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How deeply wrong ideas about “fairness” have penetrated

Strange to see an article like this in what is still sometimes called the Torygraph:

Mortgage lenders penalising couples with children

Mortgage lenders are penalising home owners with children by reducing the amount they can borrow. The crackdown could potentially prevent them from switching to cheaper deals when interest rates rise.
Many banks and building societies have tightened their affordability criteria in light of the Financial Services Authority’s post-credit-crunch review of the mortgage market. But it has emerged that families with children are being hit hard.

Emphasis added by me. All the terms emphasised relate to a metaphor of punishment. But it is not meant to depict just punishment; the author, Teresa Hunter, apparently feels that parents who are lent less money than non-parents are having something unfair done to them. This is reinforced by having the first person quoted in the piece as saying:

“It is absolutely unfair to penalise people with children by reducing their capacity to borrow compared with a single person or a childless couple.”

The whole story is presented as being one of discrimination akin to racial discrimination. Did the author notice that there was a little financial unpleasantness in 2008 that had something to do with indiscriminate lending? Does she feel that encouraging people to to borrow more than they can afford is doing them any favours? Has she not noticed that children cost money?

132 comments to How deeply wrong ideas about “fairness” have penetrated

  • Jaded Libertarian

    I’m loathe to stick up for insurance companies, since I rather view them as part of the whole “government problem”. They are corporations that exploit legislation-happy government to establish partial or complete monopolies in the financial market and keep prices high.

    On the one hand the government should not be in the business of telling companies what they can and cannot sell, and what their prices should be.

    On the other hand, insurance companies (along with banks) have been happy to exploit the onerous regulatory framework in this country to create a decidedly unnatural market situation which royally shafts the consumer.

    So do they really have a defence when the government decides to shaft them a little?

    The words “reap” and “sow” keep spinning round my brain.

  • Gareth

    From the article:

    “It is absolutely unfair to penalise people with children by reducing their capacity to borrow compared with a single person or a childless couple.”

    Equal treatment of people doesn’t dictate equal outcomes from that treatment.

    Also from the article a comment from David Hollingworth of London and Country Mortgages:

    “Children cost money and this is now being factored in.

    It wasn’t before?

  • Frankly I find the whole property and property market so foul and corrupt that I’m getting to the point of thinking we ought to have a 200% Land Value Tax or something.

  • pete

    No so sure it’s fair to criticize the Torygraph.
    They seem to have a policy of publishing these sort of lefty dribbling articles. Riddell, Lean, Grey. Interesting thing is what goes on in the comments. The writer usually gets flayed. Looking at the comments to this one, it doesn’t exactly seem to be received to universal approval.
    Maybe there’s a purpose to it.
    It’s not as if the usual Telegraph reader is likely to be hanging around the CiF pages at the Graun so may be unaware that sort of drivel is commonplace & drives the politics of all the major parties because its cheerleaders are so influential. Being exposed to it fuels some useful anger & might provoke reaction against it.

  • pete

    The Telegraph seems to be written for an increasingly small, unimaginative and complacent group of people who are secure in their dull but relatively well paid jobs and who are mostly insulated from the recession – just like the Guardian is.

    That’s why we get these whining ‘unfair’ style articles in both papers.

  • Ian F4

    I’ve always been mystified by any sort of insurance or risk assessment since I removed my wife from the car insurance and it went up, how having a vehicle being driven twice as much means a less risky premium is beyond me.

    Being in IT, I can only assume their software didn’t go through enough testing.

  • Jaded Libertarian

    I’ve always found the concept of mandatory insurance to be most illiberal in any case.

    If a person causes damage in any other sphere then they are expected by the legal system to make good in whatever way they can in a manner that is agreed upon by all parties. Only with cars are you assumed to be either unable or unwilling to take responsibility for any damage you cause – and what is more payment is expected to be immediate.

    Either way the governments very dismal assumption of bad faith fills the insurance industry’s coffers nicely.

  • Ian F4,
    Could the fact that removing your wife from your car insurance makes it go up in price be because in general (a) married guys live a more settled life than bachelors with fewer late night parties and so on, and (b) a man who knows that if he smashes up the car he has to admit it to the wife is likely to be a safer driver.

  • Eric

    Does she feel that encouraging people to to borrow more than they can afford is doing them any favours?

    I dunno. Here in the US some of those people have been living, rent free, in “their” houses for years after refusing to make payments. Doesn’t seem like a bad deal to me, particularly in the states banks have no recourse besides repossessing the house.

  • Laird

    The expense of raising children is real, and it makes perfect sense to consider that factor when calculating how much debt load someone can safely be expected to handle (which is the reason for the lower lending limit). But this brings up a problem I have long had with all “automated” lending systems and hard rules such as this one (rather than simply instructive guidelines). Considering the cost of children wasn’t previously considered not for any rational underwriting reason, but merely because the regulator didn’t require it. It is now being considered for the identical reason. In other words, there is no real “underwriting” going on, but merely feeding data into a black box. Individual circumstances don’t matter. Frankly, I think that’s just stupid.

    In this particular example, lowering the lending limit for couples with children probably makes sense in the case of a purchase. But where the borrowers are already in the home and have been making the payments, this rule could preclude them from refinancing either to reduce those payments (if they can get a lower interest rate) or to lock in a payment level they have already demonstrated that they can handle (if they’re changing from an adjustable-rate loan to a fixed-rate one). In either case the lender would be in a better position if it made the new loan, since it would be reducing its existing long-term risk exposure. (This assumes, of course, that the lender will be holding the loan in its portfolio; if it plans to sell it to some other entity of course that entity’s rules would apply. But the principal is the same in either case.)

    This is the problem you have whenever government gets involved in the market (here, via the regulatory scheme): it invariably imposes a one-size-fits-all set of rules, with little or no room for discretion even when deviation from them would make eminent sense.

  • Really though, this isn’t really addressing the root problem. People shouldn’t have to borrow these absurd sums just to have a roof over their head. That’s the problem, not some kind of Rooseveltian “right” to borrow money, or a requirement to ensure that everyone can borrow. Borrowing money is a bad thing to have to do. It’s an economic drag. It’s necessary sometimes, but the less that needs to be done, the more economic growth you’re going to get.

    The point here is that government is already involved in the market by deciding where people may live; by deliberately restricting the housing stock, by declaring housing regulations, by pumping credit into the mortgage market, all deliberately designed to make houses absurdly expensive. The whole system is corrupt. Arguing about specific minor regulations like this just misses the point.

    It’s a national, nationalised scam. Whatever one may think of Georgists, it has to be said that Mark Wadsworth’s consistent denunciation of “the housing lobby” is entirely correct in its fury.

    What would be the free market price of an ordinary house? A very few thousand pounds. If the government just let people build houses when and where they wish, there would be no mortgage market as we know it. Yes, some people would pay a lot for a house in central London, but most of us would live virtually anywhere if you could buy one for £5000 or less.

  • Jaded Libertarian

    I’m trying to remember a quote that was very apposite. Perhaps someone can refresh my memory for me.

    It dates to early colonial times in the US. A visitor from England observed that the tribes of the NE provided provided small lodges of their own, or a “room” in the larger main lodge to starting out young couples without placing any financial burden on them at all. The lodges, the writer observed, were insulated and waterproofed to to the point that they were superior to English homes of the times.

    The writer observed how Englishmen often worked their whole lives and could never call themselves the owner of anything as remotely as good as what the members of this tribe enjoyed, and they did so without debt.

    It may have been a quote in Henry David Thoreau somewhere. Any ideas?

  • newrouter

    but most of us would live virtually anywhere if you could buy one for £5000 or less.

    check out the city of detroit!

  • Russtovich

    Wouldn’t the fairest way to do this then would be to make it law that the people residing in the home have to hand over a copy of their completed tax forms every year to their mortgage lender?

    Have a child since getting the mortgage; premiums go up
    Get downsized or have a lower income than the preceding year; premiums go up, etc.

    It doesn’t make sense to get a 20, 25, 30 year mortgage and never have to prove your ability to pay ever again does it? :)

  • Laird

    Russtovich, mortgage payments aren’t “premiums”. A mortgage isn’t insurance, it’s a long-term contract which both sides are legally (and ethically) bound to honor. The payment amount is a function of the interest rate and amortization period; there’s no “insurance” component.

    Sure, it’s entirely possible to have a short-term loan which recasts periodically (we call that a “balloon” feature) or where the interest rate and payment amount resets (adjustable-rate mortgages, or ARMs). Commercial mortgages typically have 5-year maturities (even if the amortization period is longer), at the end of which time the lender can decline to renew the loan or offer a renewal on changed terms. And precisely what do you expect it to do if the borrower can’t refinance elsewhere? Foreclose, even when the borrower has a perfect payment history? That’s the Sword of Damocles hanging over the commercial mortgage market in the US right now, with several trillion dollars of loans set to mature over the next few years and essentially no ability to refinance them. So the banks do just what you’d expect: they “extend and pretend”, hoping that the borrower will survive and continue paying. They have no other real choice. I have a lot of experience with consumer balloon loans; trust me, they’re a disaster. Subjecting every residential mortage to that feature is the very last thing we would want.

    And we’re now experiencing the downside of the widespread popularity of ARM loans during the last decade or so. Payment amounts go up; people can’t handle the new payments; they default; banks foreclose. We’ve essentially eliminated ARM loans in the US for that very reason. And you want to take their very worst feature and apply it to all loans? Not wise.

  • “a man who knows that if he smashes up the car he has to admit it to the wife is likely to be a safer driver.”

    Well, yeah. That amused me.

    OK, I’ll duck and cover here but would it be farcical to suggest that the change (if change there is) is related to the government dramatically upping university tuition fees. Seeing as going to college is now going to wind-up about the quarter of the cost of a modest home…

    Oh, and what IanB said. If there is one thing I truly cannot stick about this country it is the obsession with house prices and the almost moral requirement that they rise faster than inflation. I’m no economics guru but how is that sustainable and isn’t that how we (and more so the Irish) got into this mess in the first place. I mean you can buy a reasonable laptop for five hundred quid. I recall when dreadful ones cost four times that. This is a good thing, right? Yes, with laptops, phones, food (unless you are Prince Chuckles), cars… They are all more affordable than they were but houses aren’t even though they are probably the most basic requirement of all. Except they are not.

    Morally I don’t, I can’t buy into this idea that rising house prices means rising “equity”, means the ability to borrow against said equity to stick crap sofas from DFS in said tub. A house is a home, it is a place to live in. It isn’t an endless credit line. It is not (or at least it shouldn’t be seen as) an investment other than in the obvious sense that it’s better than bivying with Ray Mears.

    When I hear the phrase “housing ladder” I reach for my hittin’ stick. I don’t “own” my home but as a sizeable two bedroom house… Well, that’s the start and end of the housing ladder for me. I live with my wife and my cat and have no plans for children. More space would just mean more work for me and the Henry.

    If I found 20 grands worth of cocaine in a Gucci Satchel (Mr Sheen, we salute you!) I’d invest in a business – either my own or someone else’s, not a house. In a very real sense we have via the housing boom lost sense of where real wealth is generated. It cannot be generated by eternal above inflation increases in house prices*. It has to be done by the old-fashioned route of providing goods and services.

    *A virtual lollipop for whoever guess why that can’t work…

  • Johnathan Pearce

    What we are seeing here is yet another example of what PJ O’Rourke has referred to as the “gimme right”: in this case, people believe in the idea that they have a “right” to borrow money at the price of their choosing, and that people should be forced to lend them money at desirable rates.

    There is no awareness among the author of this article that Natalie links to – at least not that I can detect – that capital represents, or should represent – money set aside; it represents deferred consumption. When real savings are lent out, they are the propery of those doing the lending. The idea that banks or other holders of capital should be compelled to lend money on terms demanded by these claimers of “rights” is a nonsense.

    Perhaps we really have reached the point where the realities of money, capital and banking have been so completely obscured by decades of central bank funny money and a cretinous culture of “rights”, that these basic facts of logic no longer apply to the wider population. That is the terrifying thing about all this.

    I wonder if the idiot who wrote that article is also wondering why rates for deposits are so low at the moment, or even cares.

  • Paul Marks

    Ian B. first (before I get on to the post).

    It is true that sometimes a government intervention counters another one – for example Milton Friedman was WRONG to oppose “Right To Work” statutes in American States (which forbid compulsory union membership in those State that have them – clue, the States that did not adopt them are the States that now have vast “post industrial” wastelands). Because these statutes partly countered PRO union regulations (such as those that forbad “Yellow Dog” contracts) and government agencies. (such as the National Labor Relations Board).

    A country which had NEITHER pro or anti union regulations is better than a State that has both – but if you are going to have pro union regulations…..

    However, this is VERY RARE – normally a government intervention (supposedly to counter another one) makes things EVEN WORSE.

    A text book case would be a 200% tax on land (or whatever) – what the f…..?

    By the way I suspect you are just flat wrong about the housing market – it is indeed overvalued (due to the massive credit money bubble – the one that has NOT been liquidated, contrary to what the establishment claim), but by nothing like the amount you think it is.

    For example, this idea that government (central or local) “stops” the building of houses is a myth.

    All a developer has to do (should a local council try and block a housing development) is whisper the word “appeal”.

