Re: Housing, the economy and growth : Sat Feb 23, 2013 9:36 am  

Sal Paradise wrote:

Quite clearly your theory is just that theory - simply not workable in the economic climate in which we find ourselves in. Businesses are not charities, they require profits/cash flow to keep functioning - even the Quakers who you so admire did their charitable deeds from positions of wealth unimaginable to us. Businesses are not going to undertake huge projects for little return, the risks are too high even you can surely see the flaws in your argument?

Which is where the public funding element of social housing kicks in, as someone stated earlier this week, "public services are supposed to cost money, its why we pay our taxes".

In theory there was nothing wrong with the now demonised buy-to-let schemes of the 1990s, other than the fact that several elements in the ladder needed to make a profit along the way whether it be from the construction of the buildings to the financiers who lent the money to private individuals to purchase them in the first place, and its that need for the financiers to make ongoing profits from the lending that is keeping private rents artificially high now - its cheaper to buy than rent, if only you can raise a deposit, which is not the way it should be.

A non-political overview of the country's housing stock in the 1980s should have decreed a proper market price for existing social housing stock without discounts to tenants (try that one on if you rent a car from Avis and then offer them a quarter of its value to purchase it when you take it back just because you've rented it for a while), only on the proviso that monies raised from sales were re-invested into new housing stock or refurbishment of existing stock.

There's nothing wrong with a government investing taxpayers money into housing for its citizens, its only political attitudes that look upon the topic as if its something they trod in on the street and walked into the carpet - the stock doesn't lose its value (have you seen what decent ex-council houses sell for now), the construction of them was always of top quality (we hated working on council house sites only because each one had a clerk of works, you never saw them on private housebuilder sites) and the maintenance SHOULD have been kept up to date were it not for political will.

Political hatred of other classes has screwed this country for the last thirty years.

Re: Housing, the economy and growth : Sat Feb 23, 2013 9:53 am  

Sal Paradise wrote:

Quite clearly your theory is just that theory - simply not workable in the economic climate in which we find ourselves in. Businesses are not charities, they require profits/cash flow to keep functioning - even the Quakers who you so admire did their charitable deeds from positions of wealth unimaginable to us. Businesses are not going to undertake huge projects for little return, the risks are too high even you can surely see the flaws in your argument?

Now where I have ever said that profit couldn't be made or that businesses should operate as charities?

Do a search on my previous posts on the subject but if that proves a little too difficult for you, have a read of this:

Before laying a single brick: introduce Land Value Taxation on all undeveloped land and any land containing an empty property. Based on the maximum developed potential of the land, the imposition of LVT should be sufficient to stimulate either a building explosion or the release of suitable building land onto the market. That should see a marked drop in land values and although it may be viewed as engineering a reduction in land prices, it will only mitigate the false increase in land values following Right to Buy.

Central and local governments control thousands of hectares of land suitable for house building, this land is owned by US the taxpayer, it is only administered by governments. So release this land to housing charities and other not-for-profit housing organisations, on 99 year leases at peppercorn rents. Allow these organisations to go to the money markets to attract the investment to fund construction. The actual cost of building a house (materials and labour) is only around 40% of its total value, the remaining 60% is the cost of the land it sits upon. There are many European institutional investors who would see the attraction in long-term investment, paying an attractive return.

These new houses could then be rented at around 50% of the prevailing rate, giving the investors a suitably attractive, long-term return and retaining a buffer for maintenance. They should also be under a robust, non-challengeable covenant to prevent any future right to buy,

The pluses include:

1) increased employment in the building sector, leading to a lower benfits bill and an increase in Income Tax & NI revenues

2) Increased employment in retail sectors - all these houses will require furnishing - with similar improvements in tax & NI revenues as in 1)

3) Lower rents leading to reductions in Housing and other benefits

4) Lower rents in the private sector through a knock-on effect

It would also require a change to the current mindset that everyone should aspire to be a home-owner. Prior to the 1980s, there was no stigma involved in renting your home, plenty of middle-class families lived on very attractive council housing developments.

