High caliber twattishness here

According to the FT:

Transport for London is to build 10,000 homes across the capital during the next decade as it turns to property development to raise £1bn of funding for the capital’s underground system, trains and buses.

The group that runs London’s public transport network has shortlisted 75 sites, spanning 300 acres in total, to use for building homes, as well as office and retail space.

So public authorities can’t build houses?

It seems they can if the funding is available.

And if it isn’t there is People’s Quantitative Easing.

Sigh. The story is that TfL are going to generate £1 billion by building housing on land they own. Not that they need £1 billion in funding to build the housing. So PQE can fuck off, right?

35 thoughts on “High caliber twattishness here”

  1. Wow, so he read that totally backasswards.

    Raising £1bn by house building vs. spending £1bn to get into property development.

    Just wow.

  2. So Much For Subtlety

    So TfL is going to copy the Northern Line and especially the Metropolitan Line’s “Metro-land”?

    How interesting. Not so much Back to the Future but back to the Edwardian period. How frightfully progressive.

  3. Some people are desperate for the magical money tree to exist. For the social progressives in the UK, it is people quantities easing (which sounds like an NHS branded laxative in suppository form).

    In America, the current magical money tree are the expatriate Americans and the accidental Americans. The American social progressives insist that these ungrateful Americans who live outside the homeland have the capacity to fund all the social spending that the homeland needs. If only they can be found and taxed!

    We live in a strange world. Drink anyone?

  4. Dickie is starting to sound like a Mastercard advert. There are some thing money can’t buy. For everything else there’s People’s Quantitative Easing.

  5. Transport for London is to build 10,000 homes

    Utterly stupid: any organisation – private or public – should stick to what it’s good at, unless there is a clear and obvious benefit to be realised from branching out. An organisation that exists for the purpose of providing public transport has no business going into property development, regardless of whether it owns prime land or not (if they want to release the value of the land, they should sell it). This will be a right mess.

  6. Tim N

    Depends perhaps how they do it?

    I know another UK example of this. Created SPV, brought in some private sector expertise (to deliver it), whilst retaining a majority equity stake.

    And variations no doubt?

  7. Depends perhaps how they do it?

    Yes. And I would hazard a guess that companies specialising in transportation will not do it the correct way. I expect they will get utterly fleeced by the developers, and/or the people who are going to build the houses.

  8. Tim N,

    Presumably TfL can exploit (i.e. extract value) from the synergy between the two businesses. A simple redevelopment of Battersea Power Station might net them a small sum, but a redevelopment with a new tube station will net a much higher return.

    If on the other hand they’re just building for the sake of it, then yes better to lease or sell the land.

  9. As has been pointed out a number of times, the increase in value of land around a new station is usually vastly more than the cost of running the tube to the new station and building it. This could be a great way of financing tube/railway expansion.

  10. Luis

    Of course Public Authorities can build almost anything. But will they do it in the most effective way? The UK has a long history of incompetence in their public authorities : Blue Streak, Concorde, AGR, System X, Scottish Parliament building…….

  11. Surely TFL can issue a bond for £1bn, and then print £1bn worth of train tickets to buy it back? Candidly, this would allow them to finance their house building programme.

  12. Tim N>

    Pontificating again?

    TfL aren’t looking to make money from property development, so they won’t be fleeced there. There’s a modest profit to be made from construction which will go to a contractor/developer. What they’re making money from is that they’ll be granted planning permission where others wouldn’t.

    Luis E>

    It’s not that they can’t build houses well, it’s that in practice they very rarely do.

  13. There are private flats in London which are over 140 years old many council ones did not even get to 40 years old.

  14. Pontificating again?

    In blog comments, too. The wonders never cease!

    There’s a modest profit to be made from construction which will go to a contractor/developer. What they’re making money from is that they’ll be granted planning permission where others wouldn’t.

    So they’re hoping that the bulk of the financial gains will go to themselves rather than the property developers? Fair enough, but they might find the developers are a pretty savvy bunch.

    And you *still* haven’t told me how the robot factories are coming along! Your blender talking to you yet?

  15. Thanks Dave. Although I’m slightly disappointed it wasn’t a link to an article the prevalence of a “bro culture” in American universities that you insisted was a real, ongoing problem the day before the Rolling Stone story was shown to be utter fabrication. 😉

  16. “contractor/developer” – not always the same thing.

    In that developers are usually interested in the whole scheme (land, planning, financing, construction (and often sub contract it because it’s not what they do), letting, selling, etc, can be very profitable and bigger risks), constructors usually more focused on the build (more traditional margins).

    “they might find the developers are a pretty savvy bunch.” – yep, almost always.

    Hence, if possible some scheme that successfully ties them in to the same equity objectives / outcomes, and with savvy support (to help the public sector bods) to ensure they don’t get screwed by the agreement.