    Everyone and their dog knows that planning inspectors find for the developer (almost allways) and the local taxpayers get hit by the legal costs – so councils give in.

    A local planning authority could really mess YOU up Ian (say if you tried to put in a major change to your house) – such a body could have you standing on your head (really mess you up).

    But a developer out to build houses? No – planning authorities and councillors and no problem for the big boys.

    What government actually does do is SUBSIDIZE house building.

    By building roads (and on and on) – sure the developer is supposed to pay for all that (“planning gian”), but in practice there is always some sort of strange problem – and the taxpayers get hit.

    Just as (for some strange reason) stuff put in by the developer (such as pavements and so on) always tends to fall apart really quickly – and has to be “adopted” by a local council (i.e. yet another burden for the TAXPAYERS).

  • Paul Marks

    Now for Natalie’s post.

    Yes – what is left out here is PROPERTY RIGHTS.

    The writer of the newspaper article automatically assumes (without even knowing he is doing it) that the money is public property (collective) to be distributed fairly.

    Like a hunter gatherer pack (of wolves or humans or….) who have brought down another animal and are distriubting the meat.

    The idea that the money might BELONG to someone (the depositers) and the bank lends it out to maximise the PROFIT it makes (to pay both depositors and shareholders) is totally alien to the newspaper writer.

    And one does not have to go back to Hayek style evolutionary biology (humans evolving in collectivist hunter gatherer packs) to know why it is alien to her – to know why the writer just assumes “social justice” doctrine.

    This is what the person has been TAUGHT – both at school (even if he went to private school) and university. So OF COURSE these are the background assumptions.

    There are good people at the Daily Telegraph (such as Simon Heffer – not perfect, but good), but mostly they reflect the general decay of our civilization – it would be rather odd if they did not.

    It is often forgotten that the collectivists did not vanish in a puff of pink smoke in 1989 – indeed the “collapse of communism” did not even have much impact on their basic assumptions (they certainly did NOT move from “economic collectivism to cultural politics” the economic collectivism remains – the cultrual politics is a means to it).

    For example, I recently heard a BBC radio sociology programme – presented by Prof Taylor.

    He had a couple of guests – the political philosophers Ronald Dwarkin, and Prof Grayling.

    And they were discussing “Ronnie’s” new book.

    In his new book “Ronnie” rejects pure equality – instead saying that some allowence should be made for how much work someone does.

    “There you go Paul” (Ian B. might say) – “1989 did have an impact…..”

    Not really – because look at the BASE ASSUMPTION.

    All income and wealth belongs to the collective and is to be “distibuted” according to some political rule.

    On that the academics (the people in charge of educting young minds) were all agreed – indeed they did not even debat the point, it was ASSUMED as automatic.

    This explains people like the Telegraph journalist.

    She sat in class with teachers who were (via teacher training) filled with such as assumptions, then she went to university – and was taught by academics with the same assumptions.

    Nothing to explain here.

    What would need explaining is if she was a “resister” – someone who went through the brainwashing (for that is what it is) process, but had rejected it.

    Such people trouble the leftists greatly.

    They really would like to understand us (for it is us) – and not for any nice reason.

  • Paul Marks

    Before anyone mentions it…..

    Of course with fractional reserve banking (and Bank of England support – which goes back long, long before the crises) to talk of the money in the bank being from the depositors is to oversimplfy.

    In a way they ARE collectivist (thanks to the Bank of England “lending of last resort” and so on) so a person could be forgiven for demanding that they do X, Y, Z. Although such a person would still be WRONG (as such demands would only make the process even worse – i.e. “Merlin” is crackbrained).

    But I rather doubt the Telegraph journalist was thinking in these terms.

  • Paul, on an anecdotal level; one of my sister’s in-laws, a small builder, had to jump through phenomenal bureaucratic hoops to build just a tiny development of a half dozen houses. By the time he’d got permission to start, after considerable opportunity cost investment, the crash had set in. In fact this is one thing that is often overlooked; State regulation frequently causes enormous delay, and that destabilises the market by oscillation, since entrepreneurs are responding not to current market conditions but to conditions in the past. Every engineer knows that to make an oscillator, you first need feedback, and secondly a delay.

    To say that a small number of large, State-connected firms get their own way- if that is true- is an indictment of corporatism. It is the classic ratchet of privilege going to those who are already large at the expense of small operators. Think of the EU’s destruction of small abbatoirs, for instance. States like big, “friendly” firms. It makes the market easy for them to control when only a handful of “business leaders” need to be invited for a meeting with the minister, rather than a free market rabble which tends to be rather uncontrollable.

    But the main fact is, that there is deliberate prevention of development on a massive scale. Green belts, environmental regulations, planning permissions, the whole regime initiated by the Town And Country Planning Act, building regulations; all these things are designed to deliberately prevent building and low cost housing. And they do. They are deliberate actions lobbied for by the property lobby (usually under the cover of “protecting the rural environment, and so on) to prevent free market property development.

    If a libertarian government were to repeal those laws, and allow free building again, property prices would plummet. We’d go back to the good old days when people who inherited a house often just left it to rot, because it had so little value. We are so far from a free property market, it’s ludicrous to try to discuss it in market terms.

    As to the “roadbuilding subsidises capitalists” thing, I’m a bit surprised at that coming from you Paul. Have you been smoking some Kevin Carson?!

  • Johnathan Pearce

    I must say that I am surprised at Paul’s argument that housebuilding is artificially encouraged by the state. The existence of the Green Belt, for instance, hardly fits with this idea at all.

    I have no idea what would be the level of house prices if we got rid of planning legislation, but other things being equal, and in the absence of inflationist central bank policy, I wager we’d see a significant drop in house prices from present levels. Of course, a lot of stuff would be offensive to the Prince of Wales and others, but the great mass of the population would benefit in having more bang for their buck, as it were.

  • I would say that the only way we are ever going to achieve mass prosperity is by the abolition of (economic) rents. The transfers of production to the unproductive under the current system are an absolute scandal; I don’t think it is unreasonable to suggest that the majority of productive growth in our country is merely soaked up by those rent increases, with little of it staying in the hands of the productive classes. Getting property prices and energy prices (and to a lesser degree food prices, though this is not so acute) down to free market levels has to be an essential promise of libertarianism. And that has to be the great promise of sound money banking reform, and also of land deregulation.

    Everyone is now utterly trapped in a corrupt system; ordinary people tied into usurous mortgages and with years of their productive capital tied up in brick piles, the actual cash from which they can never realise because selling one home simply funds the buying of another, for most homeowners. The wealth redistribution by the free market of an end to the property racket would be phenomenal- far, far more than any socialist can promise, let alone achieve, by force.

  • Laird

    Of course housing prices would be lower if we magically removed all those “externalities” of building permits, zoning laws, construction codes, etc. Blinding flash of the obvious and all that. But as to how much, well, that’s quite a different matter. It’s completely unknowable, of course, but I submit that even in such a libertopia house prices would be far higher than “a few thousand pounds”.

    If you look a couple hundred years or so, before all those governmental obstacles existed, you’ll see that very few common people could afford houses (at least in the US). In the cities most property was owned by the monied classes, and houses leased out. In the country they were largely homesteads built by the occupants themselves (or their ancestors). It wasn’t until the rise of the thrift industry, and various similar mutual aid societies, that mortgage loans became generally available and home ownership became widespread (indeed, became the middle-class dream).

    Governmental regulations are indeed an impediment, and do increase costs, but nowhere near as much as Ian B would have us believe.

  • Poor people were far poorer in production terms than they are now Laird, you have to factor that in. The astonishing thing that needs explaining is why housing costs are not now relatively trivial; instead they have consistently (at least in the UK) oustripped inflation. They ought to, on free market principles, have fallen in value year on year.

    Every worker nowadays represents a vastly greater production of goods and services than he did a hundred years ago. The fact that subsistence costs haven’t dwindled to a relatively trivial sum indicates how terribly far from free market prices we are. Britain has a vast, relative to the population, surface area. It works out at about an acre for every man woman and child. And yet, we are constantly short of houses and prices are absurdly high. Something is terribly wrong.

    If it were possible to buy a bit of land off a farmer, and build a simple house there yourself, the property market would collapse to little above cost price. That is not allowed. Instead, we are crammed like cattle into approved pens while Prince Charles builds romanticist “eco-villages” on his feudal estates.

    Time, I think, to wheel out Madame Guillotine.

    I must admit, I’m coming round to an element of LVT, not so much on carefully balanced economic arguments so much as a pure zeal to unseat the aristocracy. I think perhaps a good compromise would be to have your first half acre tax free, and then tax the rest at at least 100% ground rent. This ensures that (a) the widow cannot be thrown out of her home for non-payment of taxes (b) the euthenasia of the large-scale rentier (c) a market in “half acres” will remain so that land values can be assessed at a market rate. This combined with complete land and building de-regulation, of course.

    Really, it’s time we stopped these fuckers wrecking the economy. Firm action is required.

    Vive la revolution!

  • Laird

    Current US mortgage rates are 4.20% for 15 years and 4.90% for 30 years. That’s “usurous”? Utter nonsense.

  • You think it’s rational to have to take out a 30 year loan for the basic human requirement of a roof over you head, Laird?

    Thirty years!

    That’s the nonsense.

    It’s kind of like wearing a burka. You’re so used to it, you can’t see how stupid it is.

  • Dom

    To say a mortgage is 30-years is simply a way of expressing the rate over a given period. It is always best to get a 30-year mortgage and pay it off in a shorter time. That’s what most people do, if my experience is typical. I paid mine off in 12 years, and didn’t see a crimp in my lifestyle. I have to wonder why anyone gets a shorter mortgage.

    There is nothing usurous or onerous about it. It’s certainly better than paying rent. At least it ends.

  • You’ve missed the point Dom, which was why property is so expensive in the first place, not the wisest way to pay the enormous price of it.

    The central feature of a free market system is supposed to be falling prices. That is the whole point of growth; the more you produce, the less the proportion of it you have to trade for another particular product. In crude terms, if a man must work half a day to buy a loaf of bread, then he doubles his productive output, the bread should now cost him only a quarter of his day’s work. The fact that house prices do the exact opposite- rising faster than production- indicates that something is grotesquely wrong with the marketplace.

    If we were to ask for a cause of persistent poverty- the “working poor”- we must surely point a large finger at the persistence of the state-backed rentier- he who either rents the land himself, or rents the money to buy it. While this state of affairs continues, we have a form of Ricardo’s Law, in which all productive increase is, for most of the population, snatched away by the rentier class. We recently saw the clearest example of that State backing recently when, the system having reached a point where that class’s greed had become so acute that the population could not sustain it, the government stepped in and awarded them trillions of inflation-Hamiltons to keep them going. We are now having more of our production transferred to them via inflation.

    And all so you can spend hundreds of thousands of Hamiltons on your “dream home”. Because in the perverted language of modern finance, a crippling cost- for the most basic of human subsistence needs- becomes an “investment”.

    Ludicrous.

  • pete

    The reason why single men pay more for car insurance than men with their wife on the policy is that insurance company data shows that single men car insurance policies pay out more in claims than those with a man and woman on.

    The insurance companies don’t know or care why this is, they just set premiums from claims data. This is what actuaries do for a living.

    If claims data showed that 17 year old boys living in high crime areas, with drink drive convictions and super high performance cars hardly ever claimed then insurance companies woud charge them tiny premiums.

    Anyone is free to set up their own insurance company and charge ‘fair’ premiums to any type of person they want. But they’ll end up doing it in the same way as every other insurance company – by studying claims data.

  • Paul Marks

    Ian B.

    The companies do not have to be state connected – just big enough to afford to threaten the word “appeal”.

    J.P.

    Greenbelt hardly applies in Northamptonshire – or most other places.

    Nor does flooding matter – houses are built on flood planes all over the place (in many counties). The authorities just deny they are flood planes (planning committees are not allowed to put weight on the evidence provided by locals – indeed local people might as well not turn up to meetings, but they are not told that).

    Ditto traffic – there is never a traffic problem, because the Highways Agency will never say there is (remember only “official” evidence has weight).

    In short a developer could want to build a load of houses in a lake – and the government agenices would say the land was bone dry.

    And the a developer could want to build a load of houses right on the M1 road – and the highways agency would say there is never any traffic there.

    In some cases actual developments are not wildly different from these these examples – but the suckers who buy the houses are not told that (and they have no case in law – because “all the regulations were followed”).

    “Lack of houses” what total and utter nonsense, it really is.

    I can remember when Northampton was nice country town – now it has suburbs of estates going on for MILE AFTER MILE AFTER MILE.

    And Northampton is typical of places in England now.

    Take the example of Kettering – like so many towns and villages there is nothing much here now.

    Only one shoe factory (out of many) still operating, no brickworks anymore, the iron works is gone – and so on and so on.

    So there a fewer houses right?

    WRONG.

    There are vastly MORE houses – the town is several times BIGGER than it was when there were actually things here.

    Again this is typical.

    Everything shuts – almost every source of production is gone. Yet there are more and more houses.

    The Town and Country Planing Acts are totally pointless.

    All they do is make the lives of ordinary people difficult – jumping through hoops (JUST AS IAN B. DESCRIBED).

