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Solving the housing crisis

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Lord Percy
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PostPosted: 18:40 - 02 Oct 2016    Post subject: Solving the housing crisis Reply with quote
https://www.youtube.com/watch?v=dcbjWGj3jBk

Thoughts?
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Polarbear
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PostPosted: 19:06 - 02 Oct 2016    Post subject: Reply with quote
Rubbish. Too many people after too few houses. Reduce the number of people wanting houses, reduce prices. It is that simple.

The only other way is to increase the number of flats and to do that we are going to have to builds HiRise blocks of flats again or buy some old cruise ships and have floating hulks.
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GSTEEL32
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PostPosted: 19:21 - 02 Oct 2016    Post subject: Reply with quote
Agreed. Simple economics. Demand ( for decent housing) is far outstripping demand.

Have we also got large swathes of some cities that are effectively no go area's?
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Robby
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PostPosted: 19:34 - 02 Oct 2016    Post subject: Reply with quote
Solution? Stop calling it a crisis.

London is expensive, but it still manages to work. Flats are still within buying range of young professional couples. Min wage means getting a council place, moving further out, or living in a slum. That's just how it is.

Elsewhere in the country, there are still cities where a young person on a good wage can buy a 3 bed house as their first home.

Any talk about insane rents in London irritates me. There are insane rents in certain trendy areas because people will pay them, but there are also affordable rents in different areas - and the transport system is really good everywhere. You're never more than an hour from just about anywhere else.
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Itchy
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PostPosted: 19:49 - 02 Oct 2016    Post subject: Reply with quote
GSTEEL32 wrote:
Agreed. Simple economics. Demand ( for decent housing) is far outstripping demand.


Nope.

Polarbear wrote:
Rubbish. Too many people after too few houses. Reduce the number of people wanting houses, reduce prices. It is that simple.


Nope.

Why nope? Because supply and demand only work in markets that are largely free from distortions.

If you distort either variable of supply or demand then then the normal supply/demand curves won't work. In the UK BOTH those variables are massively distorted by government policies.


In a nutshell ...It's very similar to some bloke trying to sell you a turd. The price signals of utility and desire in a free market without external forces mean you can accurately measure how much something is worth. Yet give that bloke a gun and that turd is worth what he says it is worth. The normal price signals are destroyed because the gun overrides the price signalling.

Take for instance demand.

The UK doesn't have major shanty towns. HK, Tokyo, Seoul, major US cities, Indian cities have shanty towns. This means supply is constricted right at the bottom AND it also increases demand because other than the odd person or pilloried group you can't go to a field and set up camp. Polarbear loves to say keep that crap in Asia. Except that's the thing in not wanting this you're distorting the market.

There is also realistic demand and unrealistic demand. We might want Panigale motorbikes but we can't afford them. Therefore our demand is unrealistic and doesn't exist. The artificially low 0.5% interest rates exacerbate this as people just look at the monthly payment at 0.5% rather than at a more realistic level of 3-6%.

The UK government has put in so many props that people can borrow 125%. Help to buy help to buy 2. Help to buy 3. House buyers ISA. Support for mortgage interest 1 and 2.


Or hell landlords that are using leverage and borrowed money to outbid actual owner occupiers. People like Fergus Wilson holding onto 1000 properties shouldn't exist. But they do because of the distortions and the government keeps bailing people out.

So you're over leveraged here is a bail out.

So you lied on a mortgage (even BCF encouraged this). Here is a bail out (low interest rates and SMI).

Anyway to the OP?

To resolve the housing problem?

It's simple, have the government step away and let the market do its work. When I say that I mean they step away from everything as only removing some of props and distortions won't solve anything. Let banks take the risks of over lending rather than have the government backstop them. The banks know this so they will lend as much as they want (I'd note that banks don't use fractional reserve banking and create money by issuing loans the BOE even admits to this).

https://www.monetary.org/wp-content/uploads/2016/03/money-creation-in-the-modern-economy.pdf

Let interest rates rise, remove the floors (housing benefit, almost all of the land restrictions).

Boom it will resolve itself.

