Housing

[andrewducker]

Ok, so the government says that by paying less housing benefit this will cause rents to drop.

This is obviously arguable - but let's take their word for it for a moment.

This drops the return on property - because you'll be getting less back for your investment.

Which means that the property is worth less.

Which will cause the market to drop.

Now, I'm fine with that*, but it seems like an unlikely thing for a majority Conservative government to want...

*It makes it easier for first-time buyers to buy. And when people are buying there's less pressure on the rental market, which pushes prices down - we've got the opposite problem at the moment. Of course, there's the question of how much a falling market will cause people to avoid buying as well. Complex stuff, economics.

Comments

[andrewhickey.livejournal.com]

Whether they want it or not, it's something that is absolutely to be desired. Housing Benefit currently has the unfortunate effect of being a subsidy to private landlords, who have been the main beneficiaries of the bubble. I've always found it ridiculous that housing is seen in the opposite way to anything else - everything else, things getting cheaper is A Good Thing. We want cheap food, cheap clothes, cheap entertainment... but expensive houses? Makes no sense.

[andrewducker]

I'd just like them to be stable. Investors in the market make the prices yo-yo.

[andrewhickey.livejournal.com]

That would be a nice start, yes. Fundamentally, I'm against the whole idea of private landlords - rent-seeking always perpetuates inequality. But if we can't get rid of them at least we can let the market settle to a level where it's possible for people on a reasonable income to escape the rent trap...

[gonzo21.livejournal.com]

Agreed. I would love to see a heavy tax on people having a second home. And a ruinous tax on third+ houses.

The investment property market has made it very difficult for anybody under the age of what... 40? To ever own their home. And arguably impossible for anybody under 25 to ever dream of buying a house.

[drplokta]

Most people with second homes are married (or the moral equivalent), and you can't really stop people from buying one house each.

[andrewducker]

Also, landlords are a public good (at least, if they are decent landlords) - many people are happy to outsource the running of their flat, repairs, etc. or do not have the resources to look after property. As well as there being a need to provide short-term living space for people who need somewhere to live for a few months at a time.

[gonzo21.livejournal.com]

Heavy tax on the third then, and ruinous for the fourth?

[channelpenguin.livejournal.com]

Provide some sort of return on safe(r) investments such as cash, bonds etc and people will do that instead of investing in property (rental return being part of the equation, especialloy to buffer against any house price drop).

At the moment we have the rather (to me) illogical situation of a tight money supply (hard to get a loan, not much money available if you want a loan) but very very low interest rates - this does not (to me) compute. Presumably our lords and masters fear the wailing and gnashing if mortgage payments go up more than they fear people with cash to invest. Or they are tryign to force us to like stockmarket gambling, ahem, investment (though of course one could always use trackers ... but that's just a bit of a gamble on a bigger entity (UK/US/EU plc as opposed to any one company or set thereof).

Of course, if house prices drop, then after a point, it will become economic to invest once more.

In some areas, e.g. Guildford, where I live (and I suspect most of the southeast) there is no way "buying to let" is a viable option if you are thinking *only* in terms of rental return as prices are so high that you cannot make the mortgage payments on any property by the rental on said property. e.g 1 bed flat costs circa 160k - rental on such is circa 750/month gross. 3 bed house, well, depends where, but about 300-350k+, rentals about 1400/m. Any recent (i.e purchase in about the last 10 years) investors have been banking on capital return (i.e. rising house prices). Fine if you have the cash and are in it for the very long game - but this means people holding the proprty rather than sellign on, thus a more static market, thus a shortage of supply vs demand thus higher prices (at least according to market theory - which in this case des seem to make a certain amoutn of sense).

I think in essence, I am saying "it's not that simple"

[channelpenguin.livejournal.com]

though I would, of course, agree with Andy re the yo-yo effect...

[channelpenguin.livejournal.com]

also, why are UK people so hung up on owning (more properly "owing" :-) ) than Europeans - who seem quite happy to rent for long long periods - maybe their whole life? Is it a historical 'class' thing? i.e. being a 'landowner' has more status?