    They do NOT prevent urban sprawl and endless estates.

    A glance at towns and villages shows this.

    Places of employment and production – vitually wiped out.

    Yet vastly MORE houses – and in endless estates (not oranic development around places of productive employment – planned estates instead).

    “The people in the new houses must work somewhere Paul”.

    Some of them do work – mostly for the government (and paragovernment) or in the credit bubble services (including distribution – i.e. the goods we import in return for “I.O.U.s”).

    It will end badly – and it will end soon.

  • Paul Marks

    By the way – for Greens.

    Kettering had the first power from waste products plant in the country – back in the 1920s (it made a profit).

    It is gone – a victim of the nationalization of gas and electricity back in the 1940s.

    There is no gas works either – of any sort.

    I repeat – most production has gone, yet there are vastly MORE houses.

    And this is typical of an English town (Wales and Scotland may be different – I do not know them so well).

    Less and less real places of production – and more and more houses.

    It does not work – it simply does not work.

    As for the claim there is a “shortage” of houses because of some government intervention.

    The trouble with that theory is that I would have to ignore the evidence of my senses – and over my whole life.

    I have SEEN the building of houses (tens of thousands, hundreds of thousands?) – over the last 40 years plus (and they were at it before I was born).

    There have been no vast numbers of children born (not if you count the people who have died), and there is no rational reason for people to move here (they may well have moved here – but only for credit bubble reasons).

    The county (like so many counties) has been messed up – messed up really bad.

    The deveopment of Corby in the 1930′s was a mistake (the steel company was pushed into a mad plan to relocate loads of people from Scoland and….. I am not going to go on, the whole story is demented).

    And the building of the M1 (after WWII) was a terrible blunder – leading to all the rest of the state backed developments.

    Oh I forgot – these developments do not exist.

    The tens of thousands (hundreds of thousands?) of houses are just a dream.

    Anyway if people want a state intervention to attack…..

    20% sales tax (VAT) on house REPAIRS.

    Good houses (better than any of the crap that has been built in recent decades) are left to fall into ruin. Because repair work is so expensive.

    Of course repairs (if it can be argued that some major change is being made – even if it is not really) come under the PLANNING ACTS.

    And as Ian B. pointed out – unless you are big enough to mention the word “appeal” (and be believed) planning authorities can tear you to bits.

    I have some friends over in Oxfordshire (“north Oxon” I whatever the freaking administrators call it now).

    They were held up for years (and for tens of thousands of Pounds) over living ON THEIR OWN SMALLHOLDING – a place their family has owned for many decades (that cut no ice with the planning authorities).

    But they are now going to have an ECO TOWN built on them.

    Thousands of houses – thousands of them. With roads (and drains and…..) all backed by the taxpayer.

    Will “planning law” stop it – not a chance.

    “But Paul – they will only have to sell their land if they want to….”.

    Anyone who says that (or anything like it) knows nothing about how modern Britain works.

  • Jaded Libertarian

    I’d buy a plot of land in the woods and build a log shelter….. but they’d make me pay council tax, then they’d bulldoze my home for not meeting planning laws and they’d probably charge me for the privilege.

    No, I think there is something very wrong with the housing situation in western countries. We pay on average 3-5 times our entire annual income for what is a fairly basic human need. And yet, often times modern housing is inadequate in terms of insulation, dryness and durability. I watched a documentary about Scara Brae once. It is 5000 years old, and it looked as if when it was inhabited that it was a good deal warmer and dryer than the flat I was living in at the time.

    If it weren’t for property taxes and building codes I think more people would be off to the woods with an axe and building their own homes.

    To be fair some of them would fall down. But I don’t think that justifies the current state of affairs.

  • Paul Marks

    That should be up to the people who own the woods J.L.

    And NO I do not mean the Forestry Commission.

    By the way – most people have not got a clue how to build anything.

    And trying to survive an English winter in a shack is diceing with death.

    Still suicide is legal – and if the owner of the wood does not mind….

  • Jaded Libertarian

    Oh I dunno Paul. A comfortable wood home is not as big a deal as you might think.

    By comfortable I mean warm and dry. Shingle with sliced logs, insulate with moss and add a small wood burning stove and you’ve got yourself what would have been considered a veritable palace by most of the humanity that ever was. And it would cost a fraction of the annual income of the average person, even if you opt for “la de da” fangled gadgets like windows!!

    But you are not allowed to live like that in the UK, and indeed most countries try and make self sufficient living as hard as possible.

    The conspiracist in me says that the government is hostile to anything that sets the individual free from “the system”.

  • PAul, what you’re describing is State mandated and directed building and population movement programmes, not free market supply and demand. What do we know about State supply? It’ll be the wrong thing; what the planners want, not want the individuals want.

    Jaded is absolutely right. And in general building your own home was a basic human skill for most of our history. It is not that difficult. Anecdotally, a friend of mine who is an engineer and a bit of a survivalist nut was in a pub with some of his slightly nutty friends, and they totted up the materials cost for a single story family home from one of the buidlers’ merchants catalogues- concret floor, breeze block walls, plaster, basic electrics, plumbing and so on. Came out well under two grand.

    A “co-operative” of several families could easily build themselves a small hamlet of “modern” homes like that (for those who don’t want a log cabin) for at most a few thousand pounds each. But you’re not allowed to, not in Britain.

  • Laird

    Ian, you most certainly are “allowed” to build that type of house in the US, if you’re so inclined, and if you’re willing to live outside an incorporated municipality or other area with restrictive zoning laws (and there are lots of such places, especially out west). (Have you ever seen the Unabomber’s cabin)?) But most people: (a) lack the time and skills to build a house; (b) want more of the modern conveniences and “creature comforts” we’ve all become accustomed to; (c) want more room than the tiny, minimalist shack you’re describing; and (d) don’t want to live that far from civilization. So you end up paying for someone else’s labor to build it, and for the granite countertops, air conditioning and electric garage door opener, and of course for the land upon which it sits (which your engineer friend conveniently forgot to include in his pricing).

    People build houses all the time; I have friends who are builders. It’s a highly competitive field, especially in the current economic environment. Most of them have cut their profit margins to the bone just to remain in business, and it still costs a minimum of about $75 per square foot to build, and that’s not because of the permits required. That’s true even if you act as your own general contractor (which most people aren’t competent to do). I’m sorry, but you just don’t know what you’re talking about.

  • You have a mediaeval guild system for construction workers over there, don’t you Laird?

  • Also, a couple more points. Firstly, that costing wasn’t for a “tiny, minimalist shack” but for a multiroom dwelling suitable for a family with kitchen, bathroom, living room, several bedrooms. Not sumptuous, but certainly not Soweto.

    Secondly, you’ve skipped merrily past the fact that the State makes sure that if you want to do it, you have to live someplace that nobody wants to live, by nationalising the more appropriate land in “municipalities” and “zones”.

  • PeterT

    I won’t weigh in on the housing debate. I agree with Ian and Jaded.

    I will say this, in relation to the original topic:

    Insurance companies do perform a valuable social function. They could do much more but the state has crowded them out of many natural business areas for them.

    As for compulsory insurance. It is of course morally reprehensible. But it can help facilitate a transition from state provided services, such as health care, where moral hazard exists (people won’t pay because they know they will be ‘bailed out’), to a private system.

  • Midwesterner

    There are probably around 2000, maybe 3000 empty improved (water, sewer, electric available at lot’s edge) lots available within ~5 miles of where I live. Anybody may build their own house here. Many do. There were loads of empty lots available during the peak of the bubble. So where are all of the DIYers?

    We are forecast to get about 16 inches of heavy snow here this week. Do you know what that snow will weigh on a roof? Do you know the load ratings for various roof assemblies? After that it is going to be teens below zero Fahrenheit this week here. How many insulated windows are there in that “multiroom dwelling suitable for a family with kitchen, bathroom, living room, several bedrooms”? Do you intend to insulate the walls with something that won’t soak up water vapor and smell like a dead cat this summer? Vapor barriers done wrong (or not at all) can do astounding amounts of damage. Foundations. The frost line is about 5 feet deep here. How do you propose to foot this “multiroom dwelling suitable for a family with kitchen, bathroom, living room, several bedrooms” so that it doesn’t frost heave? And what is the floor made out of? The cheapest house I built was a vacation cabin on piers and even those have a fair amount of expensive materials in the floor structure. Do you know how to size beams and joists so the framework doesn’t sag and cause the bathroom door to not close and the water to puddle at the wrong end of the tub and the sewer pipes to run uphill? For that matter, do you know to design a DWV system? That works? And doesn’t siphon your toilet bowl dry and vent sewer gas into your house? Will you drill a well or pay for a hookup to municipal water? Or dip water out of a pond, skim off the scum and filter it? If you are building on an unimproved lot, do you have a clue about how to build a septic system that won’t seep its contents out onto the neighbor’s lawn?

    People who think they know how to build a house cheaper than the people who do it for profit might want to read up on the Dunning-Kruger effect. Some people might describe it as “not knowing what you don’t know“. People can and do learn all of these skills to build their own houses successfully. But they better be unemployed with a wealthy spouse if they intend to do it without hiring professionals. Do you know the various electrical, plumbing, mechanical, framing codes? While a lot of political baggage has been added to them in the last few years, the bulk of what is in them is there because it was learned empirically. When particular construction practices cause insurance claims, the codes adjust to reduce those claims. My contractor’s insurance was predicated on following those codes. My opinion? The cheapest way to get a house is to go to a dealer and buy one with wheels under it. And you will get what you pay for (if you’re lucky a/o astute).

    My experience supports Paul’s statements pretty well. Big developers who know who to buy and how much to pay them get almost carte blanche. Homeowners and small operators that can’t afford the lawyers, well, Paul covered it already. Laws are for the weak who can’t fight back.

    One more thing. As somebody who made money fixing other peoples houses (and sometimes their DIY efforts) very many people simply should not own homes. Period/full stop/whatever. Not unless they can afford to pay people like me to do their worrying for them.

    Make that two more things. I live in the house my father grew up in. The original part of it was built in 1900 and was well made for the time and budget. Yes, those houses were a whole lot cheaper. But they had no vapor barriers, no insulation, single pane windows, no running water, no bathroom, and no wiring. Even the quality windows of the time were so drafty that my father recalled the candle on the table flickering with gusts of wind. My father’s family slept on the front porch in the summer and lived with ice on the floor in the winter, used a chamber pot for a toilet (and an outhouse) and gasoline lanterns for light. And of course wood for heat. If you try to comfortably heat these houses now, the bills are exorbitant and the (heat and humidity caused) water damage permanent and irreversible.

    And PeterT, compulsory liability insurance, provided in can be purchased in an open insurance market, is entirely reasonable. If you are no risk to anybody else, your premiums will reflect that. If your problem is with assignment of liability, that is a different question, but if your property is constructed in such a way as to pose a potential risk to others, then compulsory insurance or a waver from the at-risk party(s) is entirely reasonable.

  • Mid, I’m a qualified electrician, I worked in construction for years and then building services. My friend, likewise, is a qualified engineer working in building services with extensive experience in construction. We often have long amiable discussions about what you call “buildng codes” and we call “building regs”.

    As I said, it was an anecdote; a quick calculation in a pub. The point was to illustrate the difference between the relatively low cost of building a basic dwelling, and the enormous actual cost of buying one.

    And yeah, I can blind people with jargon with the best of them. I can say, “hey, you can’t run an electrical supply to your shed because it’s outside the equipotential zone and you’re on PME” and bamboozle them with soil stacks if I so desire. But knowledge is easily purchased, and the dark tradesman’s secret is that most of what we do is pretty easy stuff. It’s just inside knowledge, that’s all.

    Hey did you know the new regs require a mains supplied smoke detector? No? I do, cos I is in the guild!

    It takes a clever architect to build an atrium. But for a bungalow, it’s pretty simple stuff. The kind of knowledge that is easily acquired, or purchased, in a free market. Every specialist likes to pretend a level of priestly knowledge not available to the masses- hey, done it myself- but the truth of the matter is, you’re either doing the same shit you did a hundred times before or looking it up in a book.

    So anyway, I don’t feel particularly intimidated by your posting. Sorry. But as an ex-tradesman myself, I can quite appreciate the motivation behind it. Rule number one of the specialist: always talk up the difficulty of your job. ;-)

  • Midwesterner

    You also aren’t telling us what was written on the estimate. Anybody can announce an unsubstantiated figure for a finished product. Why don’t you clue some of us in on it so we can start making a lot more money? And incidentally, sewers that don’t drain and walls that drip water are not ‘jargon’. The are the consequences of doing things on the cheap. So show us your budget. I’m not trying to “intimidate“, I’m saying show your cards. Here’s a reminder of your claim:

    they totted up the materials cost for a single story family home from one of the buidlers’ merchants catalogues- concret floor, breeze block walls, plaster, basic electrics, plumbing and so on. Came out well under two grand.

    [...]

    for a multiroom dwelling suitable for a family with kitchen, bathroom, living room, several bedrooms

    And since you mention electrical, I was working in a house where a DIYer had been doing his own electrical. I got kicked by a ‘dead’ circuit. It turned out that the guy had fed the circuit through two separate breakers at two different points. Flip a light switch and link them together. He didn’t even know it and it had been that way for a while. That isn’t jargon. It is the simple sort of thing you learn from a book or an apprenticeship. And it is the sort of thing that can cause serious injury.