Lots of people who were silly will lose their homes. Shanty towns will spring up. Banks will be more prudent as they have to chew their own losses. There will be lots of bankruptcies.

Problem resolved problem is you've got millions of people playing cognitive dissonance. I know what it's wurf so I'm going to hold out for what I think it's worth (while taking government bail outs to enable me to hold out my position rather than go broke).
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JonB
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PostPosted: 22:37 - 02 Oct 2016    Post subject: Reply with quote
Itchy, from what basis are the government currently encouraging 125% LTV borrowing?

Help to buy equity (not London) is merely a 20% share in a new property.

The purchaser still needs to find a minimum 5% deposit and a mortgage for the rest.

The support the government has provided is for the low deposits that are generally held. The reason for low deposits from FTB is because of increasing prices over and above wage inflation, plus associated rents that are taking so much salary out that trying to muster a hefty deposit on top is really challenging.

The reason for all this? Lack of houses in the right areas. Simple economics.
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Derivative
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PostPosted: 23:04 - 02 Oct 2016    Post subject: Reply with quote
I don't agree with the 'build pretty houses' idea. It sounds like it was basically pulled out of a hat.

I just think it's blatantly obvious that we should build more homes until there's a surplus. What's the worst that can happen? We end up with really cheap rent and a few empty homes? Sounds like a real catastrophe, that.

People act as if the country is lacking in green. London has two great whacking parks in the middle of it and in 30mins-1h drive you're in fields as far as the eye can see.

I live in NE London and people have signs up protesting new building. Gives me a bit of a giggle, it's like painting a mark on your door for identification. Epping Forest is around the corner for fuck's sake.

WRT the 'flat in reach of 2 young professionals' - that's basically a tautology. People that can afford it can afford it. I don't think it's reasonable to consider anything outside of software/high finance a non-job.

Teachers, police, firefighters, accountants, etc etc - should just rent forever and deal with a 1h commute for eternity I suppose.
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Itchy
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PostPosted: 23:06 - 02 Oct 2016    Post subject: Reply with quote
Quote:
The reason for low deposits from FTB is because of increasing prices over and above wage inflation


And why is this the case? Where does the 'price increase' come from? It can come from two main places. A growing economy or loans/credit being created.

I'm pretty sure the UK economy hasn't grown 200%-500% in the past ten years. So it must be loans/credit created faster than economic growth. Prices are set at what an individual can borrow. So if there is no credit the price is what is in your pocket. If there is £10 in my pocket it's £10 as there is no more money in existence. So if an individual can borrow £90 then the price is £100 as £90 credit and £10 cash.

So wait the government are lending people more money via the deposit thing to counter increasing prices? But isn't this making even more credit available? So you're borrowing £150 instead of £90 now thus feeding into higher prices?

The big issue is we had a massive massive expansion of credit from 2002-2007 with self certs, lies on mortgages or I/O mortgages (this is a big thing to look for with 1.5million I/O mortgages mostly BTL). The government chose NOT to unwind this credit expansion and kick the can down the road and made everybody eat a 20% living standards loss (GDP per capita fell considerably). They chose not to unwind because it would be a big vote loser. But it's similar to PFI you get some short term gain politically but in the long term it has much bigger negative consequences...

So yeah supply demand economics. Except it was a massive supply of credit rather than the houses themselves.
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Derivative
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PostPosted: 23:14 - 02 Oct 2016    Post subject: Reply with quote
Quote:
There are insane rents in certain trendy areas because people will pay them, but there are also affordable rents in different areas - and the transport system is really good everywhere.


Any clues? As far as I can see the bottom end is 800-900 quid basically anywhere for a 1 bedroom flat. I haven't really seen studios in the outer regions.

I mean, I can put in places like New Addington on Rightmove and get zero results under 800 quid.

Are you considering the entire region bounded by the north and south circulars 'trendy'? I guess that might sort of make sense.

Quote:
You're never more than an hour from just about anywhere else.


Err, I'm currently over an hour from Hyde Park and I'm on a tube line. 1.5 hours from Croydon.

That's not actually terrible, mind, the fact that the rent on a 1 bedroom flat costs 100% of minimum wage is. It feels pretty weird to know that most of your neighbours couldn't afford to live here if they started today.