There would of course be some losers: Buy to Let landlords and the banks who loaned them the money are the most obvious. But hey, we're all in it together ain't we?

I'm still waiting for someone to offer a serious argument against, care to have a go?

Re: Housing, the economy and growth : Sat Feb 23, 2013 9:57 am  

JerryChicken wrote:

Which is where the public funding element of social housing kicks in, as someone stated earlier this week, "public services are supposed to cost money, its why we pay our taxes".

In theory there was nothing wrong with the now demonised buy-to-let schemes of the 1990s, other than the fact that several elements in the ladder needed to make a profit along the way whether it be from the construction of the buildings to the financiers who lent the money to private individuals to purchase them in the first place, and its that need for the financiers to make ongoing profits from the lending that is keeping private rents artificially high now - its cheaper to buy than rent, if only you can raise a deposit, which is not the way it should be.

A non-political overview of the country's housing stock in the 1980s should have decreed a proper market price for existing social housing stock without discounts to tenants (try that one on if you rent a car from Avis and then offer them a quarter of its value to purchase it when you take it back just because you've rented it for a while), only on the proviso that monies raised from sales were re-invested into new housing stock or refurbishment of existing stock.

There's nothing wrong with a government investing taxpayers money into housing for its citizens, its only political attitudes that look upon the topic as if its something they trod in on the street and walked into the carpet - the stock doesn't lose its value (have you seen what decent ex-council houses sell for now), the construction of them was always of top quality (we hated working on council house sites only because each one had a clerk of works, you never saw them on private housebuilder sites) and the maintenance SHOULD have been kept up to date were it not for political will.

Political hatred of other classes has screwed this country for the last thirty years.

The idea that there should be no benefit to buying doesn't make sense - there is a risk in purchase that has to be reflected in the longer term benefit of doing so. At the end of the mortgage term the house is yours reward for the risk and no further payments are you suggesting that rental properties should also be given for free once the house is paid for?

On the rest I agree - I don't have an issue with government borrowing to fund house building I am not as convinced as you that it will be the panacea to all the issues you think it will.

On Mr Fish's idea that businesses should suddenly all become altruist it is just that a pie in the sky idea and shows a complete lack of understanding of the way business is financed and why they cannot invest huge sums in projects with little return.

Re: Housing, the economy and growth : Sat Feb 23, 2013 10:17 am  

cod'ead wrote:

Now where I have ever said that profit couldn't be made or that businesses should operate as charities?

Do a search on my previous posts on the subject but if that proves a little too difficult for you, have a read of this:

Before laying a single brick: introduce Land Value Taxation on all undeveloped land and any land containing an empty property. Based on the maximum developed potential of the land, the imposition of LVT should be sufficient to stimulate either a building explosion or the release of suitable building land onto the market. That should see a marked drop in land values and although it may be viewed as engineering a reduction in land prices, it will only mitigate the false increase in land values following Right to Buy.

Central and local governments control thousands of hectares of land suitable for house building, this land is owned by US the taxpayer, it is only administered by governments. So release this land to housing charities and other not-for-profit housing organisations, on 99 year leases at peppercorn rents. Allow these organisations to go to the money markets to attract the investment to fund construction. The actual cost of building a house (materials and labour) is only around 40% of its total value, the remaining 60% is the cost of the land it sits upon. There are many European institutional investors who would see the attraction in long-term investment, paying an attractive return.

These new houses could then be rented at around 50% of the prevailing rate, giving the investors a suitably attractive, long-term return and retaining a buffer for maintenance. They should also be under a robust, non-challengeable covenant to prevent any future right to buy,

The pluses include:

1) increased employment in the building sector, leading to a lower benfits bill and an increase in Income Tax & NI revenues

2) Increased employment in retail sectors - all these houses will require furnishing - with similar improvements in tax & NI revenues as in 1)

3) Lower rents leading to reductions in Housing and other benefits

4) Lower rents in the private sector through a knock-on effect

It would also require a change to the current mindset that everyone should aspire to be a home-owner. Prior to the 1980s, there was no stigma involved in renting your home, plenty of middle-class families lived on very attractive council housing developments.