  • John

    What a discouraging comment stream.

    Midwesterner:
    I usually find that I agree with nearly everything you have to say, but not this time. I’m sure that you are well aware that construction is not rocket science, that engineered solutions are almost always better than code, and that the code is written by a company run by the building trades groups and the code books sold under copyright. They are forever updating them to satisfy their customers (local govs and building trade groups and unions) and increase their sales. Building codes are the classic case of regulatory capture, designed by business interests to produce artificial barriers to entry.

    Also implicit in your remarks is what sounds to me like the idea that we are contemptible over-grown children who must be nannied for our own good and who should stand aside and let the experts and the enlightened gov do the job. No thanks.

    Furthermore, contractors are subject to a lot of constraints which do not arise in physics and which do not apply to a homeowner building a basic home. All of the regulations, all of the habits, all of the processes which allow them to knock out a cookie cutter house on the cheap, etc. are a liability once the narrow specialty has been left behind. Which is not even to start on what layers of taxes do to labor costs.

    OTOH, I hate to be defending Ian in this thread, because he’s arguing for the state to make me a serf on my own land because I own more than a half acre. Plus I think he’s overstated his case.

    If I can’t find people who understand my wanting to live my own way on my own place without interference from government at this blog, I don’t expect I’ll see them anywhere.

  • Laird

    You have a mediaeval guild system for construction workers over there, don’t you Laird?

    Umm, no, at least not where I live. I presume you’re referring to unions, and I’m in a “right-to-work” state with very few unions (outside of government employees, that is). None of the independent builders I know are unionized. Plus there’s all the illegals you could want, if you’re willing to take that risk (many are). And house construction still is nowhere near as cheap as you seem to think it should be, not by an order of magnitude. There’s something faulty in your logic, or your assumptions.

  • Johnathan Pearce

    Some random thoughts here:

    I find IanB’s attack on private absentee landlords surprising, but then maybe he’s been worn down by the LVT fanatics, who claim that taxing something – land – makes it cheaper. I guess in a punitive way – like with taxes on booze and so on – it might do so. But there is the tax incidence issue: the cost gets passed on in higher costs elsewhere, in most cases, and those costs are borne by someone, not necessarily some rich property developer.

    One thing that the LVT advocates claim is that there is some private “hoard” of land that would come onto the market more quickly than otherwise were it not for said grasping landlords holding out for a higher price. The problem with that argument is that you can therefore define as “hoarding” any delay in a would-be seller coming to the market. It is such a question-begging term that there is really no point in it, IMHO.

    What about farmland put in fallow? Is that “hoarding”. Or what about the case of squatters who take over a property left vacant for a period of time? How long must the vacancy exist for the “homesteading” of these squatters be seen as legit, or not?

    Then again, the price we pay, and the time that a person takes in bringing something of value to the market, is a matter of subjective preference. I am always suspicious of attempts to use the coercive, taxing power of the state to bring about some sort of “desirable” pattern of wealth/property ownership. We all know where this leads.

    Zoning laws, etc, are the real culprits much of the time. Let’s also not forget things such as building codes, regulations and other inflators of cost.

    It is pretty clear to me that if we take out these factors, and stop encouraging land speculation by central bank confetti money, that we’d get a more sensibly priced housing/commercial property market. But the fact remains that much of the economic growth in the UK occurs in the South and Southeast, and its dense population profile will drive prices up higher than some of us might like. Well, tough. That’s actually a feature, not a bug: it shows that prices reflect supply and demand.

    The Georgists want to suppress this price movement, not realising that doing so interferes with the efficient allocation of capital. There is no “right” or “wrong” price for a house or piece of land on which it stands (and don’t get me started on the Georgists’ whole confused ideas about “unimproved values”, “idle land”, etc).

    Rant over.

  • Paul Marks

    Jaded Libertarian.

    I will leave the buidling work to you – if ever we are in that situation.

    I am not being snide – if you think you can do it, you get to try (after all I know I would be no good).

    Of course I will almost certainly dead at the time – so you will not need to house me (or not house me), just bury me (for health reasons).

    Ian B.

    Yes I was being unfair in thinking the number you put out was a real estimate – you did NOT commit yourself to it.

    The number was pants (Laird is right about that) – but as we can not know what the market price would be (there being no free market in housing since about 1914 – when rent control came in….) I will not commit myself to a number. But YES it would be lower than now ( for example ….the collapse of the credit bubble will cause a house price fall)

    As for government housing policy.

    COUNCIL HOUSING.

    Starting in Liverpool and London and few other places…..

    Then (after WWI – and thanks to Neville Chamberlain and others) local councils were pushed into vast schemes.

    Every town and village in England has these ugly houses – a person just knows them by sight (Tolkien describes them in “The Scouring of the Shire” they are the state houses that Sharkey’s men built).

    Rent control (and so on) destroyed private house development – for the poor, so we (yes “we” I am one of them) got shoved in places like this.

    Of course in these days of “housing benefit” rents in the Council Houses have been pushed up.

    “What do you mean it is getting harder and harder to pay, you can apply for housing benefit – after all MOST people do not pay rent anymore”.

    No thanks – I would rather jump off the roof.

    Oh – by the way.

    Jaded Libertarian….

    “The state does not allow people to opt out”.

    You suspect wrong.

    I sat on the planning committee that had a (yet another) case of caravans being put on a bit of ground (slightly more sensible than your building a hut in the woods – by the way do not build it “in the woods” you are likely to cause a fire in summer, as well as freeze in winter).

    It was PASSED.

    There was no “material planning consideration” to stop it.

    Actually I hate it – lots of caravans off so many villages, full of people who seem to have no jobs.

    How do they have the money to buy land? Or even rent it?

    Still that is not a material planning consideration – so I voted to PASS.

    Anyway I notice that nobody had replied to my point about the HUNDREDS OF THOUSANDS OF HOUSES that have built in England over the last few decades.

    What freaking “housing shortage”?

    Or have I dreamed all these houses?

    I repeat there has been no great baby boom (rather the reverse) and productive industry (and farming) has been in DECLINE.

    And what is left is more and more automated.

    It is credit bubble – credit bubble and “service” stuff (government and private – IOUs for Chinese goods).

    I repeat.

    It will end soon and it will end badly.

  • Paul Marks

    By the way “housing benefit” has the same effect on rents (makes them go UP AND UP) as government subsidies do to university tuition fees, or that government subidies (Medicare, Medicaid, SCHIP….) do to health cover prices in the United States.

    Basic economics.

    But hardly anyone (certainly not university “economists”) take any notice of the basic principles of economics.

  • Johnathan, John, I’m not supporting the general Georgist case. Their economics is generally pants (e.g. the capture of externalities nonsense). My proposal for an excessive LVT is purely a position that we need a whole series of measures to break the property cartel. It’s a serious issue. What triggered the great bank meltdown? People who couldn’t pay the inflated property prices which benefit a minority against the majority.

    So, and I’ve made clear I’m writing from a ranting revolutionary position, the intention is purely and simply to smash the current propertied class. It would have to be linked to a total deregulation of land; the abolition of green belts, zoning, building codes, State compulsory purchase powers etc. We need to find a way to make it economically worthless to lobby for land use restrictions that force up prices, and one important aspect of that would be snatching the land from the large-scale owners. You can send in the war veterans, or you can use a punitive tax. I prefer the more peaceful latter.

    Hence my suggestion of the “free half acre”. It ensures that the average Englishman can have ample land for a home and even some small scale production, while not being a “serf”; he can have absolute security on that land. What he can’t do is own half of Cornwall and rent farm the population. But then, my preferred solution, I must admit, to Prince Charles, the Duke Of Westminster, The Council For The Protection Of Rural England, etc, involves tumbrels and guillotines, to be honest. Srsly.

    On the matter of the building estimate;

    As I was typing it, I thought, “somebody’s going to demand the architect’s plans to this little bungalow”. And sure enough…

    The point is, it was a back-of-a-beermat estimate of purely materials costs by people with the general skills to build their own bungalow. Most of us pay professionals to do most things for us because it is more efficient. The general point is that if building new properties were simple and easy; if you could buy the land on Monday and start breaking ground on Tuesday, you would expect “production lining” of home building by professionals to be pretty cheap. You would expect a rapid increase in supply and fall of prices to a small margin above costs, as with other free market products.

    Let’s take Laird’s “order of magnitude”. That still makes a modest home around £20,000. That’s less than a year’s median wages. A significant loan would be required for many, but not the exhorbitant loans we routinely take on as mortgages. Take a look at the tidgy bungalows on this estate agent’s website in my area. Midwesterner; think in your mind’s eye how much materials and labour went into them. Now look at the prices! And many of them “need work” and are “mature”. Most goods lose value as they get older. Not second-hand homes…

    It seems obvious that little homes like those, built by efficient professionals, couldn’t be constructed for less than £20,000 (our second beermat estimate). Where are they?

    Back when I was house-bashing, one of the striking things for me was how shit many of the houses were we worked on. Old, rotten walls. Crumbling brickwork. How the hell am I expected to get a fixing in this, it’s like sand! They needed, literally, tearing down and replacing. Yet they’d been bought by shiny eyed young couples as a pride and joy. And like generations of builders before us, we were patching them up again, for another ten years or so. The contrast to The City, where commercial office buildings are rapidly replaced when they reach end of life- and indeed built with a recognition that they will be replaced within at most a few decades- is startling.

    Why the difference? I’d suggest that a major reason is that the regulatory costs- getting permission to demolish and build- for a major office development comprise far less of a barrier than the same for a single home owner as a proportion of costs.

    So, for me, freeing the land is I think an important step in freeing the economy. We can’t go on with all of the ordinary man’s productive increase being soaked up by payments for piles of shit to live in. The landed aristocracies’ heads in environmentally appropriate whicker baskets would be a good start- or at least a fun family day out at Tyburn- but failing that a tax they cannot afford to pay may do the job. Combine that with the abolition of land use restrictions, all State land planning, and so on, and we may have a chance at being country people can afford to live in again.

    Looking at least worst options, I’ll take the free half acre and a tax if I’ve got commercial use for more land.

  • erratum-

    built by efficient professionals, COULD be constructed

  • David Lucas

    I suspect this is an unintended consequence of a new FSA-driven “affordability” test for mortgages.

    Being a top-down “good idea” it lacks the test of market reality. What we don’t know is whether the affordability test correctly risk-profiles different kinds of household.

    A family with children are I suspect more concerned to avoid losing a family home, less able to move and hide, etc etc. They are more likely to knuckle down and change their lifestyle to keep the children’s life going smoothly.

    Of course it is possible that on average families over-extend themselves, fail to cut spending to indulge children, and are too busy to keep on top of their finances.

    Or that there are different kinds of households that they could identify and discriminate between – though that could get controversial pretty quickly.

    I know that teachers, doctors and lawyers were considered good risks for unsecured consumer credit, because they tended to spend up to their perceived status and found it very hard to go off-grid while still exercising their profession.

    But any kind of industry-wide or government-driven political decision to mandate a specific test is likely to cause significant unfairness somewhere or other, with no option of finding a smarter competitor who wants your business.

  • Also, Johnathan-

    But the fact remains that much of the economic growth in the UK occurs in the South and Southeast, and its dense population profile will drive prices up higher than some of us might like. Well, tough. That’s actually a feature, not a bug: it shows that prices reflect supply and demand.

    I’m not sure that’s entirely true. The problem is how you measure “growth”. GDP? It is a kinda useful proxy for growth, but horribly distorted. For instance, it includes State spending. And the balance of payments.

    The thing is, much of the economic activity around London is- and has been especially since Thatcherism- in the financial services sector. And it’s debatable whether any of that is, meaningfully, “growth” or “production”. In a free market, financial services provide a service to productive industries; that is, their services can only be rendered as growth if they lead to an increase in production as meaured by the creation of more goods and services which consumers freely purchase. It is not clear how much of the financial services sector under the current nationalised money system is actually doing that. Some of it is. But what proportion?

    Under a free market analysis, I would argue that it’s better to see most of FS as simply a semi-private bureacracy which skims profits due to its cartelised status. That naturally draws money into the area in which it operates, but what’s it doing to the economy in general? From a Misesian perspective, I think we should conclude that the South East is simply the area standing directly in front of the fiat money cannons, rather than as being super-productive.

    One would expect that under a regimen of free markets and sound money, most of the current financial sector would simply disappear, to be replaced by a rather quieter banking system that just does what it’s supposed to do; lending savings to entrepreneurs at market interest rates.

  • Johanthan Pearce

    So, and I’ve made clear I’m writing from a ranting revolutionary position, the intention is purely and simply to smash the current propertied class.

    Eggs and omelettes. This process never goes well, Ian.

    Far better to focus on removing regulatory distortions. If you aim to smash the existing patterns of land holding,, etc, a lot of perfectly legitimate owners of land as well as rent-seeking types are going to get hurt.

    Like I said, these things rarely turn out well. Once we lay down the atrocious idea that we should tax landowning/other activities into the dirt, for some supposed public good, then we are in the badlands. I am not interested. No siree.

