2 thoughts on “Optimism Dashed: Reality of housing white paper is all politics, no economics”

  1. Posted 08/02/2017 at 19:40 | Permalink

    I love the NIMBY stuff related to Gypsy and Traveller sites…when the Remain influence means no one is racist….really?

  2. Posted 10/02/2017 at 19:24 | Permalink

    Anyone who says the UK has a shortage of housing is misguided at best. Given the fact there are over a million more dwellings than households and 25 million empty bedrooms, it is more likely we have an over supply.

    Economists agree that rent controls are a bad idea because they act as an implicit subsidy to tenants, causing over consumption of housing. Yet this logic isn’t applied to freeholders, who enjoy an implicit subsidy worth over £200bn per year because they do not pay compensation, as tax, for their right to exclude others from valuable locations.

    Not only does this cause excessive vacancy and under occupation, but is then capitalised into rental incomes and thus selling prices. Pushing the average price of a UK home up by two thirds.

    These then act as a transfer payment from those that own relatively little land by value compared to the taxes they currently pay, to those where the opposite is true. Typically from the young/poor to the elderly and the rich. It is this transfer payment that is the cause of affordability issues and excessive individual, inter generational and regional inequality. They are two sides of the same coin.

    While reducing this transfer payment is a noble aim, doing so by building more houses will add billions of pounds of unnecessary extra costs onto our economy.

    It would surely be better to tackle the transfer payment at source with a Land Value Tax. Not only would this be far more effective in reducing selling prices and wealth/income inequality, but it would allow the market to allocate immovable property at optimal efficiency, rationalizing our existing housing and reducing costs. Which at the end of the day all policy proposals should be based on.

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