Thatcher's slow-motion housing timebomb


#22

You think United Kingdom has a housing problem???

Hear about my home country, Spain:

Between 1998-2008 more than 500.000 new homes were build each year, yet the prices grew an astonishing 150% (173% in Madrid between 1996 and 2003). Now that the bubble has bust we have more than two million vacant houses that have never being inhabited, yet nobody can afford to pay the ridiculous prices with shrinking salary wages, increased taxes, and exorbitant bank mortgages. People all around Spain are being evicted from their houses with no possibility to get rid of their mortgages (In Spain if you get evicted you still have to pay your mortgage, even if the bank sold or rented your house to another family). Unemployment rate are at record high, 28%, and even worse, people between 18 and 35 unemployment rate is as high as 53%!

It is the wet dream of a neo-liberal, a market that increases its prices no matter how low is the demand. It is the nightmare of the working class, a vital asset that keeps getting more expensive no matter what.

Spain is chock-full of ghost towns, futuristic, brand-new, expensive ghost towns.


#23

What about squatters?


#24

Well this article wears its politics on its sleeve, and of course it sits well with Cory’s current views. If we strip away the party politics slightly (Thatcher left office in 1990 - 23 years ago - and most of those years were Labour controlled) what the article is arguing for is that council house building on the scale of the 60s and 70s would be the solution to the UK’s housing crisis. Look at what those houses were, the soleless concrete estates that have been a major caused of so many social problems in the UK subsequently, that were hallmarks for bad design and bad construction. Is that really the solution to anything?

Private developers are champing at the bit to build housing - particularly in London and around it - but they are held back by the same problems with planning that would effect any developer, state or private. That’s where we need to look first.

Its state intervention, in the form of the Town and Country Planning Act, that’s the key driver here. Not the only one mind, uncontrolled housing benefit in London has been a massive subsidy for greedy landlords, massively inflating both house prices and rents, and the bank bailout and quantitative easing have effectively been a huge state-subsidised push for people to invest in buy-to-let accommodation. Add in the nutty Help to Buy policy, subsidising deposits, which has helped push things up again, and you’ve a messy situation.

We need more houses build, and history tells us that the private sector will build ones that people want to live in, in places that they want to live, and which are less likely to fall down or make people ill. What we need in the meantime is for the state to stop subsidising landlords at the expense of first time buyers, tenants and taxpayers in general.


#25

Justice is fast and relentless against squatters in Spain. Specially if the houses are own by some bank. Yet the banks are the main source of unpaid housing taxes.

Even then, squatters are increasingly common, whole families with working members still paying the mortgage of a house that will lay there unoccupied for decades. :frowning:


#26

Perspective from a Lambeth council tenant who used to work for one of Gordon Brown’s shadow Treasury team in the late 80s.

The important advantages to the Tories of Thatcher’s housing policies were; it allowed marginal Tory councils to replace council tenants with homeowners; it locked more people into a desperate need to hold on to a job no matter what simply to keep up mortgage payments; it created an artifically inflated housing market that allowed people to borrow more than they could afford against the value of their house thus creating a feel good factor in a failing economy.

Brown was initially committed as Chancellor to calming down the housing market. In the end the vested interests pressured him into largely ignoring the problem.

Now we have a government with a Cabinet dominated by people who have extensive financial interests in property development companies. It’s more direct. The people who benefit most from a housing price bubble and crash are property developers. ALL of this is commonly discussed within political circles. It isn’t a case of accidental problems caused by well intentioned politicians making mistakes. It is deliberate thought out policy to create a housing boom and bust in order to make large sums of money for Cabinet members and the Tory Party’s backers.


#27

Neo-liberal is the term the rest of the world uses for what we call neoconservative in America. It is mainly concerned with deregulation of financial markets, privatization, and laissez-faire capitalism in general. Thatcher and Reagan were both early neo-liberals.


#28

Yes, but on top of that the local residents also need to be consulted, especially on major builds. When I lived in Berkshire a few years back, the council had mapped out plans to construct a completely new village. What held it up was the consultation process with everybody living in the surrounding area.

Personally I’d like to build my own house. This way I’d get what I want at a cost that I’m prepared to pay. It would be nice if the government started providing incentives and support for people to do that.


#29

This is the key point, and the author takes extraordinary pains to avoid it. The author never answers the question of “why aren’t private builders building more homes, if the prices are so high and there are massive profits to be made?” Why are the greedy developers not building houses left and right, to the point where people are complaining about the shoddy construction because of the speed with which they were put up? The answer of course, is that they aren’t permitted - by the very same people who are now complaining about the housing shortage. Thatcher’s policy was a crony act, to be sure - the homes should have been sold at market prices on the open market - but it doesn’t hold a candle to the stranglehold of central planning and subsidies currently restricting supply.


#30

Are the house prices in the chart nominal values? Assuming so, I’d like to see that chart adjusted for inflation - as I suspect it might change it’s story a little …


#31

Land developers seek to maximise profits and with the downturn in house prices (last part of the graph), building was put on hold in the UK until such time as the upturn started. (very last part of the graph). In order to build you first need planning consent, the problem with that is when it is granted you have a limited amount of time before you must start construction or the planning consent must be re applied for.

Firstly there is no guarantee that you will get the new planning consent and also you will have to redo all the required studies required (Flood Risk, Environmental, Design Access Statements etc etc).

They do need to have some development going on to generate some income to pay their costs during the down turn but mostly the land just sits there generating some rent from farmers and waiting to increase in value. What is not generally known is that Land Developers are not House Builders, sometime they do, but a lot of the time they sell the land with the planning consent granted on to a House Builder. They make their money by increasing the value of land from non residential use to that with building consent. House Builders pay the premium price but avoid the expense of seeking planning consent, also the increased price is passed down to the house buyer.