  • Johnathan Pearce

    The thing is, much of the economic activity around London is- and has been especially since Thatcherism- in the financial services sector. And it’s debatable whether any of that is, meaningfully, “growth” or “production”.

    Well, a lot of the “speculative” activity in the City might be pointless, although I should hardly have to explain on Samizdata that financial trading is a rather integral feature of a free market where prices move around and people need liquid markets in which to hedge risk. Just because aspects of some markets seem ephemeral does not make their value any less than hitting metal with a hammer to make a car or whatever.

    It does not matter as such why the Southeast is relatively more or less prosperous than the rest of the country; that is a side-issue. The key is that it is more prosperous, and that the cost of living there is, not just for reasons of land-zoning, more expensive than if you happen to live in Suffolk or mid-Wales. We actually want the price of land in the former to be more pricey than in the latter, since this creates an incentive for people to move to cheaper areas, or build high-rise developments to capture the capitalised rental income, etc.

  • Don’t worry Johnathan, I’ll be in charge of the Committee For Public Safety. I’ll be sure to only smash the right eggs. ;)

    As I said, hyperbolic ranting aside, that’s why in fact the Georgists’ LVT does, in this context, make some sense. No eggs, no smashing, no heads in baskets. As a means of euthanising the rentier class, it actually does make practical sense, with the proviso it’s set at a deliberately punitive level. The central purpose is to stifle the current practise of egregious rent farming.

    I think there is a very good argument that we’re in a “hyper-Ricardian” economy at the moment. Ricardo argued that the rentier would reduce the labourer’s wages to subsistence. They appear, by State collusion, to have actually been reduced to below subsistence, trapping the majority in unsustainable borrowing and State handout dependence. We can’t carry on like this. It’s not a matter of “public goods” but of the abolition of a State-supported cartel. Big difference.

  • Richard Thomas

    Just to dig up Midwesterner’s point about buying a home with wheels under it, in the US, a basic trailer (mobile home/modular home) can be had for a tad over 1000 UKP. Despite the stigma attached*, this will provide you with very comfortable living space including kitchen, several bedrooms and one or two bathrooms. You won’t be raving about the construction quality but in terms of judging cost of a basic livable structure, you know it has to be less than 1/2 of that.

    The point really is that you don’t buy a house, you buy land with a house on it. Or, if you want to build your own, you just buy the land. It’s the artificial scarcity that is the issue. Maybe mentioning “appeal” will get you through, maybe it won’t. It’s speculation and the uncertainty is a barrier to entry.

    *The stigma is mostly associated with single wides. There are some pretty fancy doublewides and two-story mobile homes out there.

    (And just to plug, I have a singlewide on a small plot in Florida on the market for $36k right now if anyone’s interested. Adjacent lot is $15k)

  • It does not matter as such why the Southeast is relatively more or less prosperous than the rest of the country; that is a side-issue. The key is that it is more prosperous, and that the cost of living there is, not just for reasons of land-zoning, more expensive than if you happen to live in Suffolk or mid-Wales. We actually want the price of land in the former to be more pricey than in the latter, since this creates an incentive for people to move to cheaper areas, or build high-rise developments to capture the capitalised rental income, etc.

    I think it “matters” a great deal. It’s a question of whether the SE is experiencing “prosperity” or merely inflation. What is the London area actually producing to make it so “wealthy”? If we look at it that you have an upper class on State welfare handed out via the financial sector- that is, fiat money booming out of the money cannons- and an impoverished worker class supporting them, a different picture emerges. The need to import large quantities of low-cost immigrant workers (the infamous “nannies, cleaners and gardeners”) suggests that picture has at least some validity.

  • Johnathan Pearce

    IanB, not sure I find your rejoinder very reassuring, even though there might be a touch of tongue-in-cheek going on here. The idea that the only reason land is not plentiful and cheap is because lots of evil private landlords/corporations own “idle” land just waiting to be used is one of those arguments I come across from time to time. It just doesn’t add up.

    The Ricardian idea about rents is questionable. In George Reisman’s Capitalism, there is a great discussion of this point (he basically crushes it). As agricultural productivity rises and more people are able to survive in non-farm jobs, so the rental power of landowers, relative to what existed before, goes down. The only things that stop this process from going on are governemnt interferences with things like landholdings, etc.

    As for the point about the Southeast, you have followed my comments long enough to know that I oppose the confetti-money-created boom in housing and other asset classes, but even if we did not have this influence, there might still be good reasons for why the Southeast was more expensive than somewhere else, just as, in the 19th Century, prices in the newly industrialising towns rose, while the rural areas trailed behind, etc.

  • Johnathan, I didn’t mention land hoarding, you did. The more general strategy of the landowners is to lobby continually to keep land off limits for market uses; green belts, nature reserves, “areas of natural beauty”, zoning and so on. It’s not so much a case of landowners hoarding market available land, as keeping as much land as possible off the market altogether; either as those permanently verboten classes I just mentioned, or by “that’s agricultural land, you’re not allowed to build houses” or “look at the pretty woodland, you are feeling sleepy, you will do everything I say”.

    We can break it down into three classes really;

    1. The Big Property Owners. These people benefit directly; by forcing up the general land price.

    2. The Small Property Owners. Having had to get on the merry-go-round of usurous mortgages just to buy a shitty bungalow, they’re so terrified of prices falling (“negative equity”) they’ll support any land restriction policy they can find, plus the financial system that has put them in mortgage serfdom.

    3. The Useful Idiots. Otherwise known as the conservation/green movements. Ignorant of economics and sucked into a ludicrous pseudo-religious worship of nature developed and bankrolled by Class 1, these largely urban twits blindly support land restriction policies, unaware that they are directly responsible for the crippling property prices they have to struggle with.

    I think the point about Ricardo is that as a general theory it’s wrong; in a free market land prices will reflect supply and demand like any other product. The development of land restriction turns the property economy Ricardian, in the same way as Keynesian policy turns the economy Keynesian. As I said, they’ve been so successful they’ve made it hyper-Ricardian, leading to a reduction below subsistence that can only be maintianed by unsustainable credit.

    In a free market none of this could happen. It isn’t a free market. It’s an entirely State market, with the “free market” consisting of desperate paupers scrabbling for the scraps the State awards them for their use. You can’t discuss the current state in a free market paradigm, any more than e.g. you can ‘t discuss the absentee landlord land situation in C19 Ireland that way.

    In broad terms, any economic class given excessive State support will have a Ricardian effect in the marketplace.

  • Laird

    Leaving aside the silliness of harping on building costs, I actually agree with much of Ian B’s rant.

    “It would have to be linked to a total deregulation of land; the abolition of green belts, zoning, building codes, State compulsory purchase powers etc. We need to find a way to make it economically worthless to lobby for land use restrictions that force up prices . . . “

    All fair enough. However, when he moves on to add “one important aspect of that would be snatching the land from the large-scale owners” he’s crossed the line into South American-style forcible land redistribution. Substituting state taxing powers for sending in the militia to dispossess the landowners makes no difference; each is an exercise in bare-knuckle state force, applied for what some may perceive as a social good. And there’s no need for it. Simply eliminating the land regulations, and removing the possibility of using state powers to restrict land use and thus drive up prices, would do the trick quite nicely. Oh, maybe not next week, but reasonably soon and with far less market disruption or opportunity for evil meddling.

    The market will clear, if it’s permitted to do so. Substituting tax policy for market forces is a very poor exchange.

  • Midwesterner

    that engineered solutions are almost always better than code,

    This is why I said the cheapest way to buy a house is to buy one with wheels under it. From what Paul says, it sounds like they are in fact an option in the UK. Prefabricated houses of whatever sort are by far the most economical choice for what you get. My only complaint about them is they are extremely difficult to remodel because they are so efficiently engineered that modification becomes a major reconstruction/re-engineering project.

    John, I am not defending code or attacking DIYers. I am saying his claim is utterly impossible. Even w/o a building code. Since I have almost all of the skills and experience necessary to build a house (and have built several between remodeling jobs), this is the kind of question I have given a lot of thought to.

    Ian clarified his original statement by stipulating “The point is, it was a back-of-a-beermat estimate of purely materials costs by people with the general skills to build their own bungalow”. That had been the assumption I was working on all along so it doesn’t change my case.

    The exchange rate calculator I plugged 2000 pounds into gave me ~$3,208. The way I start a job is by estimating from the bottom up. I’ll estimate Ian’s project at 900 square feet. I lived in a house that meets his description that was 1000 square feet. It was tight and there was no wasted space. If one plans on a 3 inch thick concrete floor and allows for 1/2″ errors in grading (so 3 1/2 inches on average) one gets 900 divided 9 equals 100 square yards times 3 1/2 inches equal 1 square yard times 350 inches divided by 36 inches rounds up to 10 cubic yards of concrete. Assuming the most efficient perimeter 30′ x 30′ we get 120 feet of footing for walls allowing 14 inches wide by 10 inches thick equals allowing for minor errors 4 1/2 cubic yards of concrete. We are now at 14 1/2 cubic yards of concrete. This site gives $75/cy which is exactly what I would expect. That gives $1087.50 just for the concrete. It doesn’t include any reinforcing, fastening bolts, clean sand or fill, vapor barriers, just wet concrete plopping out of the truck.

    We have now spent 1/3 of Ian’s budget and we have a floor. We haven’t even started on walls yet, so let’s start. The best guess average price I’ve seen for cinder blocks (UK ‘breeze block’) is $1.15 each but it apparently varies a lot depending on location. Using 9 feet walls to allow for a little bit of frost depth, the tables here give us 1215 blocks and 92 cf of mortar. I didn’t deduct blocks for windows and doors but I didn’t add specialty blocks either. That’s about $1400 of blocks and I didn’t look up the mortar.

    We are now at $2487 dollars and all we have are a concrete floor and block walls. No doors, no windows, no partition walls, no plumbing, no electrical, no heating, no plaster, no paint, and wait for it, no roof. And of course, no labor or tool expenses.

    Let’s look at a roof. The cheapest roofing system I can think of is what we use around here on machinery sheds. It is manufactured trusses (you can make your own) and steel sheet roofing. I found steel sheet roofing for $65/square which, if the house has no eaves, is going to be around $650 plus a ridge cap and gasketed nails (or screws).

    Let’s stop at this point. We have a raw concrete floor. Raw cinder (breeze) block walls (w/o mortar) and steel to put on the roof that doesn’t exist yet. And we are at $3137. Add in the fasteners for the steel sheets that will go on the roof when it is built, and the mortar to keep those block walls standing, and we have already blown past Ian’s estimate.

    If there are any contractors out there who want to generate a takeoff for Ian’s project, and can do it for less than triple his price in materials alone, I’d like to see it. You can even totally ignore code although you will then need to defend the omission. For example, code requires that all rooms used for sleeping have windows that can be broken out and allow a fireman in full protective gear to get in and remove a person with CO, etc poisoning. Even if that wasn’t code, I won’t regularly sleep in rooms that don’t have an escape. Also, code does not require the underside of stair cases to be made fire resistant. At least it didn’t when I was working. But I always try to do that. I even talked one client into letting me empty a storage closet and put fire retardant drywall on the underside of the stairs. You don’t need to meet code to satisfy the claim, just build a safe house.

    “Let’s take Laird’s “order of magnitude”. That still makes a modest home around £20,000. That’s less than a year’s median wages.”

    Let’s see a ‘skilled homeowner’ sort of person build a house in less than one man year. If I were estimating for myself, I would probably allow that what with the need for crews on things like concrete work and weather delays and all. So that price must include what that person would have been earning had they chosen to work instead. And anybody capable of building their own house is capable of fairly well paying work. I own many thousands of dollars of tools and would need to rent thousands more in addition. But I did not include any tool expenses or any labor at all in my calcs. None. So my guess is that when you are done you will have a house that cost about what a bare bones house like you were building would cost on the market.

    Once again, Ian spouts a line of bullshit (£2,000) and is now in full back pedal. But even his order of magnitude back pedal doesn’t cut it if you count the time you are not working a paying job.

  • Midwesterner

    the silliness of harping on building costs

    Can I build a house for you? Just sign right here. :-)

  • Johnathan Pearce

    Johnathan, I didn’t mention land hoarding, you did. The more general strategy of the landowners is to lobby continually to keep land off limits for market uses; green belts, nature reserves, “areas of natural beauty”, zoning and so on.

    I know I raised it. But when these guys lobby for zoning, they are using the violence-backed power of the state; the Georgists, as you know, argue that this hoarding will happen even if we did not have such interference, hence their arguments for LVT.

    I agree with you on the NIMBY issue. The trouble is always going to be persuading large swathes of the homeowning population to allow a lot more building on open, “green” spaces. Any politician who argues for this, of course, is treated as one level down from Caligula.

    I would not say it is an “entirely” state market – more a sort of mishmash. And we haven’t even discussed the evils of compulsory purchase yet, often justified on utilitarian grounds.

  • Midwesterner

    When people start advocating for a total elimination of zoning or similar restrictions on the use of private land, I ask them if I may buy the lot on one side of their 3 bedroom house with a pool and build an asphalt plant and on the other side build an animal carcass rendering facility. If not, why not?

