraud] One of the main reasons for doing this was to counter the ever-rising influence of Henry George and the Land Taxers.
So that explains the curious conclusions above. If the free-market price is above the cost of production it is ‘evil and mis-guided public regulation’ that must be causing it. Absent is any notion that the cost of Land, the other pre-eminently obvious factor of production has something to do with it!
That is not to say Planning Laws don’t push up the cost of housing, or rather reduce the exploitation opportunities for a given parcel of land. Mandating maximum numbers of houses per acre allowed to be built is one obvious rule which pushes up costs. But the same rule will have vastly different effects in different parts of the country, and in different parts of a city. Why would any Council or Government want to avoid cramming the maximum profitable number of houses onto an estate? Public amenity perhaps? Neighbours in a leafy spacious suburb would wish to maintain the character of the area. These may be crass motives, but if the public vote for them, isn’t that democracy?
In the final analysis we would say that the price of the plot of land incorporates both the regulatorily-imposed shortage of effective building plots plus the societally derived value of amenities like transport, good schools but above all the prosperity and earnings potential derived for the efforts of people working together in the local economy.   
But let us take Bowman, Myers and Southwood at their own analysis. The super-pricing of houses above their construction costs is due to interference in the free market by Planning Laws and Regulations. This leads to the obvious conclusion that the more regulations abandoned the more, through the normal workings of the market, will house prices come down to near their cost of production. The sentiment we totally agree with, but which regs. To go, and how much difference will it make?
One of the authors has been active in the YIMBY campaigns, both generally and in London. Their obvious name Yes-in-my-back-yard is a deliberate contrast to Nimby – Not-in-my-back-yard. It is a positive message and you cannot but admire their efforts. Showing examples of mansard additions to tall, but venerable London street housing is fine. It shows that in special circumstances cramming in more accommodation need not spoil the neighbourhood.
The authors also point to good practice abroad. “Japanese land use regulation is light touch. At its most restrictive, it allows buildings three floors high that use up the entirety of their parcel of land.” For other examples of liveable densely packed cities the authors point to central Paris and Barcelona, as what might eventuate from a bonfire of the regulations.
(Oh what a tasteless remark when the example of Grenfell Tower is fresh in the memory. Lax inspection or light-touch regulation meant that death-trap cladding was affixed to the outside. This high-rise tower block has been by far the preferred response to cramming more people into the urban environment. Maybe regulation is not such an unmitigated drag on the market after all)
So essentially what the authors claim is that allowing the maximum exploitation of every plot without any local control would ‘fix-it’. This is what you might call BATAW — Build Any Thing Any Where. As a philosophy is has appeal, especially to those who crave Freedom for everyone. This is pure economistic fantasy and it is impossible to imagine any regime, authoritarian or not implementing it. They may point to ancient city centres which we find so attractive as models to copy. The higgeldy-piggeldy layouts and tall houses on narrow streets are appealing true (but wasn’t it the fire risk of jette’ed floors which led to their banning after the Great Fire of London in 1666?
The authors make a very good case that “By historical and global standards, today’s most successful cities in America and other Western countries are astonishingly sparsely populated and sprawling.” They lay the blame for this, of course, on ‘the regulations’. But where do they find the consumer appetite for city cramming? Sure, public housing in the form of tower blocks is a disgrace, and many tenants can’t wait to get out. The private sector is very good at providing swanky, concierged apartment blocks. This may be good for the elderly and the footloose young. But overwhelmingly the demand is for stand-alone houses with your own front door and with a garden. Hence urban sprawl. We can visualise raising a family here, perhaps the most fundamental and virtuous instinct of them all.

[1] 14Sep2021
[2] Earlier I gave a figure for UK building cost of about £1,350 per sq m. Building costs in the US are about half that at about $90 per sq. ft. say $900 (£666) per sq m according to a heavyweight US reference,  The Economic Implications of Housing Supply’ Edward Glaeser, Joseph Gyourko  J. Econ Perspectives 32 1,wINTER 2018.
[3] Gaffney, M., Harrison, F., & Feder, K. The Corruption of Economics. (London: Shepheard-Walwyn (Publishers) Ltd., 1994)