Wondrous, just wondrous

Ritchie welcomes Labour’s plan to build many more houses:

If the price is kept sustainable by ensuring land prices do not surge to match the demand for housing – which can of course be fixed by planning legislation – then I will welcome it even more.

But if you fix planning legislation so that land with planning permission is cheap then why the hell do you need the government to go build the houses? You’ve already provided the incentive for private builders to go gangbusters, haven’t you?

It’s entirely typical of the Murph. He builds some grandiose system which requires lots of government intervention and taxing and spending and jobs for the boys like The Murph. But hidden in there is an assumption necessary to make the plan work. An assumption which then also means that the rest of the plan isn’t necessary.

It’s there in his pensions “work” with Colin Hines for example. Pensions should be invested in real assets like green schemes and the like and there’s to be a vast overarching system to make them do so. These green schemes will pay interest on lovely safe bonds to the pension funds.

But if you can work out a way to make green schemes pay interest on lovely safe bonds then you don’t need all the rest of the regulation of pension schemes. Because the pension funds would be just overjoyed to invest in lovely safe bonds.

As above, if land with planning permission is cheap as a result of changes in planning legislation then you don’t need to do anything more. Except, perhaps, get out of the way to avoid being trampled by vast armies of profit seeking builders.

12 comments on “Wondrous, just wondrous

  1. True as this may be, is there anything inherently wrong with the government building/owning houses?

    The government (via housing benefit) is the biggest consumer of rental housing by a considerable margin. Why would it not take advantage of the fact that it can borrow cheaper and faster than the rest of us, and buy in epic-bulk? Plus, they’re going to piss money away on something.. and if that money can get into the hands of armies of brickies, sparkies and apprentices as quickly as possible then it’s immediately better than almost all the other money they spend. Plus, we get an asset at the end which actually does create a return.. (in the form of a saving).

    I wouldn’t want their role to extend much beyond being a bulk purchaser.. just point to a plot of land and say ‘Ok developers, we want X dwellings of Y broad specification on this site.. go tender’. Let the developers work out the rest.

    I know they royally fucked things up in the past, but everyone was building shit in the 50s & 60s.. and the quality of most (private) housebuilding in the country today is pretty poor.

    Maybe all I’m saying is that building social housing is one of the least worst things that government can spend money on.. so when the nutters are demanding it, should we be grateful?

  2. Yes. as with the “it isn’t the crime its the cover up that causes the problem”, it isn’t so much the initial government intervention that causes the destruction it is the endless pile of jerry rigged additional rules and bureaucracy added over decades to stop the market reasserting itself that do.

    In the early years the USSR was actually relatively productive (if you ignore the millions dead), but by the late 70s sclerosia and brain death (literally in Brezhnev’s case) had set in.

  3. How do you ensure land prices are kept low, are we talking all land prices, or are we talking of keeping the individual land plot prices low.

    If it’s the latter I don’t see how that translates into cheaper housing, just more profit for the developers.

    We want cheaper housing, cheaper individual plots provide this.

  4. @ fake
    The local council decides where it wants to build, issues a CPO so that it can buy the land at “existing use” price and *then* gives itself planning permission to build a housing estate complete with primary school, co-op store and pub; later, when it’s half-occupied, add a new/extend an existing bus route. Simples.
    I remember my then local council doing this when I was pre-/early-teens (it took a few years from start to finish).
    Worked quite well, actually. They had spent the late ’40s building temporary houses (“pre-fabs”) to replace the ones that got bombed and the early ’50s on replacing those and clearing the worst slums so this was better quality to replace Victorian terraces that weren’t actually slums but didn’t meet 1950s standards. They even had grass in every other street where small kids could play football without skinning their knees every time they tripped/slipped.

  5. Tim has faith in market forces. I’m a bit skepitical. House prices have risen substantially relative to average earnings over the last 20 years or so which means it SHOULD BE profitable for builders to put up more houses. But they aren’t doing so to any huge extent. I’m puzzled.

  6. If the actual cost of building houses is rising faster than the rate of inflation, it would be interesting to see how much of that is the result of increased regulations requiring more expensive insulation etc.

    House builders get squeezed between rising land prices and higher build specifications. The result is smaller houses to hit the price points they need to sell them.

  7. **It’s the land prices which have risen, which are part of builders’ costs.**

    The point I am trying to make though, is that if you price control plots of land (individually), the sale price will still be based on the average market value.

    So it doesn’t make sense to make plots cheaper, and let private developers build on it, they will still sell at the same high price, just more profit for them.

  8. “True as this may be, is there anything inherently wrong with the government building/owning houses?”

    Yes.

    If you live in a government house, will you vote for a government that might eliminate government houses?

    If you live in a government house, will you vote for a government that will increase your rent?

    Government housing is just another way of buying votes.

  9. Amazing stuff on this thread.And a basic ignorance of rent seeking and its tendency to turn all market forces simpletons’ dreams to ashes. There is massive demand for houses at the moment. Why don’t the private sector builders and developers all rush in and compete on price to flood the country with cheap houses? Because they can make as much by dribbling out a supply of very expensive houses.
    Fact is privatisation, and private sector left to itself, have failed.
    The political superstructure of the Homeownerist parties (all of them, although Labour is at last showing some mettle) is all that’s keeping the rent- seeking ancien regime up, by promising (bribing) voters that their houses will increase in value as long as they don’t press for their rightful wages.

  10. @DBC Reed

    Ah. It’s the Rent Seekers Under The Bed. Again.

    I’d suggest that you are the one being simplistic.

    1 – The alleged backlog basically does not exist, and Miliband is simply posturing. See, for example,

    2 – Even if it *did* exist, 400k planning permissions is a barely adequate supply for today’s recovering but still low build rate of 120k or so a year, even *if* it was all in the right places and all viable (bearing in mind planning levies of up to £50k per house).

    For a small estate, it can easily take 3-5 years to get permission.

    Local Councils actively restrict land available for housing even when landowners have plenty available.

    >Why don’t the private sector builders and developers all rush in and compete on price to flood the country with cheap houses?

    Because you can’t just build a house without any planning involvement, and you have to be able to build them economically and *sell* them.

    Planning bureaucracy is a huge part of the problem.

    If you want to build a small number of houses – say 25 or 30 – you will have to be able to lay out £60-70k as a stake to enter the casino of the planning process. That’s just what it costs to apply and then fund an appeal.

  11. @ DBC Reed
    When were house-building companies state-owned? I must have missed that.
    The housing shortage went from enough houses but not all in the right place pre-97 to a major housing shortage by 2010 with the side-effect that house prices more than doubled.
    Fact is – New Labour completely screwed up by *simultaneously* reducing housebuilding and increasing immigration (3.8 million between the 2001 census and the 2011 census).

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