  • Mid, my line of bullshit was as clearly stated, some friends with a beermat. Your more serious costing in fact supports it; considering they were costing something pretty basic over a beer, they were in the right ballpark. Let’s take your tripling of materials costs for our nice simple home at £6000. (Remember, no staircases, it’s single story, and no gigantic fire exits a la “code” either.)

    So, take a professional building contractor. In our imaginary free market they’re geared for large scale production line building. They have economies of scale and large purchasing power for raw materials. Labour is non-unionised and there’s no permit raj. Can they knock out little bungalows for £20,000? I think that’s reasonable, don’t you? If not, double it. Make it £40,000.

    So why do they cost £150,000 or £200,000, even in a semi-dilapidated state? That’s the issue here. Something that costs £40,000 to manufacture[1] that sells for £200,000… that’s a hell of a markup.

    Yes, I’ve switched from my perhaps idealistic suggestion of “amateur communes” to professionals building the things. I concede that point, although I’d suggest it’s feasible for the more enthusiastic person. Nonetheless, professionals are supposed to be more efficient than amateurs, which is why professionals do most jobs. We might consider a situation in which floor walls and roof units are sold and the owners then do the plastering, painting, internal electrics, plumbing, guttering- all jobs DIYers can do easily. Pretty much anyone can fit UPVC windows to a professional standard too[2], install baths and other ablutionals, do tiling, etc.

    I stand by the later estimate that in a suitably competitive environment, mass produced bungalows of the type on the estate agent’s website I linked to ought to easily come to market for £20,000 or thereabouts. With “buyer completion”, quite a lot less.

    The other point you may bring up would be the cost of services- road access, utilities (lx, water, sewage), but those are externals- either supplied by councils or private utilities companies. They aren’t included in the price of a house on the market, so we should not include them either. At least in Britain for instance, the house itself includes the water main only as far as the connection to the public main; electrics only so far as the service connection, etc.

    [1] And that high estimate is now way over the odds, I would say.

    [2] The pro standard generally being, smash ragged hole in wall, jam in window, try to get a couple of fixings, fill gaping holes with copious sealant, fuck off before it falls out again.

  • When people start advocating for a total elimination of zoning or similar restrictions on the use of private land, I ask them if I may buy the lot on one side of their 3 bedroom house with a pool and build an asphalt plant and on the other side build an animal carcass rendering facility. If not, why not?

    Good question. Why not? It’s not your land, is it?

    A more full answer might be the anarcho-capitalist approach of using the civil courts. And to bear in mind that your little residential street might not be a good place for an asphalt plant or animal rendering facility, whose owners might actually prefer to naturally cluster in industrialised zones where there are copious electrical and other service supplies, water, heavy transport links, etc etc.

    Another option might be for a legal requirement that changes of business use must be approved by adjacent landowners, moderated simply by the local magistrates court, rather than by distant bureaucrats engaging with lobbyists.

  • As another point of comparison, I just looked up some random land prices, at random in Bedfordshire. Arable land is about £8000-£10,000/acre (and you need much less than an acre for a house).

    In contrast, 1800 sq ft with planning permission for a house is £150,000. That’s just 0.04 of an acre. That’s also the cheapest. Quite a contrast, especially when you remember that the arable land has net productive value to the buyer, whereas the residential land is a net cost.

  • Haven’t you figured it out yet?

    NOTHING should cost ANYTHING.

    (Except being a racist or homophobe, those should cost everything.)

  • Midwesterner

    Your more serious costing in fact supports it;

    Can they knock out little bungalows for £20,000? I think that’s reasonable, don’t you? If not, double it. Make it £40,000.

    No I don’t so go with the £40K. So now £2K has turned into £40K and my “costing in fact supports it”. WTF!

    “no gigantic fire exits a la “code” either.)”

    I will not buy or build (in any legal system) a house with bedrooms that do not have an escape window in case of fire. It is too certain of a way to die. There is a minimum size that a fireman wearing protective gear and an air tank can fit through. The opening has to be that big once the sashes are broken out. I will not concede that point or other similar safety points or you are not building a house, you are building a coffin. So no, I don’t accept this either.

    The other point you may bring up would be the cost of services- road access, utilities (lx, water, sewage), but those are externals- either supplied by councils or private utilities companies. They aren’t included in the price of a house on the market, so we should not include them either. At least in Britain for instance, the house itself includes the water main only as far as the connection to the public main; electrics only so far as the service connection, etc.

    I have sat through enough meetings where commissioners struggled with how to provide this entitlement to even think of writing it off as inconsequential. It is just one more form of compulsory redistribution. What is it with you guys in the UK that you think ‘necessities’ (even unto the NHS) are natural resources to be divvied out ‘fairly’? Sewer collection and treatment infrastructure is very expensive and capacity sensitive. If you reject the municipal authority over building, then you must reject the expectation of a connection and service. It really is that simple.

    I am beginning to wonder if you are a progressivist agent sent here to muddy the waters. Why else would you think you can just make stuff up and nobody will fact check you? Since a lot of what you say makes good sense or is at least thought provoking, why make stuff up? It just makes me wonder every time I read a comment of yours spouting ‘facts’ that are not from a field I know something about, if you are telling the truth or just making it up as you go.

  • Midwesterner
    When people start advocating for a total elimination of zoning or similar restrictions on the use of private land, I ask them if I may buy the lot on one side of their 3 bedroom house with a pool and build an asphalt plant and on the other side build an animal carcass rendering facility. If not, why not?

    Good question. Why not? It’s not your land, is it?

    Of course it is. I bought it from the nice estate agent. It’s got a clear title. I own it. It’s mine. I can do what I want.

    Don’t worry about the streets. My trucks won’t have any problems with them. They’re construction and farm trucks, they drive in a lot worse than anything that will happen to the streets.

    And I don’t want to cluster in an industrial zone, I am a busy entrepreneur. I want to walk back and forth between my house and my two businesses any time of the day or night. They’ll being running 24/7 dontcha know.

    Another option might be for a legal requirement that changes of business use must be approved by adjacent landowners, moderated simply by the local magistrates court, rather than by distant bureaucrats engaging with lobbyists.

    This is approximately the correct answer, but why? I’ll give you a hint. It is based on property rights of the owners.

  • Mid, we seem to be somewhat at crossed purposes. The point I was making with the beermat calculation was simply the relatively low cost of the building compared to the high cost of the land. Your estimate was more accurate than mine. I accepted it. The initial estimate was for purely raw materials, the later estimate for a completed building, and in a spirit of generosity to get past this specific costing point I said, okay, take the high value, double it, whatever. The point stays the same.

    On the second point, I’m sorry to have been unclear. I wasn’t trying to claim sewerage and roads as an entitlement; merely that they are not incorporated in house prices but come from other sources. I would expect a new village to have to pay for connection to e.g. sewers, water mains, electrical grid, not pretending that they’re “free”. That is, that those costs are additional external costs. I don’t know about the USA, but here in the UK you already have to pay for those things. If I build a house miles from anywhere and want an electrical supply, I will have to pay the (private) electricity company (it may not be full cost, as they may be eager to supply me if I am a large user. The point is, it’s a market rate).

    So the general point is, I’m trying to compare the cost of the building to the cost on the property market, and showing that most of that is the land value, not the construction cost. That’s the point, not the specific costing of a build. I haven’t worked construction for a long while. You do. I accept your general figures. My initial (“secondhand”) estimate was too optimistic. But the general point still stands, which is that the (hypothetical) £40,000- our highest figure- is only a fraction of the £200,000 on the property market.

    The other point which the land values I posted demonstrates is that there is no way to build cheap property in the UK. It’s no use building a shack on land that cost you £150,000 and several years of negotiation with the State just for the right to build on it. It’s a classic example IMV of State manipulation of the market squeezing out the cheap end. See also health care…

    The other minor point about the safety code is irrelevant really; you may not want to sleep in my crappy hypothetical house, but that’s just your personal taste and in a free society, that’s your choice. I don’t think the size of the bedroom window very strongly affects the argument. I suspect much of the property in the UK, including this flat I’m typing this in, with its tiny bedroom window, wouldn’t suit your requirements. Feel free to stay in a hotel if you visit :)

    I misunderstood the point about the rendering plant. I thought it was built on somebody else’s land next to your own. If it’s on your own land, go for it. It’s up to you. But if your neighbours don’t like it, I refer you to the answers that I already gave.

  • Richard Thomas

    However, when he moves on to add “one important aspect of that would be snatching the land from the large-scale owners” he’s crossed the line into South American-style forcible land redistribution. Substituting state taxing powers for sending in the militia to dispossess the landowners makes no difference; each is an exercise in bare-knuckle state force, applied for what some may perceive as a social good.

    OTOH, if I turn up at an owned but otherwise unused piece of land and throw up a house and plant a small subsistence garden, what is to prevent me other than bare-knuckle state force applied for what some may perceive as a social good?

  • Richard Thomas

    Something else just occurred to me. Back in the 80s when housing was really on its way up, my grandmother had some extra land at the side of her house and my uncle (a bricklayer) and my father built two two-story houses on the land. Curious, I asked my father how much construction for each had cost and he told me about 19k (late 80s) UKP apiece. Again, it’s more about the land.

  • Actually, the question of utlilties is an interesting one; it’s the same question as the “net neutrality” argument. Who should pay for users of a pipe? Should the householders pay for the installation of the sewer, because they gain a service from it, or should the sewer company pay that capital investment, since it gives them access to new customers? Should the village residents pay for a road to be laid to their village, or should an entrepreneur lay a road then charge them rental for its use? These are good questions for free markets to decide.

  • Midwesterner

    This site yields a materials (no labor, no land, no profit, no overhead exp) of 18,000 to 24,750 for a 900sf house. That is the true cost that you gave as £2K ($3.2K). That is approximately an order of magnitude. In other words, it is bullshit. The point cannot stay the same when the premise it is based on is bullshit.

    I’m trying to compare the cost of the building to the cost on the property market

    Except you’re not. You are trying to compare the cost of raw materials that can be made into a house to the cost of improved lots.

    and showing that most of that is the land value, not the construction cost.

    Except it isn’t. Remember this rule of thumb?

    25% material, 25% labor, 25% land cost, 12.5% builder profit, & 12.5% builder overhead.

    You had to magically make close to 2/3s of the cost of a builder constructed house disappear in order to make that claim. There are very good reasons why almost all houses are built by professionals. Otherwise everybody would be building their own homes.

    RE “you already have to pay for those things.” No you don’t. You only have to pay the cost of connecting. Somebody else has to build the generating/pumping/treatment capacity to handle all of those people who connect. “as they may be eager to supply me if I am a large user.” and reticent to supply you if you are a small (as this proposal is) user. As long as infrastructure capacity planning is delegated, control has to go with it. Otherwise it is an unfunded mandate.

    It’s a classic example IMV of State manipulation of the market squeezing out the cheap end.

    And I’ll tell you exactly why. It is because it is provided by the government and they may not discriminate. So they elect to only allow the construction of houses that pay a lot of taxes because it makes their job easier/possible. This is the perverse incentive of ‘free’ goodies provided by the taxpayers. Everything encourages maximum tax revenue. Which is the root of the problem that is bothering you.

    The other minor point about the safety code is irrelevant really; you may not want to sleep in my crappy hypothetical house coffin, but that’s just your personal taste life and in a free society, that’s your choice. I don’t think the size of the bedroom window very strongly affects the argument. I suspect much of the property in the UK, including this flat I’m typing this in, with its tiny bedroom window, wouldn’t suit your requirements. Feel free to stay in a hotel if you visit :)

    Have you priced thermal windows? Like in other things, size matters. I suspect you’re right. That is why insurance varies with the construction of the structure. It also effects sale price and can determine whether it qualifies for a loan. I’m curious how big your bedroom window is (with the middle busted out). Does it meet many, or even all, of these requirements?

    Richard Thomas, ask your uncle how much he would have charged if he had done that work for hire. I suspect your father was talking about the cost of materials only. If so, then that sounds about right.

  • Curious, I asked my father how much construction for each had cost and he told me about 19k (late 80s) UKP apiece.

    ^^<blockquote> tag

    Interestingly enough, that works out via this convenient historic price calculator to £40k in today’s money, so we’re in the right ballpark. A modest bungalow should be somewhat less than that.

    It’s also fun to put in 19th century dates and note how Britain’s great economic success period was accompanied by… currency deflation.

  • Mid, with all due respect. You tend to get fixated on something and then get all angry so I can virtually hear your fists banging on the keyboard. You are bashing away at an argument I already agreed with you about. I don’t know what you want me to do. Fly to wherever you live and make a public apology for daring to give an off-the-cuff figure in the town square? Have it tattooed on my forehead? How many times are you going to spit “bullshit” through the red mist?

    Look, we’re past that point. 2k was too low. YOU ARE RIGHT ABOUT THAT.

    But the point here, and if you could stop fixating on your l33t estimating skills for a moment, is that quite clearly the cost of a bungalow is not, at least in the UK, “25% land cost”. It is far higher than that, and I gave you a specific, referenced example from a British land values website showing land starting at 150k for a bungalow.

    You can build the finest bungalow you ever saw. Give it gold bathtaps and marble floors and a roof that slides back to reveal a secret superhero HQ and rocket plane, and you’re not going to produce another 300k in materials and labour.

