LSE on the UK gov’s new housing plans

"The fundamental problems with housing remain the same as in the last fifteen years and of those the most fundamental is the lack of land for development. Only fundamental reforms of our housing supply process will help and this proposes none. Indeed it in some ways goes backwards. It goes from a set of (not very good) mechanisms delivered in 2007 with the Regional Spatial Strategies to a set of aspirational gestures. Frankly the Secretary of State could build more houses with a magic wand."

From the Spatial Economics Research Centre blog

Does “the Economist” know what a “market failure” is?

Apparently not. "Do British housing markets suffer from market failure”? The answer is no.

Here’s a quick refresher - a market failure is when the market - left alone - doesn’t produce an efficient or pareto optimal solution. Good examples are externalities such as pollution or congestion, or public goods such as new vaccines. The London housing market is not a good example of a market failure, where poor outcomes are the result of clumsy government regulation restricting supply. The fact that the market is responding to insane restrictions on new supply by focusing what little building they are allowed to do on expensive rather than affordable houses is not a market failure. Yes it is a market, and yes it is producing poor outcomes, but it is failing because of over-regulation. That is a government failure not a failure of the market mechanism.

It’s one thing when ordinary people use economic jargon in a colloquial sense with a totally different meaning to the economic term, but you expect better from a magazine called the Economist.

More affordable housing for London?

"Affordable housing" is a phrase which needs to go on the banned list. What does it even mean? Something to do with affordability, and something to do with social (subsidised) housing. Mira Bar-Hillel of the Evening Standard notes the wikipedia definition - affordable for someone on median income - coming to a back-of-an-envelope value of around £100,000 (assuming a mortgage of 4 times a £25,000 salary).

She then seems to go off the rails a bit discussing the application of this concept to an actual development - the new central London Mt Pleasant development.

"of the 700-odd flats proposed, fewer than 50 may be for social renting. It also means that, based on current prices in the area, the private flats could easily fetch a total of over £4bn. And be mainly sold to foreign investors.

So based on those numbers (£4bn for 700 flats), each of these flats could sell for more than £5 million each. And the Evening Standard's Property and Planning correspondent thinks Britain should be selling off £5 million pieces of real estate for £100,000? Is it just me or does that sound totally insane to anyone else?

Meanwhile Labour councillors are angry about Royal Mail being "hell-bent on packing in as much private housing as possible" whilst there are "huge housing shortages in London." Does Labour want less homes in London or more homes?

Why does housing policy inspire such epic logic fails from otherwise seemingly intelligent people?

Build on the greenbelt now

the true enemy of our threatened wildlife like the nightingale is not housing but agricultural intensification ... 

There is now more bio-diversity in back gardens than on English farms. ... 

Intensively farmed land has a negligible - even negative - environmental value and is almost sterile from the point of view of wild life; take a look at the 2011 National Ecosystem Assessment. That is the sort of land we should be allowing houses to be built on. The vehement opposition to building on any intensively farmed greenbelt land fails to recognise it for what it is - almost worthless from a social, environmental or amenity perspective. 

Paul Cheshire, Emeritus Professor of Economic Geography at LSE

Nightingales not neighbours

Oh and just to add additional insult, Simon Jenkins thinks we should be prioritising habitat for 180 nightingales over houses for around 15,000 people, valuing each nightingale at nearly 100 people. I've got nothing against nightingales, but do they each really get priority over a hundred people?

Why aren't young people in England angry about housing?

Apologies for being such a bore, but it drives me nuts that we aren't building enough houses in this country. Every year there are twice as many new households as there are new houses built. Every year. This is the first lesson of economics - prices are set by supply and demand - if demand continues to outstrip supply twofold every year then prices will continue to increase and houses will continue to be split into ever smaller fragments. I rented a beautiful apartment last month from a young married couple, both Oxford graduates, one of them a doctor. It was beautiful, except it was also quite symbolically the converted basement of a much more beautiful house above it. Even the most successful people of my generation are doomed to living in the basements of our parent's generation.

And yet simply building more houses, in the places that people want to live, and yes occasionally on some muddy field in a part of the greenbelt, would create jobs, reduce prices, reduce the housing benefit bill, and create all sorts of new positive dynamic externalities as places like Oxford are allowed to follow their natural economic geography and increase in density of smart people. But when the university does try to build more housing, on brownfield land next to the railway in the centre of town, campaigners complain about ruining the skyline. Not even building on "greenbelt," not destroying animal habitat or some beautiful piece of land itself, but obscuring the view of a church spire. Why aren't young people angry about the miserable hovels we are forced to live in? Most of us have been lucky enough to escape Britain at some point in our lives - we've seen the possibilities of better cheaper housing that exists in almost any other country in the world. Where is the angry youth pro-building lobby?

And now in addition to already having the smallest and most expensive houses in Europe to choose from, my  search in Oxford is thwarted by "Housing in Multiple Occupation" rules. Any rented house with more than one "household" in it needs to be registered, with increased legal obligations on the landlord, which means lots of landlords just don't want to bother registering, and so can't or won't rent to a group of young professionals instead of a family. So after being priced out of getting our own houses and basically forced to share because of government planning regulation, we're now thwarted in attempts to find a house which the government will allow us to share because of yet more well-meaning but utterly self-defeating regulation. Here's a better way to take power from landlords and give it to renters: Build. More. Houses.

The solution to Britain's housing crisis

I just had a great idea inspired by David Goodhart. Clearly the reason that poor countries have monstrous governments is that all the smart liberal citizens who might have otherwise overthrown them have chosen to use their exit rather than their voice and left the country, so we should force them all to stay.

Similarly, the reason that Britain has absurd policies, such as the housing policy that leads to the smallest and most expensive houses in Europe, is that everyone who might otherwise have complained has left - about 1 in 10 Brits or 5-6 million people live abroad. So there's a simple solution, ban emigration from Britain, forcibly repatriate the 5 million, and all our political problems will naturally be solved. The "post-liberal" political solution. Sounds great huh?

The economics of the UK housing benefit cap

I'm as liberal as they come. Economically and socially. I believe in markets, but I also believe that we need massive redistribution to ensure effective safety nets and fair life chances for all children. But sometimes, the Guardian, you just take bleeding heart liberalism to whole new levels.

Yesterday you invited us to feel sympathy for Amira and her four children, who are losing their publicly-funded £812 a week flat near Edgware Road because of the new cap on housing benefits. Eight hundred and twelve pounds a week.

Median earnings in the UK are around £500 a week. Yes, we need a safety net. But should we really be paying 160% of average earnings in housing benefit alone for people out of work so that they can live in very desirable postcodes in central London?

£812 a week is £42,224 a year. Considerably more than what most working people earn. Paid by the state in rent.

Homelessness is scary. Moving kids to new schools can be disruptive. These adjustments needs to be handled delicately. But if we drop the status quo bias for one second, paying £812 a week in housing benefits for one household (PLUS other benefits) is insane.

(The win-win solution here, by the way, is remove planning restrictions, ignore the nimbys, let the private sector build the extra houses that it would if it could, and watch rents fall).