Thankfully I have an actual job. No good for the other 80% in my age group though.

Last edited by Derivative on 23:35 - 02 Oct 2016; edited 4 times in total
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Itchy
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PostPosted: 23:17 - 02 Oct 2016    Post subject: Reply with quote
Derivative wrote:

I just think it's blatantly obvious that we should build more homes until there's a surplus. What's the worst that can happen? We end up with really cheap rent and a few empty homes? Sounds like a real catastrophe, that.


Bank balance sheets will be negatively affected that's what. Their balance sheets contain debtors as assets. If a debtor welches/goes bankrupt. Then the credit that was created from their loan is unwound their assets go down yet the liabilities stay the same. Do this enough and they're insolvent
(banks are by their nature always insolvent).


If lots of houses are built and there is an alternative to debt servitude people will go bankrupt and take these alternatives as a rational choice* . This causes banks to go kaput. Government then has to step in and bail them out again.

And of by complete coincidence of course ex-politicians tend to conveniently get jobs with such banks and generally want to keep these banks sweet. I mean can you imagine it Tony Blair printing his CV out and going for an interview?


*rational choice is similar to the tax credit sweet spot. People would reduce their hours to the magic 16 hours and get their wages topped up to 90% of their full time wage and have a lot of free time on their hands. It was rational in the short term but ruined their longer career prospects.
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Derivative
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PostPosted: 23:22 - 02 Oct 2016    Post subject: Reply with quote
Oh, sure, there's that.

That doesn't explain the leagues of people coming out with frankly odd comments like Polarbears 'oh no high rises'.

What percentage of the population has a BTL?

The only other reason to care about your house price once you're in there, is if other areas of the country move differently, or you're planning to move abroad.
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Itchy
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PostPosted: 23:37 - 02 Oct 2016    Post subject: Reply with quote
Derivative wrote:
Oh, sure, there's that.

That doesn't explain the leagues of people coming out with frankly odd comments like Polarbears 'oh no high rises'.


It's because Polarbear was a sailor and visited many Asian port cities. He saw the skylines and reeled in horror at how crowded it all was.


Quote:
What percentage of the population has a BTL?


IIRC 3.4-4 million outstanding I/O BTL mortgages.
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Derivative
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PostPosted: 23:39 - 02 Oct 2016    Post subject: Reply with quote
Itchy wrote:
Quote:
What percentage of the population has a BTL?


IIRC 3.4-4 million outstanding I/O BTL mortgages.


I'd take a wild stab at that being about 2-3m individuals, then. About 8% of the adult population. Doesn't include owned outright or repayment, though. So that is potentially a large proportion. Hm.

Quote:
He saw the skylines and reeled in horror at how crowded it all was.


The thing is, you don't live there if you're rich, so what's the issue?

Improve the transport, get out the cranes and South London could house millions. Holland Park not affected. Hell, it might even improve the nice regions as the lowers move en masse to the cheap housing.

That's basically the way I see it. As one of the 'chosen', why would I shit on the others?
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Rogerborg
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PostPosted: 07:25 - 03 Oct 2016    Post subject: Reply with quote
Ostensible Problem: More people are living as a couple, without children.

So, that makes housing supply worse because... their young children are living elsewhere? Eh?

Liberal logic.

Holds this up as an example of beautiful housing:

https://www.e-architect.co.uk/images/jpgs/cambridge/tennyson_road_cambridge_3.jpg

Plummy voices saying "idiom" and "per se" may sound insightful, but in the end it's just irrelevant psychobabble. Planning permission for housing is decided (and largely denied) by councils, not by nearby residents. That's the problem that needs to be addressed, and it's not even touched on.
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Itchy
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PostPosted: 07:32 - 03 Oct 2016    Post subject: Reply with quote
Derivative wrote:


The thing is, you don't live there if you're rich, so what's the issue?


Because not everybody is rich and therefore the vast majority will live in high rise?

Derivative wrote:
Improve the transport,


In a city like London you're looking at a couple million per metre of track and or improvements.