There would of course be some losers: Buy to Let landlords and the banks who loaned them the money are the most obvious. But hey, we're all in it together ain't we?

I'm still waiting for someone to offer a serious argument against, care to have a go?

OK - we are not in the 1970's society has moved on people want to own their own house - they see 5-10 years of pain for multiple years of gain as the mortgage becomes less of a burden until it is eventually insignificant. I own my house now if I had to rent it I would be paying 800-1000 a month. I would be paying that for the next 40 years? I am not subject to upward only rent increases - even charities have to recover increased/inflationary costs through higher rents. We are an ageing population which would need the government to continue supporting their rent well into old age - surely encouraging home ownership reduces the burden on the tax payer? We have had this argument before - to which your reply was "Well it is working now".

If you want to increase house building surely do this in line with credit suppliers through government guarantee - given the choice people want to own their own home - there is no getting away from that.

Your view that putting a tax on land will suddenly see a clammer to build - bonkers, in a country with limited land it is suddenly all going lose value - reversal of supply and demand!! Builders have plenty in their land bank they are not developing because they cannot sell the completed housing. Are saying the local authorities would also be subject to your LVT too - wow our council tax will end up in the stratosphere.

Your idea is so pie in the sky as to be laughable - has this ever been implemented anywhere - if not it is probably an indication of how good an idea it is.

Re: Housing, the economy and growth : Sat Feb 23, 2013 10:24 am  

Sal Paradise wrote:

The idea that there should be no benefit to buying doesn't make sense - there is a risk in purchase that has to be reflected in the longer term benefit of doing so. At the end of the mortgage term the house is yours reward for the risk and no further payments are you suggesting that rental properties should also be given for free once the house is paid for?

Well I didn't suggest either point but for what its worth I agree although I'd suggest that the risk during a 25 year mortgage term is not your but the lenders and their reward is the interest earned, its win/win.

We're currently going through all of this with my eldest now, she is looking to move out, both her and her partner are employed full time in "professional" jobs, their joint income is roughly the same as my wife and me, they have been given "the nod" from at least one lender that they would not have a problem lending to them, and yet its the prospect of a £16000 deposit that is stopping them.

They've been looking at renting but the rates are so high around here that once committed to renting you are caught in a trap of using your salary to pay the rent with nothing left to save for a mortgage deposit.

Its not insurmountable in their case and no doubt we'll be called upon to help out - the paradox is that my wife works in a hotel that hosts two to three weddings most weekends, some of which are billed in excess of £20,000, yes, even in this strife some people have the cost of a decent deposit for a new house to waste on one days worth of wedding celebration, you have to shake your head sometimes.

Re: Housing, the economy and growth : Sat Feb 23, 2013 10:34 am  

JerryChicken wrote:

Well I didn't suggest either point but for what its worth I agree although I'd suggest that the risk during a 25 year mortgage term is not your but the lenders and their reward is the interest earned, its win/win.

We're currently going through all of this with my eldest now, she is looking to move out, both her and her partner are employed full time in "professional" jobs, their joint income is roughly the same as my wife and me, they have been given "the nod" from at least one lender that they would not have a problem lending to them, and yet its the prospect of a £16000 deposit that is stopping them.

They've been looking at renting but the rates are so high around here that once committed to renting you are caught in a trap of using your salary to pay the rent with nothing left to save for a mortgage deposit.

Its not insurmountable in their case and no doubt we'll be called upon to help out - the paradox is that my wife works in a hotel that hosts two to three weddings most weekends, some of which are billed in excess of £20,000, yes, even in this strife some people have the cost of a decent deposit for a new house to waste on one days worth of wedding celebration, you have to shake your head sometimes.

You are risking the deposit, fees and taxes and also the potential losses in the early years if things don't pan out. As house prices are pretty static the risk to the lender becomes greater if things go wrong.