Does it really matter if you pay x00/month for evermore in mortgage or in rent? Very few people buy, pay off mortgage and stop - they usually just keep buying more expensive houses through out their lives - until maybe the very end. Are we all SO heavily focussed on the last few years of our lives?

[undeadbydawn.livejournal.com]

because when Thatcher allowed Council Tennants to buy their own homes, the Average Working Family *immediately* launched upon it as a major status boost. Most low earners could _never_ have even considered the possibility of owning property before then. It meant you could do more or less whatever you liked to your home without asking The Man for permission first - a massive boon given the generally atrocious design and quality of stock council housing.

unfortunately as housing stock dried up, people clicked that you can buy more than one, and let it out.

suddenly you're a landlord. And 99% of regular people haven't the faintest fucking clue how to be a landlord.
the net result is the housing clusterfuck we now have to live with
[NB: I am 100% in favour of folks buying their own homes. I utterly fucking despise Buy To Let, with very few notable exceptions]

[nineveh-uk.livejournal.com]

Because rental conditions in the UK are sh*t. Except for those few people on truly long-term tenancies, rent for someone like me means paying almost as much as I would on a mortgage, without being able to do anything to the place to make it feel like home, at the mercy of whether my landlord can be bothered to fix anything that goes wrong, and liable to be kicked out at a month's notice.

I'd happily rent under e.g. German conditions. Under present UK conditions it means a lifetime of making someone else rich whilst living in poor quality accommodation.

[skington.livejournal.com]

What are German rents like, then? (Curious.)

[pete stevens (from livejournal.com)]

I bought a much nicer version of the house I rented. In addition to being substantially cheaper (mortgage interest versus rent, even if you include the loss of investment income on the deposit) the walls are no longer salmon pink. The heating bills are 25-50% lower. I could put a proper fire in. I have curtains that actually function. The rain no longer comes in. I have a catflap. I no longer have to put up with random people inspecting my house at 8am without notice and randomly charging me for contract renewal.

My rented house was both expensive and comparatively well done up compared to many other options I'd seen. In my 18 months of renting I only had to threaten to sue my letting agency once.

As one staff member of the agency said, somebody has to pay to keep the bosses Aston Martin on the road.

[strawberryfrog.livejournal.com]

Why would I like to own property? Because moving all my stuff every year or two is a pain and a waste of time. Because the main difference in landlords is the degree to which and manners in which they are incompetent. Because London rental properties are dilapidated and/or energy inefficient, and I have no great incentive to improve the facilities since I don't own them. Because I don't want to pay off someone else's mortgage and leave them with the resulting asset.

[cybik.livejournal.com]

Renting sometimes means you don't get to choose who you live with. It often means waiting for several weeks for a landlord or letting agent to fix something fairly important (like heating in the middle of winter). It means you can't change anything without consultation. It has meant rent hikes of %15-20 in the past (for me, anyway - more than once).

[andrewducker]

Yeah, the problem at the moment is that the banks are worried there might be a drop in housing prices of up to 25%. Which means that they won't lend you more than 75% of the worth of your property. This is fuck all use for most people starting out on the property ladder. But the rates are low, because government interest rates are low, because the government wants companies to be able to borrow cheaply, so they can turn a profit.

Dunno what bonds are paying out at the moment.

I don't think that buy-to-let has actually made sense for a while, but nobody wants to sell at a loss, so many people are trapped in it. Which explains (part of ) why rental prices have gone up - landlords need the cash in order to pay the mortgage.

[strawberryfrog.livejournal.com]

the banks are worried there might be a drop in housing prices of up to 25%. Which means that they won't lend you more than 75% of the worth of your property

That's an interesting analysis - what they do says more than what they say.

[the-locster.livejournal.com]

Totally agree. Cheap housing is defintely a desirable thing for everyone; everyone except existing property owners that is. But then even they are ending up forking out cash to their kids to help them onto the property ladder.

private landlords: the main beneficiaries of the bubble?