    I would remind you yet again that the 2k, anyway, was for a bare simple dwelling, not a nice house for sale on the US market, so the “order of magnitude” thing is way off, but, what’s the point? You’re going to just keep on fist-typing about this one, secondary point- the specific accurate price of concrete- as opposed to addressing the main point and saying

    bullshit bullshit bullshit

    and we’re going to just go around in circles forever, I know this because we’ve been here before.

    Calm down man. 2K was too low. We’re over that now.

  • I’m curious how big your bedroom window is (with the middle busted out). Does it meet many, or even all, of these requirements?

    No, it doesn’t, Mid. And this is kind of the point. Your preference for the “bare minimum” is emotionally influenced by your economic incentive- as with the building code writers in general- to constantly update that bare minimum. And like I said, as a tradesman myself, I know that incentive well.

    Oooh, that socket might get used for a lawnmower. Regs say I’ve got to replace it with an RCD, here’s my bill..

    That’s not necessarily the same standard as the market would choose. Which is the whole damned libertarian argument against regulation in the first place.

  • Laird

    OTOH, if I turn up at an owned but otherwise unused piece of land and throw up a house and plant a small subsistence garden, what is to prevent me other than bare-knuckle state force applied for what some may perceive as a social good?

    I see: government using force to steal your property is indistinguishable from government using force to prevent someone else from stealing your property. Right. How could I miss something so obvious?

    Next time you might consider applying a modicum of thought before clicking that “post” button, Richard.

  • Richard Thomas

    or should the sewer company pay that capital investment

    Interesting how our thinking becomes indoctrinated by what is around us. Potentially there could be multiple* sewer companies competing for that business.

    (*Potentially none as well of course)

  • Richard Thomas

    Midwesterner, right, we were talking about materials only. Though there were contractors brought in for several parts of the process. Also some unskilled labor to work with my uncle.

  • Richard Thomas

    Laird, full thought was applied.

    What I was hinting at is that we need to look at real estate ownership at an angle that, if only for a while, is stripped of the power of government enforcement.

    I’m being careful here to try to steer clear of appearing to be saying “strip the landowners of the land and redistribute it ‘fairly’ (for whatever that means)”. Yet there are some knotty problems if you look at real estate. Firstly, there is the natural need of every man to have a space to exist (leave aside being able to produce for himself for the moment). We can argue if this is a right or not but if so, it is at odds with others having a monopoly on land. That this is not currently really a problem is really only because it is not a problem and not because there are not problems of principal at stake. That slaves were fed did not mean that there was not a problem with slavery.

    Next we have that much land was obtained by conquest. Now, again, I’m not saying that it should all be returned or such nonsense but by what claim is it the responsibility of the government to maintain the status quo of the outcome of that situation? When exactly do we set the date and time of the “big freeze”? Why then and not now?

    So to bring it down, what I am saying is that there is something wrong with the principals which govern current land ownership, principals which allow a few to control huge amounts of land and seek rent from those who seek merely to exist and live and I think it behooves us to take a step back and reexamine the situation. Given the extant circumstances of human existence, what is the correct protocol to moderate land usage between individuals (assuming we’re not going to go around just bashing each other with rocks)?

    Personally, I don’t really like the LVT though I can see its attractions. Also Ian’s 1/2 acre per person, if flawed, has a pleasing sound to it. Truthfully, I haven’t heard anything that sounds like the correct solution yet and what we have will likely do for now. It does bear thinking about though.

  • Midwesterner

    This is how Wikipedia defines the rentier class. With that in mind, here are some of Ian B’s beliefs and goals. I didn’t blockquote them as there are a lot of them and this way seems easier to read. He will probably say its all just hyperbole and he doesn’t really mean it. Well, not literally. But I give him credit for consistency and choose to believe he does mean it just as he has said it.

    *******************

    It’s a national, nationalised scam. Whatever one may think of Georgists, it has to be said that Mark Wadsworth’s consistent denunciation of “the housing lobby” is entirely correct in its fury.

    What would be the free market price of an ordinary house? A very few thousand pounds. If the government just let people build houses when and where they wish, there would be no mortgage market as we know it. Yes, some people would pay a lot for a house in central London, but most of us would live virtually anywhere if you could buy one for £5000 or less.

    ****************

    And in general building your own home was a basic human skill for most of our history. It is not that difficult. Anecdotally, a friend of mine who is an engineer and a bit of a survivalist nut was in a pub with some of his slightly nutty friends, and they totted up the materials cost for a single story family home from one of the buidlers’ merchants catalogues- concret floor, breeze block walls, plaster, basic electrics, plumbing and so on. Came out well under two grand.

    A “co-operative” of several families could easily build themselves a small hamlet of “modern” homes like that (for those who don’t want a log cabin) for at most a few thousand pounds each. But you’re not allowed to, not in Britain.

    **********************

    Also, a couple more points. Firstly, that costing wasn’t for a “tiny, minimalist shack” but for a multiroom dwelling suitable for a family with kitchen, bathroom, living room, several bedrooms. Not sumptuous, but certainly not Soweto.

    *******************

    If we were to ask for a cause of persistent poverty- the “working poor”- we must surely point a large finger at the persistence of the state-backed rentier- he who either rents the land himself, or rents the money to buy it. While this state of affairs continues, we have a form of Ricardo’s Law, in which all productive increase is, for most of the population, snatched away by the rentier class.

    ****************

    I must admit, I’m coming round to an element of LVT, not so much on carefully balanced economic arguments so much as a pure zeal to unseat the aristocracy. I think perhaps a good compromise would be to have your first half acre tax free, and then tax the rest at at least 100% ground rent. This ensures that (a) the widow cannot be thrown out of her home for non-payment of taxes (b) the euthenasia of the large-scale rentier (c) a market in “half acres” will remain so that land values can be assessed at a market rate. This combined with complete land and building de-regulation, of course.

    Really, it’s time we stopped these fuckers wrecking the economy. Firm action is required.

    Vive la revolution!

    *******************

    I’m not supporting the general Georgist case. Their economics is generally pants (e.g. the capture of externalities nonsense). My proposal for an excessive LVT is purely a position that we need a whole series of measures to break the property cartel. It’s a serious issue. What triggered the great bank meltdown? People who couldn’t pay the inflated property prices which benefit a minority against the majority.

    So, and I’ve made clear I’m writing from a ranting revolutionary position, the intention is purely and simply to smash the current propertied class. It would have to be linked to a total deregulation of land; the abolition of green belts, zoning, building codes, State compulsory purchase powers etc. We need to find a way to make it economically worthless to lobby for land use restrictions that force up prices, and one important aspect of that would be snatching the land from the large-scale owners. You can send in the war veterans, or you can use a punitive tax. I prefer the more peaceful latter.

    Hence my suggestion of the “free half acre”. It ensures that the average Englishman can have ample land for a home and even some small scale production, while not being a “serf”; he can have absolute security on that land. What he can’t do is own half of Cornwall and rent farm the population. But then, my preferred solution, I must admit, to Prince Charles, the Duke Of Westminster, The Council For The Protection Of Rural England, etc, involves tumbrels and guillotines, to be honest. Srsly.

    *******************

    So, for me, freeing the land is I think an important step in freeing the economy. We can’t go on with all of the ordinary man’s productive increase being soaked up by payments for piles of shit to live in. The landed aristocracies’ heads in environmentally appropriate whicker baskets would be a good start- or at least a fun family day out at Tyburn- but failing that a tax they cannot afford to pay may do the job. Combine that with the abolition of land use restrictions, all State land planning, and so on, and we may have a chance at being country people can afford to live in again.

    Looking at least worst options, I’ll take the free half acre and a tax if I’ve got commercial use for more land.

    *********************

    Don’t worry Johnathan, I’ll be in charge of the Committee For Public Safety. I’ll be sure to only smash the right eggs. ;)

    As I said, hyperbolic ranting aside, that’s why in fact the Georgists’ LVT does, in this context, make some sense. No eggs, no smashing, no heads in baskets. As a means of euthanising the rentier class, it actually does make practical sense, with the proviso it’s set at a deliberately punitive level. The central purpose is to stifle the current practise of egregious rent farming.

    *******************

  • Midwesterner

    I don’t know about you guys, but when I read the tone and text of those comments all assembled together like that, it sent a rather unpleasant chill down my spine. I believe he means exactly what he said.

    Vive le sans-culottes.

  • Oh good grief, Mid. You’re quoting my comments in this thread!. You think nobody else can read? They’re IN THIS THREAD, you maroon! Why would you possibly quote stuff in THE SAME THREAD as if you’d just discovered it on wikileaks? I am quite mesmerised by the strangeness of this.

    Sigh.

    Here’s a clue, Mid. I’m a reasonably intelligent, politically well read libertarian, in a place full of reasonably intelligent, politically well read libertarians. You have two options

    1) I’m a secret marxist who accidentally let slip phrases like “euthanise the rentier class” (actually Keynes, not Marx) by accident. And now I am exposed! Oh noes!

    2) I used that provocative language deliberately in the expectation that those intelligent well read libertarians would recognise it.

    Which is it?

    So, what’s going on here, Mid? You’ve been on that materials estimate like a horny dog on a leg, and it’s quite clear after several comments that despite my deferring several times to your expertise, you’re not going to let go until you’ve messed on my sock. Why would that be?

    1) You’re one of those slightly disturbed people who has to keep hitting somebody even after they’ve apologised for knocking your pint over. Just to prove who’s boss around here.

    2) Your income is heavily dependent on a restricted property market in which high land values prevent the construction of cheap property (the £10k shack’s not worth building on a £150k plot), and that State building code, hard-won by property market lobbyists, that requires you to obsess about fireman access to your bedroom, you kinky devil. Guild members don’t like free markets. Never have. Bankers don’t want free market banking. The property class (rentiers and hangers on in the construction and real estate guilds) don’t want free property.

    Which is it?

    Anyway, apologies for the French Revolution gags that went over your head. They were for the well-read folks, not the horny jack russell.

  • Well, Mid, I just got smited, so you’ll have to wait for my reply.

    I don’t know about you guys, but I’m seriously starting to think that Midwesterner’s a fruitcake. I saw this coming several posts ago. It’s that whole “how dare you define God as omniscient and omnipresent” thread all over again, isn’t it?

  • Laird

    Well, Midwesterner, you’re a fruitcake and I’m a fascist. Perhaps we should form a club.

    Richard, I have zero interest in debating the history of property ownership. I don’t care in the least that someone stole the land a thousand years ago. The person he stole it from probably stole it himself. It’s a pointless, fruitless, totally sterile discussion. Property ownership and the mechanisms of its transfer have been established for centuries, and that’s good enough for me. Dislodging it now would be far more disruptive, socially as well as economically, than any putative “inequities” you may perceive in the current system.

    The only proper function of government is the protection of persons and their property. A government which fails to discharge that primary duty, or uses its power in contravention of that duty (in the manner you suggest) is completely illegitimate. I find your facile rationalization of a silly comment unpersuasive.

  • Richard Thomas

    Dislodging it now would be far more disruptive, socially as well as economically, than any putative “inequities” you may perceive in the current system.

    Well, if that’s our yardstick, Perry may as well close this website down, turn the server into a doorstop and auction off the domain name on ebay.

    However, whilst I’m not actually advocating the overthrow of the system, I think it’s worth taking a look. The truth of the matter is that the “Property ownership and the mechanism of its transfer have been established for centuries” have actually been established for many millenia and that is that whoever is most capable at projecting force is the one who controls the property. At the moment, in most Western countries, that projector of force is the government. Since the government in Western democracies is nominally supposed to represent the will of the people, I think it only makes sense to consider how it should operate in that role. Simply asserting that it should maintain the status quo because it is the status quo seems somewhat mundane to me.

    If you have zero interest in debating or discussing the matter, that’s fine but I think you’re missing out on something that is potentially quite interesting and very enlightening.

  • Richard, the part of the Georgist/anti-propertarian argument that’s made me think again is that I had to grudgingly admit that there is something different regarding land than other products. The best way I can think of putting it is that the land rentier doesn’t bring anything to market. It’s already there. All they can do is restrict access to that thing (land) and charge money for it.

    If you compare that to say a crane hire business for a builder; well, he hasn’t got a crane of his own, it would be uneconomic to buy one. The crane renter has invested in a crane and brought it to market. Without him, there would be no crane. But the landowner hasn’t brought anything to market that wasn’t there already.

    There does seem to be a “natural justice” disconnect between, er, small property and large scale property ownership. I have a strong personal sense that owning “a place to live” is the best security a person can have and very naturally just. But when somebody owns huge areas of land from which they can collect a rent for, basically, doing nothing but administrate the rent collection, there seems to be very little natural justice involved. The crane hirer is making construction work more efficient. The land rentier… isn’t. He’s just forcing people to pay money for land because he got there first, or it was given him by a King, or he is the King, or whatever. There does seem to be a qualitative difference.

    I actually resisted thinking along these lines for some while, because I’m so strongly in favour of property ownership on a personal level.

    One interesting thing I think for libertarians is that the libertopian fantasy of going somewhere else to live a libertarian life is entirely scuppered simply because all the land is taken, and none of the current property groups (the “nations”) are likely to let us have any. Not the same level of ownership, but it illustrates the problem. By contrast, nobody could stop us buying our own crane.

