Another ludicrous housebuilding idea

This one is apparently from the bloke who used to sell pasties. Unless there\’s two Greggs out there.
But it\’s got all the usual flavours of Ritchienomincs in it. Just print the money via QE and build lots of houses. It also contains this absolute gem:

While there are plenty of suitable sites for building already available, a programme on the scale I envisage would clearly require more.

One way to achieve this would be through the compulsory purchase of farmland at a sensible multiple of its agricultural value – say three or four times – which would give farmers a very good profit but not the lottery-winning values currently ascribed to development land.

Sigh. And that\’s just so Ritchienomics too.

If you make land with planning permission cost £30k a hectare (which is that three or four times ag value) then you don\’t need the rest of the plan nor the QE cash. Because people would be falling over themselves to purchase and build upon such land. It normally costs £1 million or something ghastly like that. Lowering the costs of housebuilding doesn\’t lower the price of houses of course: that\’s set by the interplay between supply and demand. But if builders can see an extra £970,000 profit out of each hectare of land you can indeed be sure that they\’ll build more. And that increase in supply will bring prices down in time.

All of the rest of the plan is therefore not needed. Just by lowering the price of planning permissioned land we\’ll have created the incentive to build. Voila, problem solved!

Which brings us back to the Worstall Plan. Why don\’t we just lower the price of building land by issuing more permits? And thus solve the housing problem in one fell swoop?

11 thoughts on “Another ludicrous housebuilding idea”

  1. From the article: “The benefits to society would be massive. Yet, incredibly, the net cost would effectively be less than zero, since it would create marketable assets, worth more than they cost to build, which would also generate a continuing income stream.”

    They would then cock it up by accommodating loads of people for free.

  2. House price gains are just a form of government subsidy, delivered via the planning system. Wiping them out is just like restricting benefits.

  3. I wonder exactly what the ‘housing crisis’ is. Lots of people (including seemingly everyone writing for the Indy, Mail and Evening Standard) would like a nice big town house in central london, so funnily enoug they ae eye wateringly expensive and nothing much can be done on greenbelt to solve that. Equally there are lots of farmers and lots of builders who would like to build nice, high margin ‘executive homes’ in surrey and hampshire since they would make an enormous profit on the transaction by changing planning permission. However, can’t see many people demanding the right to buy said executive home. Housing problem is in modest flats and houses in and around major urban centres – mainly in the south east. Making builders and farmers rich is not solving the issue

  4. Should add that the aforementioned journos all walk out into high street kensington every day and are evidentally consumed with property envy as they pass estate agents windows. Hence lots of articles about how 30 somethings (like, err them) should be able to buy a nice big house near their office and how we need to ‘tax the rich’ to bring this about.

  5. from 2 consecutive paragraphs
    1-building new council and housing association homes.
    2- Yet, incredibly, the net cost would effectively be less than zero, since it would create marketable assets, worth more than they cost to build, which would also generate a continuing income stream.

    So the continuing income stream is predominantly the government paying benefits via tenants to itself.

    Perhaps the good baker would like to tackle perpetual motion for his next essay.

  6. Yes, even Dr Eoin seems to have stopped pushing his perpetual-motion housing co-op, possibly finally convinced that the figures don’t add up.

    And how does this pasty flogger create a “marketable asset” that is going to be used for social housing and so isn’t ever going to be sold?

  7. How many times do I have to point out that the pure planning gain (ie the increase in value immediately upon granting of planning permission for housing) is nowhere near the figures you mention, particularly for large scale developments? Possibly yes for a couple of houses fitted into a small plot in a village, or and old farm yard or such like, where there are no infrastructure costs to account for. But for big urban extensions the increase in value is probably from agricultural value (up to

  8. How the f*ck can you have a blog comments section that won’t accept a pound sign???????????????????????????????????????????????????????????

  9. How many times do I have to point out that the pure planning gain (ie the increase in value immediately upon granting of planning permission for housing) is nowhere near the figures you mention, particularly for large scale developments? Possibly yes for a couple of houses fitted into a small plot in a village, or on an old farm yard or such like, where there are no extra infrastructure costs to account for. But for big urban extensions the increase in value is probably from agricultural value (up to 10k/acre) to c. 300k/acre. One sees figures bandied around of up 1m/acre for development land, which is correct. But that is for a smallish (perhaps 20 acres) of land with all services provided, and being part of a larger development where the infrastructure costs have already been met by the someone else. A housebuilding firm can move right in and just build houses and sell them. To get that plot worth 1m/acre the developer has had to build roads, sewers, sewage treatment facilities, put in utilities, create storm water drains and lagoons, plus provide funding (and land) for schools, playing fields, open spaces, landscaping. On top of all that there is the local infrastructure levy that the LA cream off for their own pet projects, and there will be a percentage of affordable housing that the developer must build/provide land for as well.

    Thus for a large urban extension (1000 houses say) the developer needs to buy 100 acres of land (roughly speaking the split is two thirds of a green field site will have houses on, one third will be infrastructure, open spaces, schools etc, and the density is approx 15 houses/acre. More for terraces, less for detached). That land will cost the developer 30m to buy from the farmer (100 acres at 300k) and he’ll end up with plots for 1000 houses. So the pure planning gain cost (ie the extra the landowner gets because he suddenly has land that can have houses built on it) per plot is roughly 30k. All the other costs would still exist even if there was a planning free for all. And in such a case the current agricultural value would no longer apply – the best located sites would attract a premium, so the actual extra cost per plot is less than 30k anyway.

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