[0olong.livejournal.com]

Have they been? My impression is that many of them have done surprisingly badly out of the whole deal, sometimes paying as much in mortgage interest as they make in rent. Haven't the lenders done rather better than them out of this?

[marrog.livejournal.com]

If they were really committed to dropping private rents, they would introduce a cap to private landlords.

[andrewducker]

Well, that's effectively what they're doing, but only on the 30th percentile. So it should make a difference for the poorest chunk of society - unless it just means that rental property dries up.

[marrog.livejournal.com]

No, it's not. They're doing something that fits with their ideology instead and hoping that it has that knock-on effect - which it really might not, because there are plenty of people who will pay those rents and can. Because their ideology matters more to them than real change.

[matgb]

Caps don't work outside the short term. Immediately, they help.

Mid term, they reduce the size of the market as there's no money to be made, increasing the number of slumlords. I've rented from an effective slumlord after he bought out my previous landlord.

I read a few papers on this sort of thing and the idea of rent control in various ways, and while it's not 100% conclusive, the evidence clearly points to controls being bad overall.

I don't like the current system. Caps don't work. The proposals look to be a very blunt instrument.

The ideal would be some system simlar to most european countries where housing benefit doesn't exist, you just get much bigger unemployment/whatever benefits, but moving from here to there will be bloody difficult--it does seem to be what IDS wants to do, but it's not what Osborne's prepared to pay for.

[undeadbydawn.livejournal.com]

if I agreed any more thoroughly, my brain would burst.

[eatsoylentgreen.livejournal.com]

yes, but the rich fuckers end up buying several properties.

[undeadbydawn.livejournal.com]

the prevailing sentiment appears to be that we, in short, shouldn't let them

[drplokta]

The long-term solution to this problem is to bring the cost of land for housing down to somewhere near the cost of farmland, which basically means a presumption in favour of granting planning permission for housing on agricultural land unless there are compelling arguments against (e.g. it's a National Park or SSSI). The green belt needs to go; it has been a ruinous policy. And in general, we should be building new housing in what's currently countryside, where there's lots of open space and not many people to take advantage of it, so it can easily be spared, rather than in cities, where it's obviously the opposite.

[andrewducker]

I'd be interested to know what percentage of the cost of housing is the cost of the land it is on (versus building costs, cost of dealing with the planning system, etc.).

We are pretty densely populated compared to, say, Spain, but similar to Germany, so I'm sure there are comparisons to be made there.

I have no particular attachment to the green belts - but I wonder if there's a role for the government is cleaning up used land so that it can be reused more cheaply.

[pete stevens (from livejournal.com)]

I bought a terrace in January. According to the estimates for house insurance it's roughly 40% house, 60% land in my case (house was described as 'in a very desirable area').

[jarkman.livejournal.com]

I have a theory - unsubstantiated by any kind of research - that ridiculous house prices are really the product of a kind of quiet collusion between the planning system and the volume house builders.

Most people who sell houses also have to buy houses (since they need one to live in), and high prices are therefore a problem.

The volume builders are the ones who can sell houses, but only have to buy land and bricks. High house prices don't make bricks more expensive, so they are in a position to make a vast profit on the difference. Furthermore, when house prices are high, people are prepared to live in smaller houses, so builders can build lots of tiny little shitboxes instead of a few decent houses.

The planning system constrains the supply of buildable land & hence the supply of houses, keeping up the profit per house, and also keeping up the value of the land banks that the house builders have established.

The planning system seems to generate a suspiciously good deal for the builders. I wonder how it got that way ?

[stillcarl.livejournal.com]

Here in NZ the government is attempting to make it less profitable to be a landlord by scraping depreciation claims on buildings expected to last 50 years or more. The hope is this will move investment from housing to more productive sectors of the economy. (It might be true. I rent and this block of flats has been put on the market. But it hasn't sold and the rent's been hiked up, so maybe it's not true and something simpler (to a landlord's POV) will happen...)

This is an interesting argument: The Case Against Homeownership. Somewhere in it there's mention of a study that showed areas with high levels of ownership were more likely to be areas of low productivity.

But what's good for the economy is not necessarily good for people...