Whining about rentals

Mr. Chakrabortty:

Report after report shows that homes in the private rental sector are far worse than either council housing or those under owner-occupation. One in three are officially classed as non-decent, while one in five are dangerous enough to present a category one hazard – that is, a severe threat to the health or safety of anyone who lives there. All those tenants’ tales you’ve heard or read about permanently broken boilers or mould carpeting the walls aren’t just anecdotes; they cohere into a statistical truth. One of the richest countries in history is fostering 21st-century slums.

It’s in these conditions that millions of people will live for good. Rental is no longer a stepping stone for students and young professionals; instead, it’s fast becoming a terminus. Well over a million families with children now rent. Just as lack of choice has triggered the rise of private renting, so it will keep a growing number of households stewing there. Polls suggest that around 80% of Britons would rather own a home than rent; the lack of new homes suggests that many under-35s without rich parents will be renting for decades to come.

The answer is of course to build more housing. And given that the major component of housing cost where people actually want to live is the chitty that allows a dwelling to be built then the answer is to issue more chitties.

Liberalise the planning system and you’re done.

You’d think that someone who makes their living writing about economics would grasp this fairly quickly. Supply constrained? Excellent, supply side reforms to increase supply.

But of course the Guardian employs a historian to write about economics……

21 comments on “Whining about rentals

  1. The answer, of course, was not to set up economic policies which rewarded a set of people born between certain years at the expense of those who weren’t. I lost out on the housing boom because I was a few years younger than my brother, who was quids in when he left uni and bought a house at just the right time. What annoys me more than anything is people who happened to be of the right age at the right time stumbled into an appreciating asset and make out like they’re Warren Fucking Buffett.

  2. Its funny really. I live on an ex-council estate.
    The horror stories I heard about for years tended to be the council houses, not the private sector. Mould on walls, boiler malfunction, leaking roof – all council properties. And the council got round to repairing when it could, sometimes a year after the problem was reported!
    Then the council sold off its entire stock (£29 each) to housing associations who immediately between them spent millions doing the properties up to standard. May not be a perfect standard but its a standard nonetheless. And repairs are done in days or weeks, never months.

    I’ve a number of friends in rented accomodation – some private. Never hear any horror stories from them. Perhaps its simply the number of problem properties is exaggerated?

  3. Planning permission for lots of houses was granted years ago near me, and yet only a handful have actually been built in the last five years.

    Which is why we need to both issue more chitties and have a LVT to encourage landowners to build the houses that permission has been granted for.

  4. It’s in these conditions that millions of people will live for good. Rental is no longer a stepping stone for students and young professionals; instead, it’s fast becoming a terminus.

    Perhaps BiG can povide some information as to what those 47% of Germans who don’t own their own home think about the situation? http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

    Anyone in Switzerland to tell us what 56% of their population in a similar position think?

    From my experience a lot of Germans and Swiss don’t want the hassle of owning their own homes and are quite content renting and living in multi-dwelling units.

  5. Yes, there are going to be advantages to renting.
    Mortgage rate goes up? So what? Roof needs work doing? Someone else’s problem to pay for.

  6. Ed: – Which is why we need to […] have a LVT to encourage landowners to build the houses that permission has been granted for.

    If this is a good idea, why not extend it to a tax on all holdings of inventory?

  7. If this is a good idea, why not extend it to a tax on all holdings of inventory?

    A few reasons:
    (i) Land is easy to identify (try hiding it offshore…)
    (ii) The ability to hold land is granted by the state (or whoever records deeds)
    (iii) If we have a price increase on , the market will generally respond by increasing production and/or increasing competition which naturally reduces the price again. We can’t “manufacture” more land (although with relaxed planning permissions we could make more of it available for development).

  8. If this is a good idea, why not extend it to a tax on all holdings of inventory?

    Rational Anarchist has answered the main points. I’ll just add that equivalents to LVT make sense for taxing use of the EM spectrum and for holders of patents and other IP rights.

  9. “(i) Land is easy to identify (try hiding it offshore…)”

    Hmmn, wonder if Sealand pays property taxes…

    “We can’t “manufacture” more land”

    It’s not land that has value, but desirable land. Arguably, we can ‘manufacture’ more of that by increasing the desirability of bits of land. Of course, one of the main things which makes land desirable at the moment is permission to build a house on it, but other things count as well. (Including a promise not to grant planning permission next door, hence the green belt ‘manufactures’ higher land values in London.)

    Just as a hypothetical illustration, if there was an ultra-high-speed rail link from mid-Wales to central London in 30 minutes, usable for the price of a travelcard, mid-Wales property prices would be much, much higher. Building such a link would effectively be the same as building more land in London.

  10. Rational Anarchist has answered the main points

    No. You were suggesting that builders should be discouraged from holding a stock of land.

    I wanted to know why you would not, under the same premise, tax oil companies on oil reserves in the ground or the man with the corner shop for the Mars bars in his stock room?

    I’m not remotely interested in rehearsing all the arguments on LVT advanced, apparently, by a prescriptive and punitive breed of libertarian.

  11. I wanted to know why you would not, under the same premise, tax oil companies on oil reserves in the ground or the man with the corner shop for the Mars bars in his stock room?

    Incentives matter. If you do this, you discourage anyone from prospecting for oil until they are ready to drill for it, and you would discourage shops from holding stock. If the shops don’t want to hold stock and neither do the manufacturers (assuming such a tax would apply to them as well) you’d get less of the items made.

    The point about land is that someone has to hold it – If noone wants to pay the taxes, then effectively noone is claiming it and it reverts to the state. With mars bars, you just get less made. With oil, you just get less discovered.