So the reason the private builders aren’t building is because the land doesn’t belong to them yet, the Land Developers are still holding on to it and have only just started increasing the rate of applying for planning consent. The other issue they have to face is councils only have to provide a certain number of new homes, and there is more land owned by Land Developers than is needed in each development area in a number of cases, so the Land Developers are fighting each other as well as the planning authorities using techniques like land ransoming to hinder other developers, this also slows down the release of land for development.

The land developers don’t care much about the lack of housing, the value of the land can only go up, even more so if there is a shortage as the demand for housing increases.


#32

central planning and subsidies currently restricting supply.

Planning permission is the responsibility of the local authorities, so you can’t blame centralized planning here. Most local councils want more houses - after all, a significant proportion of income for them is from council tax. However, Tory councils approve in general less new houses than councils controlled by Labour.

There’s no suggestion on why this is the case. A part of it will definitely be because the Tories control more councils consisting of towns and villages compared to Labour with more urban councils.

Another reason is that in Tory areas, you are more likely to run into opposition for new houses being built. Endless consultations and people that have the resources to fight tooth and nail against things that negatively affect the value of their property. Just look at HS2 and the controversy of the section running through the Tory heartland.


#34

Central planning is not restricted to national governments. :slight_smile: The very fact that the council has such tight control over whether or not homes can be built is precisely the reason there are issues - a mistake on a home-builder’s part, or a disagreement with the council, could result in the builder going out of business. And the issue with Tory councils being worse than Labour councils simply shows that the Tories are slightly more control-freak, which shouldn’t surprise anyone. Once you subject a market to tight political control, it should be obvious that political and personal concerns will override economic ones.


#35

And as a follow-on, consider these questions:

What is the personal effect on the council members if not enough houses get built in their area?
What incentives, other than additional tax revenue, do council members have to approve new housing?
What disincentives do they face?
If there were corruption at the local level where the council were extracting bribes from builders in order to approve projects, what effect would that have - would the council approve more homes, or fewer? (Hint: restricting supply keeps prices high.)


#36

Speaking of Shirley Porter, if you’re familiar with the events around the Homes for Votes scandal you might recognize some of her words recycled through the mouth of The Smiler in Warren Ellis’s Transmetropolitan. Which, lest we forget, was written to the backdrop of late Thatcher/Major era conservativism in the UK (where Warren lives). It reflects the quality of political cynicism of the time quite accurately, and I’d recommend it to any newbies who don’t understand how we got into this fix for the feel of what was going on …


#37

Only because people always wimp out in the end. Those paper crowns just seem so damn alluring to idiots…


#38

In which case you are arguing against (urban and rural) planning, not central planning.

There are reasons why planning is important. Take Belgium for example, you have towns and villages and the main N roads (similar to A roads in Britain) between them are lined with houses, for the full 10 or so kilometers between them. It’s not a effective use of land, and what you get is sprawl. In Britain you don’t see that due to the more extensive planning laws. It ensures the character of the villages and towns by designating land as greenbelt.

Sure, there are ways that government at the local level can be improved in the UK. Councils need to be more transparent, although they have come a long way in the past few years. Previous planning decisions and pending applications should be available on your local council website if you would like to get involved in the process. With regards to close relationships between the council and property developers, that’s what your local authority elections are for.


#39

I’m sure that the people needing housing will be so glad that the “character” of the villages and towns was ensured - they can enjoy it while they are living outdoors.

The problem with relying on local elections to control this sort of thing is twofold: one, the special interests (the builders) have a lot of incentive to participate in local elections and influence them. What you’ll find in many localities is that the councils are largely made up of builders, ex-builders, and their friends. Two, the opposing interests are diffuse, and in the case of “people who would move here if there were inexpensive housing available” have no say whatsover in the local elections. The combination of those two public choice incentives means that it is highly unlikely that local authority elections will ever resolve the issue, even if the local electorate was fully aware of the problem and the proper cure.


#40

It’s worth remembering that many of the new homes that were built are famously substandard. Allegedly, in some cases the rated life of the timber frame of the house is several years shorter than the average mortgage used to buy it. By the time the mortgage is paid off, the house is already starting to fall apart.

Hence the joke about “What’s the difference between a [insert name of well-known construction company] house and herpes? It’s easier to get rid of herpes.”

Which is just one more theft against the poor.


#41

Political definitions in the US have been muddied somewhat. A classical liberal in political theory is a laissez-faire, procapitalist and minimal government involvement view. Think Herbert Hoover or many of the economic conservatives out there. Wealth and power and a perceived merit system.

In the states, that minimal involvement with the actions of the people got mixed up (in people’s perceptions) with social liberalism - letting people have oral or buttsex or smoke the demon weed. So ‘liberal’ became a politicized term in a highly local (USA) context, and now implies more progressive, left of centre policies.

Neoliberal is a term used for people who still advocate for an updated version of classical laissez faire economics. In the US neoconservative most often fits, though once again it gets mixed up with the social conservative thing and becomes something new. (though I think most ‘neoconservatives’ see the social conservatives as useful idiots more than anything else.


#42

That’s a bit of mis-characterisation on your part really. It’s not that the UK is in a housing crisis, it’s more of problem with housing inequity. People aren’t being forced to live in the streets, it’s that more and more people are forced into worse-off situations.

I’m not arguing against your point that developers are too close to the councils. In fact, that sentiment I agree with and so does I believe, most of the public. However, getting rid of planning is not the way to fix them.

Interestingly, one of the solutions to spur house building is to centralise the system so that there is a dedicated planning commission that deals with these issues bypassing local authorities. Similar to how academies were brought in to free schools from local government control.