Why not just make all housing cheaper by building more homes of any kind?

Ministers are planning to build just a sixth of the affordable rented homes needed to meet demand, according to a damning assessment of England’s crisis-hit housing market.

Nearly 600 extra low-cost rented homes need to be built every week if demand is to be met, as more low-income families are locked out of owning their own home. However, the government is only planning to deliver an extra 100 a week under current proposals. It means that demand is outstripping new supply by 500 homes a week, according to new analysis by the independent Joseph Rowntree Foundation (JRF) thinktank. It said that this exposed government building plans as “woefully short” of what is required.

Building a new mansion increases the supply of housing buy that one unit that then brings down, infinitessimally to be sure, the price of all other houses as supply increases relative to demand. Do this a few hundred thousand times and we’re getting there.

It’s also true that the mansion gets occupied, meaning one smaller and more affordable house becomes free for occupation. After all, that is how it works. Cheaper housing tends to be the older stuff, no?

12 comments on “Why not just make all housing cheaper by building more homes of any kind?

  1. Because as I keep telling you, the construction price of houses is largely fixed, at a high level by all the impositions put on development and construction of them by the State. So no house builder can afford to build houses below a certain level, he’d be losing money on every plot if he did. So they stop building. And wait for the price to recover before building any more.

    Its not a question of permissions, house builders have permissions out of the wazzoo at the moment, they are being granted left right and centre. But all these house can only be sold at current prices because of the baked in costs – if prices start to fall, they’ll stop the building.

    I am intimately involved in a large urban extension housing development. I know exactly how many houses are going on my land, I know how many acres I’m selling and I know how much money I’ll get for the lot. It works out at just over £16k per house built. So if the State expropriated my land for nothing and then built exactly the same development, the houses could only drop by that amount each. Thats it. The rest of the cost is fixed – building and infrastructure costs, building regulation costs, planning costs, Section 106 or CIL costs to the local authority.

    This is why houses can fall in price based on supply – the supply now has very high fixed costs. If you could buy a plot of farmland and build whatever you liked on it, live in shipping container house if you wanted, with no payments to anyone, then supply would be virtually infinite and the price of houses would collapse. But just saying ‘issue more planning chitties’ as you keep doing won’t work – its the baked in costs that have to be looked at. Many of which are perfectly reasonable I may add – the cost of improved road access, utilities and local services must surely fall on those creating the new demand, so those costs have to be attributed somehow to the builder of a new house or houses.

  2. Isn’t the way we finance house buying also going to put a floor on on the price with the median house price in any area being roughly 5x median household income?

  3. There’s more to it than making houses cheap. The government that does so also upsets every last person who already has a house. Never mind the sensible arguments, someone who has lost even theoretically some large portion of the perceived value of their house IS NOT happy about it. It costs votes. And there are more of us than first-time buyers.

  4. Problem is that the high prices are sustainable – no one wants to sell for a ‘loss’ so the sale volumes are low.

    Young people are renting instead of buying so eventually the market will forces sales.

    This may require the existing homeowners to die so that their estate makes the sale but it will eventually happen.

    Question is whether the government can manage this so that inflation eventually cancels out the effect.

  5. Thanks for the insight, Jim. That would seem to be backed up by the situation in my town. There are several large areas of ex-factory, demolished, cleared and given the get-go. But they’re just sitting there.

    In the places where works have taken place, the council has forced a low-cost / social housing element. This added to costs of the build, and yet lowered the value of many of the other new properties (because scumbag proximity). But the council wants lots of high-density occupation so as to collect tax to pay for diversity officer pensions, et al.

  6. To expand on Jim’s comment.
    The vast majority of houses being built will be purchased with the aid of a loan & it’s the availability of credit determines the prices of houses.
    It really isn’t very hard or expensive to build a house. Basically, it’s four walls & stick a roof on it. This must be an acceptable standard of housebuilding because a very large proportion of the UK’s housing stock – and a lot of its more sought after housing stock – was originally built to exactly this standard. Place I owned in the London suburbs, the deeds required to be built on the plot a house to the cost of not less than £350. 1899. That house would now set you back half a million.
    Thus the housebuilding requirements Jim talks about are largely various entity’s – developers, local authorities, government etc etc – means to hoover up that created credit.

  7. @PJF: all housing developments over a certain size now have to have a certain % of ‘affordable housing’, often as much as a third. The cost of this is of course dropped on the remaining privately owned houses……..

  8. Rhoda Klapp raises an obvious point. There’ll be a lot of disgruntled voters out there if life’s losers are given state of the art social housing in Kensington and Chelsea at a peppercorn rent, while muggins has to work all hours god sends to pay the mortgage on a crappy flat located two hours from their place of employment.

  9. There’s loads of house building going on in my town, I haven’t noticed ‘HMG Dept of House Building’ on any of the planning applications or any of the bulldozers. The last houses built by the government around here was the ‘RAF Estate’ in the 1950s built by squaddies.

  10. ….as more low-income families are locked out of owning their own home

    Dear Low-income families,

    .
    Rent, don’t buy

    .
    The Big Secret Timebomb : H/T BBC R4 Moneybox 10 Feb 2018

    From 5 April 2018 homeowners who are New and Existing [ie Retrospective Law] unemployed, disabled, ill will receive zero from DWP towards housing costs*, they will have to borrow or become homeless.

    Renters will continue to have rent paid (housing benefit).

    * Maximum currently: interest on first £100,000 or £200,000 of mortgage dependent on purchase date after 6 or 12 month no payment; duration & other restrictions apply. Both payments are less than half the cost of housing benefit, plus owner still has to cover insurance, maintenance and Gov’t mandated improvements.

    .
    Gov’t: “Buy a home we help: Help to Buy, Stamp Duty, Cheap Loans.

    Small print: if made redundant, disabled, terminally ill we won’t help. Rent and we will.”

    .
    PM May “…help the just about managing…” – she’s a liar

    Regards,

    P

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