The biggest problem is that it's an ancient city and thus is very hard to change and modify. There is also resistance to actual change. I don't want no X near my house type thinking. When this resistance is considerably less in places like Tokyo or Seoul. You can look at the mass transit systems there and they make London's look tiny.

[quote="Derivative"
get out the cranes and South London could house millions. Holland Park not affected. Hell, it might even improve the nice regions as the lowers move en masse to the cheap housing.

That's basically the way I see it. As one of the 'chosen', why would I shit on the others?[/quote]
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Derivative
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PostPosted: 08:43 - 03 Oct 2016    Post subject: Reply with quote
Itchy wrote:
Derivative wrote:


The thing is, you don't live there if you're rich, so what's the issue?


Because not everybody is rich and therefore the vast majority will live in high rise?


I think we're talking at cross ends here.

The point I'm trying to make is that a flat in a high rise is better than a shared room in a makeshift flat in a terrace, or living with parents, or living in the next town and earning half as much.

I think most of the issues people have with blocks of flats are based on filling them with the absolute bottom sector of society, failing to maintain them, and then wondering what went wrong. Docklands and surrounding is full of buildings that are basically being given a paint job and sold on to higher tiers.
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Rogerborg
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PostPosted: 09:28 - 03 Oct 2016    Post subject: Reply with quote
Derivative wrote:
the absolute bottom sector of society

Root cause analysis: complete.

They have to live somewhere. Keeping them isolated together is better than allowing them to metastasise.

Best final solution would be to address the demand side rather than the supply.
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UnknownStuntm...
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PostPosted: 11:57 - 03 Oct 2016    Post subject: Reply with quote
Houses are not commodities. They are homes. Places to live. Not places to make you a profit.

Tax 'second homes' (buy to let, city pad, etc, etc) at 500%. Job done.
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Rogerborg
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PostPosted: 13:13 - 03 Oct 2016    Post subject: Reply with quote
There have been moves recently to make rent seeking less lucrative, but my understanding is that it's not resulted in a flood of properties becoming available for occupier-ownership because of wheezes.
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kawashima
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PostPosted: 14:07 - 03 Oct 2016    Post subject: Reply with quote
I heard many "ugly" in the vid. Thumbs Down
I'm envious of those houses he said "ugly".
They are much bigger than ours.
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Ste
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PostPosted: 14:19 - 03 Oct 2016    Post subject: Reply with quote
UnknownStuntman wrote:
Tax 'second homes' at 500%

Jealous much? Laughing
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Monkeywrenche...
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PostPosted: 14:51 - 03 Oct 2016    Post subject: Reply with quote
UnknownStuntman wrote:
Houses are not commodities. They are homes. Places to live. Not places to make you a profit.


Noble concept, but the only way to make this true is to have all homes identical inside and out and built all in the same place.

Even then there would be aspiration to move to the outside of the cluster, which people would be willing to trade goods, services or cash for. so i guess it's not true.
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UnknownStuntm...
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PostPosted: 15:25 - 03 Oct 2016    Post subject: Reply with quote
Ste wrote:
Jealous much? Laughing
Yeah, about 500%!
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Robby
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PostPosted: 16:29 - 03 Oct 2016    Post subject: Reply with quote
Derivative wrote:


Any clues? As far as I can see the bottom end is 800-900 quid basically anywhere for a 1 bedroom flat. I haven't really seen studios in the outer regions.

I mean, I can put in places like New Addington on Rightmove and get zero results under 800 quid.

Are you considering the entire region bounded by the north and south circulars 'trendy'? I guess that might sort of make sense.


Looking on rightmove, there are a good few 2 bed flats near me in SE London for about a grand a month. It doesn't go much lower for a 1 bed or a studio, but I'm working on the basis of two people living there and splitting the bills. Living alone is going to cost an arm and a leg, I view it as a luxury.

These flats are either on the same rail line as me (15-20 mins to Victoria) or on the slower line (30 min to Victoria or London Bridge). All about 30-40 minutes on the bike.

My young professionals comment does include police, teachers, accountants. It means a combined income of at least £50k, more likely £60k+. That means up to a third of the take home income on rent, which is a lot but not unusual.
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