How excellent!

Home ownership in the UK will slump to its lowest level since the mid-1980s over the next decade, leading to an “unprecedented crisis” in the housing market, the National Housing Federation (NHF) has warned.

Now leave aside the fact that this report comes from the builders who are looking for handouts.

The actual result is quite probably desirable. It is possible for home ownership rates to be too high.

It\’s long been known that a level of home ownership which is \”too high\” (defining \”too high\” is a bit tougher) increases the general unemployment rate.

This is because jobs tend not to pop up just where people already live. So some people need to move to where the jobs are. It isn\’t the easiest thing in the world to sell up, buy again and move. It\’s certainly more difficult to do that than it is to move out of one rental and into another.

So, labour force mobility is constrained by having too high a level of house ownership. Constraints on labour mobility lead to higher unemployment rates. More of the population living in rentals should, ceteris paribus, lead to greater potential (at least) labour mobility and thus a lower unemployment rate.

At this point we get the inevitable comment that sure, so we should build more social housing, right? And in a pure world, perhaps. Except, moving within one local housing catchment area is pretty tough, certainly more difficult than buying and selling. Moving across such boundaries is near impossible: takes years at the very least.

So whatever problems social housing fixes this isn\’t one of them.

6 thoughts on “How excellent!”

  1. That’s why the UK was a major manufacturing centre in Victorian times. Nearly everyone rented in those days. It wasn’t uncommon for whole towns to empty when jobs dried up.

  2. Rather than droves of unskilled and semi-skilled workers playing musical chairs around the country, would it not be better to offer tax breaks for companies to locate new factories in areas of high unemployment, on the condition that they employ local staff?

  3. @ Monty
    That would not be necessary if it made sense to build the factory there – and planning restrictions didn’t stop them. But at the current price of diesel fuel, they will build factories near their markets unless there is some compensating factor to offset the extra transport costs of building factories in the North-East or Lanarkshire. There was – lower wage costs – until the Wilson government helped the London-based TUC impose “national wage rates” on industry. Now the two homes of UK heavy industry are close to being an industrial desert (a few oases like Nissan in Sunderland remain).

  4. I agree with you concerning the negative effects of national wage rates, and the minimum wage. But even without these formal restrictions, we would have an effective minimum wage predicated on the level of out of work benefits. So not an easy thing to de-construct.
    It seems to me that we are wasting quite a lot of resources by cramming so much of our economy and population into the south east, as if it was impossible to transport raw materials or finished goods from one end of the UK to the other, while we are all spending our money on shiploads of stuff coming over from China.

  5. @ Monty
    If you have some savings or live at home with parents the level of out of work benefits is less than £2 per hour.
    I fully agree with your second paragraph.

Leave a Reply

Your email address will not be published. Required fields are marked *