We are in a similar position to you - our youngest has got a job in Glasgow with Morgan Stanley - it is much cheaper for us to buy him a flat than rent him something. We are also in a fortunate position of being able to use the equity in our house as a guarantee against the flat - another hidden benefit of ownership. Agree the deposit is an issue for youngsters but is it a bad thing that they have to give somethings up - clubbing, holidays - to get something more substantial. Short term pain long term gain.

Re: Housing, the economy and growth : Sat Feb 23, 2013 10:36 am  

Sal Paradise wrote:

OK - we are not in the 1970's society has moved on people want to own their own house - they see 5-10 years of pain for multiple years of gain as the mortgage becomes less of a burden until it is eventually insignificant. I own my house now if I had to rent it I would be paying 800-1000 a month. I would be paying that for the next 40 years? I am not subject to upward only rent increases - even charities have to recover increased/inflationary costs through higher rents. We are an ageing population which would need the government to continue supporting their rent well into old age - surely encouraging home ownership reduces the burden on the tax payer? We have had this argument before - to which your reply was "Well it is working now".

Occasionally we need politicians who are able to look back to previous generations and try and work out how the best bits of their time in power worked and the model for local authority housing is a point in question if we go back to the 1960s/70s.

There was never a requirement to make a profit from social housing.

Thats the main point, there was never a need to make a profit, it was social housing for the use of tenants who paid reasonable rents to tenant the property with no expectation or requirement to own the property and the knowledge that in their retirement they would simply shift down into a retirement bungalow at a cheaper rent, in summary the local authority would provide their housing needs for a lifetime at a rent that was set at a level as to be affordable.

The "profit" in this was a population who were settled into a way of life, could budget around the weekly rent, knew exactly where they were going and why they were working, based their budgets on cash in hand and the large majority of them became part of a local community that lived, entertained and died together.

Sounds like some sort of fictional utopia doesn't it ?

I look at my wifes parents who rented all of their lives, took on a brand new 3 bed council house in 1964 and lived there until they died, my father-in-law had the opportunity to purchase his council house for the last fifteen years of his life and yet he never would, his youngest son almost bought it one year (he was in the RAF but "domiciled" at the house and had the right to buy) but my father-in-law wouldn't let him, as far as he was concerned it wasn't his house to buy it was the councils and when he died then someone else would benefit from renting it.

He wasn't an overtly political man, would never speak of politics, but he had a strong sense of what was right and what was wrong in a community and it was those beliefs that I always admire.

Re: Housing, the economy and growth : Sat Feb 23, 2013 10:50 am  

JerryChicken wrote:

Occasionally we need politicians who are able to look back to previous generations and try and work out how the best bits of their time in power worked and the model for local authority housing is a point in question if we go back to the 1960s/70s.

There was never a requirement to make a profit from social housing.

Thats the main point, there was never a need to make a profit, it was social housing for the use of tenants who paid reasonable rents to tenant the property with no expectation or requirement to own the property and the knowledge that in their retirement they would simply shift down into a retirement bungalow at a cheaper rent, in summary the local authority would provide their housing needs for a lifetime at a rent that was set at a level as to be affordable.

The "profit" in this was a population who were settled into a way of life, could budget around the weekly rent, knew exactly where they were going and why they were working, based their budgets on cash in hand and the large majority of them became part of a local community that lived, entertained and died together.

Sounds like some sort of fictional utopia doesn't it ?

I look at my wifes parents who rented all of their lives, took on a brand new 3 bed council house in 1964 and lived there until they died, my father-in-law had the opportunity to purchase his council house for the last fifteen years of his life and yet he never would, his youngest son almost bought it one year (he was in the RAF but "domiciled" at the house and had the right to buy) but my father-in-law wouldn't let him, as far as he was concerned it wasn't his house to buy it was the councils and when he died then someone else would benefit from renting it.

He wasn't an overtly political man, would never speak of politics, but he had a strong sense of what was right and what was wrong in a community and it was those beliefs that I always admire.

What is life expectancy now compared to the 60s/70s you cannot change the mind set of a generation. LC would still have to support all these people in social housing as they could not afford to pay the rent on the OA pension - we just end up a greater burden on those paying council tax. Encouraging ownership reduces this exposure. I have nothing against renting but it just seems money down the drain that will continue your whole life.