  17. it’s RM who seems to think he’s busting the myth “public authorities can’t build houses?” unless I’ve misread him.

  18. Transport companies often get involved in property development as they control a lot of land and their activities add value to it.

    In Hong Kong the MTR Corporation is one of the biggest property developers and is so successful that it gets involved in TOD on the Mainland. The various rail companies in Japan do also. Admittedly these are private transport companies…

    Still no reason why TFL should not be able to partner successfully with developers to build useful stuff and make a few quid…

  19. It would be rash to leap to any conclusions about what Murph believes given the rapidity with which he contradicts himself. However I have yet to see him address the fundamental problem of how you can build houses when the construction industry is already running at capacity.

  20. Still no reason why TFL should not be able to partner successfully with developers to build useful stuff and make a few quid

    No reason why Edinburgh couldn’t build a tram system either.

    The various rail companies in Japan do also.

    The Japanese are astonishingly good at doing disparate things very well under the same roof. Yamaha started making pianos, and shifted to motorbikes and outboards while expanding its range of musical instruments without a drop in quality. The Koreans also tend to be good at it – Samsung make offshore platforms and mobile phones.

    But generally, at least in my experience, companies trying to go into a completely new business normally end up making a hash of it. TfL are either likely going to have to hire experts in to manage the process for them. Let’s hope they’re going to hire on merit and not give plum jobs to well-connected dimwits and people who make the diversity statistics look good.

  21. If I remember correctly the Metropolitan Railway did not develop Metroland itself but rather sold the land it had speculatively purchased in the areas it was building a new line through, in the hope that builders would snap it up, which they did. It helped that they were the sort of houses that people very much wanted and the Met played on that with some effective advertising showing scenes of semi rural domestic contentment. Can’t see TfL quite having that sort of flair.

    It’s not just public bodies that are bad at this stuff though, one of the reasons Railtrack went tits up was that, as someone said, they saw themselves as a property company with a bit of awkward railway attached and took their eye of the ball in regard to their core business. With the result that they got hopelessly stiffed by a minor functionary of the Blair regime, a humiliating end for anyone.

  22. Bloke in North Dorset

    @TimN

    I’m not sure that South Korea is the best example. Each of the Chaebol were told what they could manufacture and given a domestic monopoly and were also shielded from foreign competition until they’d honed their skills. I’m sure that fat controller would love to implement that sort of policy here.

    I don’t doubt that there are people in local authorities and TfL who if left to their own devices problem could do a good job in getting some housing developed. However they would not be left to their own devices as there is political control of both entities.

    A developer would be single minded and focus on making the most money. TfL and LAs would have to have stakeholder meetings and consult all bodies. Then they’d have to take in to account all the input, especially form the shoutiest organisations.

    Greens would demand buildings be built to ludicrous specification and not just to he current building regs to “showcase” what could be done. Then the anti-car lobby would make it impossible for car drivers and a haven for cyclists and walkers. Disabled organisations would demand that every house be disabled person ready, just in case.

    By the time they’ve consulted and incorporated all of this and more in to the plans 5 years have passed and costs have soared.

  23. And it has to include lots of affordable housing, after all nobody minds paying $1m for a property only to have someone 2 doors down pay a fraction of that for the same property.
    Then they will have a diversity quota for workers and for customers

  24. So Much For Subtlety

    Luis Enrique – “is there anybody who thinks public authorities cannot build houses?”

    Can? Sure. After World War One the private builders were building so few houses, the government just had to step in and do it properly. I believe they have never once built as many houses in a single year as the private sector was before the government got involved.

    Housing and governments do not go together. The beginning of a solution is to remove the government from the equation.

  25. “Oh, I’m sure it *can* be done. But by the twats we put in charge of stuff in the UK? No chance.”

    I was going to add that, but goes without saying really!

  26. I’m not sure that South Korea is the best example. Each of the Chaebol were told what they could manufacture and given a domestic monopoly and were also shielded from foreign competition until they’d honed their skills. I’m sure that fat controller would love to implement that sort of policy here.

    Yes, I quite agree. It was more an example of a company being able to successfully do very different things under the same roof (shielding from competition is no guarantee of that!).

    I think the success of the Korean companies is that, despite being sheltered from foreign competition, they were encouraged to compete ruthlessly against one another. The degree of rivalry between Hyundai Heavy Industries and Samsung Heavy Industries borders on fanatical.

  27. @ SMFS
    You presumably mean WWII.Most inter-war houses were built by preivate developers.
    The principal reason why private developers were not building houses in the 1940s were government regulations introduced during WWII to prevent them usingscarce materials to build houses rather than contribute to the war effort. Mac Millan abolished the temporary wartime regulations and increased housebuilding by well over 50%.

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