    I’m not entirely convinced that land tax is the holy grail that some seem to think that it is, but it’s definitely true that residential land values have been increasing way higher than inflation for some time now, and land tax would help to suppress that (as would removing the exemption from capital gains tax that a primary home enjoys).

    Council tax incidentally does function as a poor land tax at lower values. It’s just set way too low, and caps out far too early. When you pay the same tax on a house worth 320k in 1991 as you do on a house worth 3.2m in 1991, there are issues.

  12. Yes, I agree with you, incentives do matter. Penalising a building firm for holding land in inventory strikes me as a way to exacerbate the lack of new builds by slowing the whole cycle down.

    By the same token, if you go to buy a mars bar, you don’t expect the shopkeeper to order one in for you because he is disinclined to stock them.

    Since we’re onto LVT, a couple of points perhaps:

    The idea that land should ‘revert’ to the state is repugnant since the state never gifted it. As luck would have it, I am in the process of negotiating the sale of some land which a state had previously decided should ‘revert’ to it. Luckily for me, both I and records of my title have outlived the state in question. Hurrah!

    Second, why should one no longer be able to afford to live in a house which one may have lived in for decades on the basis of land values over which one has no control? The house has no greater utility to the owner if it’s valued at £2m today compared with £20k when it was bought. Any owner-occupier deriving satisfaction from rising house prices is a dunderhead.

    The thing about taxes on income and consumption is that these are in a sense self-financing in that they are broadly met out of an individual’s cash-flow. To oblige the individual to sell his home is confiscatory.

  13. If the house or rather the location is of no greater utility today than yesterday, why wouldn’t you mind moving if you were fairly compensated for your trouble?

  14. The idea that land should ‘revert’ to the state is repugnant since the state never gifted it. As luck would have it, I am in the process of negotiating the sale of some land which a state had previously decided should ‘revert’ to it. Luckily for me, both I and records of my title have outlived the state in question. Hurrah!

    You have that privilege while the state or society or whatever allows you to continue to have it and hasn’t pried the land from your cold, dead hands. There is no natural entitlement to land or some unilateral god-given right to exclusive possession – there is what the rest of society is prepared to live with, it is a bilateral agreement. Having to pay tax based on the location value is no more repugnant than the present arrangement – possibly less repugnant, although obviously YMMV.

  15. UK Liberty: – thank you for your two contributions neither of which, alas, conveys any meaning to me.

    Perhaps one of us is indisposed.

  16. @ukl
    There is no natural entitlement to land or some unilateral god-given right to exclusive possession…

    Rather than being ‘natural’ or ‘god-given’, the right to the peaceful ownership of one’s property stems from laws. I think it’s generally agreed by historians and economists that if a nation has such laws, it prospers & if it does not, it’s a hell hole.

  17. My point was perhaps unclear; I was trying to make a point about property rights or laws, where they come from and how people think about them. We are used to a certain set of circumstances; very few people try to derive property law from first principle, people tend to retrospectively justify (if at all) from the present circumstances, particularly if they are satisfied with the present circumstances. And further that people seem to set their worst view of a proposed set of circumstances against their idealised version of the present. “Why should I have to move…” – why shouldn’t you have to move? People have to move today if they cannot afford to continue to live at the same location.

    AFAIK no LVT supporter opposes property law, LVT doesn’t entail getting rid of property law, it just recognises that location premiums exist and collects them publicly, for the benefit of society (which has created that location premium) as opposed to today’s private collection of the location premium by owner-occupiers, landlords and banks.

  18. No. You were suggesting that builders should be discouraged from holding a stock of land.

    Yes, I would like the builders to get on and get the houses built. I would like to discourage speculators holding land just as a financial asset and not making productive use of it.

    I wanted to know why you would not, under the same premise, tax oil companies on oil reserves in the ground or the man with the corner shop for the Mars bars in his stock room?

    LVT would in effect tax the oil reserves. Ideally, I think we should have no tax whatsoever on income or consumption, so zero tax on the Mars bars.

    I’m not remotely interested in rehearsing all the arguments on LVT advanced, apparently, by a prescriptive and punitive breed of libertarian.

    I’m more of a classical liberal than a libertarian. In my opinion taxes on income or consumption are more prescriptive and punitive than LVT and equivalents, both in terms of the actual tax that has to be paid and in terms of the information collection and bureaucratic processes necessary to administer the system.

  19. @ukliberty
    If you believe that “society (which has created that location premium)” you may be excused for believing in fairies. There is a location premium for a space in a shopping centre next to M&S – this has been created by the developer who attracted M&S into his planned shopping centre with good design, tailored to what M&S wants, in an place to which shoppers might come and a special deal on rent. This involves a substantial cost to the developer which he recoups from those letting adjacent stores. You want expropriate the amount that the developer could recoup for his efforts and expense for the benefit of “society” – dou you perhaps mean “Ingsoc”?

  20. In this context, society is shorthand for everyone including but not limited to shopping centre developers and railway station builders. It’s to draw the distinction between the value of his property we can attribute to the efforts of the individual and the value of his property we can attribute to the efforts of other entities in his area.

    It isn’t a one-sided thing; a shopping centre developer wouldn’t build in an area without any potential customers, likewise the people in an area may benefit from a shopping centre being built. But the point is the value of an individual’s property is not entirely attributable to his efforts – some is attributable to the presence of a shopping centre, some to the nearby railway or underground station, some to the nearby better than average schools and so on. All of that is under the umbrella of ‘society’ in this context.

    You want expropriate the amount that the developer could recoup for his efforts and expense for the benefit of “society” – dou you perhaps mean “Ingsoc”?

    This is an example of what I’m talking about when I suggest some people compared the worst view of the proposal with some idealised version of today – owners of business property today pay a property tax. john77, I am 100% certain you know about business rates.

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