Re: Housing, the economy and growth : Sat Feb 23, 2013 11:19 am  

Sal Paradise wrote:

What is life expectancy now compared to the 60s/70s you cannot change the mind set of a generation. LC would still have to support all these people in social housing as they could not afford to pay the rent on the OA pension - we just end up a greater burden on those paying council tax. Encouraging ownership reduces this exposure. I have nothing against renting but it just seems money down the drain that will continue your whole life.

And yet it works just fine throughout Europe ?

I used to have an agency deal with a French company and every year they would recall their UK based (French) rep and replace them with another who would arrive in this country with an expectation to be able to spend perhaps one weekend looking for somewhere to rent for a year - and they were always looking in the London area.

I can't tell you how many times I had the same conversation with the new rep about how we British were obsessed with home ownership and for what reason.

I can tell you exactly when the mindset of a generation that you speak off started - it started towards the end of 1982, I was working in Newcastle and our office was above a branch of Northern Rock, I was living in hotels at the company expense (for six years - LOL) but they were suggesting that it was about time I found somewhere to live, the very next week a sign appeared int he window of Nthn Rock advertising mortgages avaialble, I went in and enquired and the manager told me that this was the first time in the history of the building society that they had ever openly advertised mortgages, until then you had to prove your worth to them for several years until they'd consider you, I walked in off the street and got one like buying a pound of apples.

£500 deposit borrowed off my dad and a mortgage of £8900 - those were the days

Re: Housing, the economy and growth : Sat Feb 23, 2013 11:27 am  

Sal Paradise wrote:

OK - we are not in the 1970's society has moved on people want to own their own house - they see 5-10 years of pain for multiple years of gain as the mortgage becomes less of a burden until it is eventually insignificant. I own my house now if I had to rent it I would be paying 800-1000 a month. I would be paying that for the next 40 years? I am not subject to upward only rent increases - even charities have to recover increased/inflationary costs through higher rents. We are an ageing population which would need the government to continue supporting their rent well into old age - surely encouraging home ownership reduces the burden on the tax payer? We have had this argument before - to which your reply was "Well it is working now".

When will you ever read and comprehend what is in front of you?

I never said we were in the 1970s but that does not prevent us from taking something that worked well for 30+ years before R-T-B was introduced. Property valuations are mostly made up of land values not bricks & mortar. If the land is leased at a peppercorn rent to a housing charity, they can then reflect that in the rents charged. This will lead to massively reduced bill for rent subsidies.

Sal Paradise wrote:

If you want to increase house building surely do this in line with credit suppliers through government guarantee - given the choice people want to own their own home - there is no getting away from that.

Credit to finance house building would be available from institutional investors. They need long-term investments that may not offer the same returns as short-term but offer a greater degree of safety. There are many such investors in the EU who would be willing to fund such schemes, if no UK based funds were interested.

There are over 1 million families in the UK who aren't really bothered whether they rent or buy, they just want somewhere affordable to live. This is the primary reason for a house, or at least it used to be. Houses should not be viewed as investments, they should be viewed as homes.

Sal Paradise wrote:

Your view that putting a tax on land will suddenly see a clammer to build - bonkers, in a country with limited land it is suddenly all going lose value - reversal of supply and demand!! Builders have plenty in their land bank they are not developing because they cannot sell the completed housing. Are saying the local authorities would also be subject to your LVT too - wow our council tax will end up in the stratosphere.

The owners of empty land would have three options, either sit on the land and pay a tax as if it were developed, develop the land and either sell or rent the developments or sell the land to someone willing to do either of the first two options. Local authorities and central government should not be sitting on empty development land, that is what my scheme is all about.

The long-term objective of LVT is to replace other taxes. LVT is simple to administer, unlike personal or corporate wealth, land cannot be offshored

Sal Paradise wrote:

Your idea is so pie in the sky as to be laughable - has this ever been implemented anywhere - if not it is probably an indication of how good an idea it is.

Similar idea have been implemented elsewhere, not least in that bastion of socialist ideology - The United States of America