  • Laird, I’m simply at a loss (again) as to what Mid is arguing, if anything, and also at a loss as to how somebody here can’t understand the spirit in which a statement like

    Don’t worry Johnathan, I’ll be in charge of the Committee For Public Safety. I’ll be sure to only smash the right eggs. ;)

    is intended. I dread to think what Mid makes of rant sites like The Devil’s Kitchen.

  • Johnathan Pearce

    I share Laird’s jaundiced view of some of this nonsense.

    It is possible – as Rothbard and others like Jan Narveson have shown – to show how a homesteading principle can arrive at a reaonsable basis for the origin of property, but even if we concede that some current property holdings in land or whatever started out eons ago through acts of violence against X or Y, it is, in my view, madness to use the sledgehammer of the State to create a sort of clean slate from which we all start off again. There is this sort of Leninist tendency, even among people who like to call themselves libertarians, which wants to tear everything down and start from scratch.

    Eggs, omelettes.

  • But when somebody owns huge areas of land from which they can collect a rent for, basically, doing nothing but administrate the rent collection, there seems to be very little natural justice involved.

    ‘Natural justice’? Sure you want to go there, Ian?

  • Johnathan Pearce

    IanB writes:

    The best way I can think of putting it is that the land rentier doesn’t bring anything to market. It’s already there. All they can do is restrict access to that thing (land) and charge money for it.

    Well, if we accept that the property right of the owner is legit, the fact he or she can exclude people and charge a price is neither here nor there. The land is his, end of subject. He does not have to prove to anyone that he is not doing something “useful” as measured by some sort of metric.

    The “rentier” may have bought that land in the hope – not always fullfilled – of capturing the capitalised rental value of the land in question. As such he is acting like an entrepreneur who perceives a value in something that no-one else might have done – the role of the speculator that is so often misunderstood or obscured.

    Some of these rentiers make a killing, some don’t. Absent the distortions we have talked about, such as zoning, central bank inflationism, and so on, there is no reason to suppose that owners of land who rent it out for whatever purpose are any more parasitical, than someone who buys grain or copper for the purpose of speculating on the commodity market.

    The thing to remember here is that land, like any other factor of production, is scarce only in the sense of being scarce relative to something else, such as labour. In the early years of the US republic, land was incredibly plentiful, but labour was scarce, and in different times and places, the picture is very different.

    I also fail to see how ownership of land is somehow fair game for seizure by everyone just because the owner rents some or all of it out and does not occupy it. People rent out lots of things (like car and aircraft leasing companies), etc.

  • David Lucas

    Jonathan – I hugely endorse your observation on the Lenninist tendency to smash thins up and start again.

    Do you want to live in a society where we have created a method or system for smashing everything up and starting again? I don’t.

    Similarly, we can fantasise about creating some general laws about what is acceptable amongst neighbours, and allow the courts to decide on the specifics. But this is a long-term, multi-party issue. The reality is that having smashing things we would then spend a lot of time developing concepts like area of outstanding natural beauty and zoning, and 99% of people would barely be aware that this had now been done in a some exciting “correct” way. They would be upset about the 50 year legal war of all-on-all that was required to get there, and might feel it wasn’t worth it.

    And believe me if you live in the countryside you are (a) very aware that utilities are not free or even necessarily available and (b) very likely to care a lot about the rules that stop the farmers fields being covered in executive boxes (and like most smart purchasers would have had my lawyer check that one of the standard packages of covenants was properly in place).

    And you know what, flawed as it is I am far from convinced that the real transaction costs don’t make a theoretical libertarian planning system inferior to a decent but more administrative system.

    I would be impressed to here of an incrementalist plan to shift planning law in a positive direction. The rest is libertarian fantasy only.

  • Johnathan, as a general observation, I think there is a good case for smashing things up in a transition from statism. The State creates, directly or indirectly, immense structures that it is unwise to simply release into the private sector, since they are not natural market constructs in the first place. An example is BT, which was simply released onto a “free” market as a behemoth that had hegemony due to its previous decades of State construction. Imagine, similarly, the BBC simply privatised. It’d be a disaster. If it is ever done away with, it would have to be entirely destroyed rather than released as an entity. It is not a market cosntruct. It would have to be destroyed.

    So likewise, when we look at systems that have developed by State patronage- and the land system is a fine example of that in Britain- it is certainly valid to imagine radically interfering in it. For those who think I am being Leninist, libertarians need to rock back and consider the vast structural deformation that is envisaged by libertarians for the financial system. We contemplate doing that because we recognise that it is not a natural market entity, but a system constructed by and dependent on the State.

    As we saw in the recent crash, the financial and property entities are closely entwined.

  • Richard Thomas

    Ian, you have hit the nail on the head (as I hoped someone would). Real estate property is, under a thin veneer of similarity, a different beast to other kinds of property (So-called intellectual property even more so but that’s another story).

    it is, in my view, madness to use the sledgehammer of the State to create a sort of clean slate from which we all start off again.

    Absolutely agreed. I don’t believe the current system is all that bad to be honest. High prices are more a function of rising demand than supply. Yet supply should have been free to rise to match demand.Though that is not reason to change the law (utilitarianism), it is indicative of an underlying issue of principle

    .

    Well, if we accept that the property right of the owner is legit

    Indeed, that “if” is the nub of the matter and also to what extent and what nature those rights take. The rights of a landowner are already not absolute. Consider public footpaths, adverse possession and eminent domain (yes, I know).

    Bringing up public footpaths brings us to another issue. It is possible to have different views on what land ownership means. A nomad will have a different view than an agrarian. A gypsy to a yuppie living in the suburbs. American Indians who believed the land was owned by no one. American farmers and cattlemen had such a different view that wars were thought. A document describing an area of land stored away in a government office is simply not the full and final answer to real property ownership. If we consider the nonviolence principle, what is intrinsically violent about finding an untended plot of land and homesteading it? Because someone in the past said “as far as the eye can see”?

    Note that I’ve studiously avoided advocating or suggesting options. I’m more just looking for discussion of the general principles. The nonviolence principle and protection of regular property is based on identifying a protocol by which men can live together in peace and freedom. Can we determine a protocol for real property that does the same? Perhaps some modifications to adverse possession laws…

  • john

    I don’t see the difference between real estate and other property other than all of the legal cruft mentioned. I think some of the differences in view come from background (especially urban vs. rural but also collectivist variations in both places).

    As one who has had people just moving in and taking over land I own, I can vouch that it is definitely an initiation of use of force, and one which shows very quickly that the “thin veneer” is over the threat of violence in collectivist impulses. Typically it is coupled with a kind urban naivety. These people also typically seem to feel that if they restrict their activities in time, space, or type it is OK.

    This is a very long and complex subject but the crux of the matter is deciding that land is different from any other natural resource and being unfamiliar with how land is used. Why is the iron in that crane mentioned above different? Isn’t your sole claim to that iron that you can prevent someone else from using it? Would it be a intitation of force for someone to come along and use some of it for their own purposes, maybe one of the parts there at the bottom which aren’t doing anything? Or the spare parts?

    Land title is no more a legal fiction than automotive title, nor is ownership dependent on the title in either case. Rather the title is a means of verifying ownership and settling disputed claims.

    There’s also a question of “good faith”, somebody laid claim to this land around 3-400 years ago through processes which seemed ethical, moral, legal, and traditional at the time. I bought it in good faith (people who support various “land reform” schemes don’t seem to ever be interested in my years of labor etc. spent to purchase the land.) from people who had in turn, and etc.

    It may be that things are different in Britain, America is still in many ways a very new country. Here land is plentiful and for the most part bought rather than inherited (not to say a lot isn’t inherited) and mostly owned by people of relatively modest means. Maybe we already have the kind of conditions British reformers have in mind. Our own urban “reformers” strike me as more people who are just self centered and provincial enough to want to make free use of everything they see without consideration for the interests of others and with no interest in property rights of any kind.

    One more idea: Property Rights are THE right. Ownership of self is the first sub-category.

  • Johnathan Pearce

    Johnathan, as a general observation, I think there is a good case for smashing things up in a transition from statism.

    Well it does all rather depend what gets smashed on the way. This is one reason why I have lost patience wiith the sort of “to save the village, we must destroy it” sort of mindset that sometimes comes out.

    The history of recent centuries does not greatly back up this point of view, I am afraid. Perhaps one of the biggest “smashings” was the breakup of the monasteries by Henry VIII. It did not lead to a libertarian paradise, although it clearly did help benefit a large, agrarian middle class, but that was in some ways a happy accident.

    Anyway, we are a long way from Natalie’s original point.

    David Lucas: exactly.

    John, absolutely. Very good points all through.

  • john

    It sounds like land in the UK is very expensive (cost of living on a small Island I guess in part.) I don’t know how hard it is to immigrate to the US, and I know some people wouldn’t want to, but it could be an easier way to get what you want.

    Small pieces of vacant land are more expensive than large ones here where I live, so Ian’s half acre could easily cost several times per acre what a larger plot would cost, but…

    When I search the local MLS on more than .5 acres and less than $20,000 (£12k?) I get 120 hits though most of them are much more than a half acre. My brother has a 3 bedroom house recently renovated on about a quarter of an acre which I think would go for about £55,000? ($85K more or less).

    This place: land is listed for $3300 an acre, so you could buy half an acre at those rates for about the cost of an expensive TV. The only trouble there is that it would probably cost almost that much again to do the survey, file the legal paperwork, etc. In which case you might be better off to buy a bigger piece, or rent it (um, but maybe that’s a problem if you’re against rent). I think the typical annual lease for land like that around here is about $100/acre.

    If you want to get really serious about cheap land, check out Texas. Also, what about Australia? Seems like land would be cheap there.

  • Richard Thomas

    John, I have to agree viz the USA. Land is fairly plentiful and cheap (though the federal government does own approximately 30% of the land. Interesting, huh?). The main problem in the US is inane zoning laws that keep industry and housing separate and cause market distortions that way.

    Just to throw out another random point, it’s often the case in the UK that when you do buy a house, you do not, in point of fact, actually purchase the land under it. From my understanding, the land my parents house was built on is actually under long term lease from Prince Charles (possibly under the Duchy of Cornwall?). I have no idea what happens when the lease runs out.

  • john

    Maybe something like this:
    (Link)

  • Says Richard Thomas:

    Real estate property is, under a thin veneer of similarity, a different beast to other kinds of property (So-called intellectual property even more so but that’s another story).

    Why am I not surprised.

    Mid, I don’t see what are you so worked up about. I thought that Ian being in large part motivated by class-based grievances (AKA ‘his other obsession’) and his consequent sense of entitlement has been common knowledge here for quite some time.

    As to the topic of construction costs etc., I think you have overreacted. It is clear that Ian pulled the numbers out of his (and his mates’?) posterior, but he more or less made that clear at the outset (although he would have saved himself some embarrassment if he didn’t try to defend them in the beginning). What seems clear to me is that even if we take your higher figures, the costs would be very significantly lower than they actually are, even after adjusting for inflation. Or am I wrong?

  • Thinking about this ‘other obsession’ (the much-less quirky and amusing one) some more, I am quite curious to know how far would Ian be willing to take it when push came to shove and the excrement hit the rotating cooling device. Would he be in the vanguard of the angry mob, with a fork in one hand and a torch in another, calling for the blood of the monied/propertied class? Or would he be among the “intelligentsia”, providing “moral support and guidance” to the useful idiots at the front lines? Or might he have a change of heart? Or, praise the Spaghetti Monster, his heart is in the right place as it is, and he is just trying to stimulate a group thought exercise? Hmmm…

  • Interesting question Alisa. On a general level, I think there are some situations where violence is rational and appropriate. Both the USA and Israel were founded by violent revolutionaries. It’s also unreasonable to expect somebody else to shoot the Tsar; so yes, the logical conclusion is that there are some circumstances where I would expect to have to be prepared to kill people. I hope it never comes to that of course.

    Most of the history we learn in school is a history of violence. There was a point when Hitler became unmanagable without recourse to violence. States use it all the time, because it is an efficacious strategy. Ultimately, my own government would escalate to the point of killing me just to get my taxes. So I think there is certainly a just case for violence against implacable aggressors. Most of the people who have ever lived have felt the same. Violence is a very normal human method for dealing with problems where the talking has run out.

    But just to clarify, my beef is not with people with money, or with property. It is with coercion. If we treat this as a “class struggle”, then the Enemy is the coercive class. I hope one day they can be persuaded to step down quietly and peacefully. But as the Egyptians are finding at the moment, sometimes they just refuse to go like that.

  • But just to clarify, my beef is not with people with money, or with property.

    A bit of backtracking there Ian? Try a new tactic, so as not to bore the audience? And, while you are at it, grow a pair for a change and stand behind your opinions/assertions throughout at least a single thread? I mean, do you really want to come a cross as someone who is being perpetually misunderstood? After such long and elaborate comments?

    But, just to clarify, I was not talking about just any violence, I was (and you were, to begin with) talking about class-based violence. And you were not talking about the ruling class, but the ‘people with money, or with property’. See, when you backtrack, you have to keep this copy-paste thingy in mind;-)

  • Alisa, to quote myself-

    1. The Big Property Owners. These people benefit directly; by forcing up the general land price.

    2. The Small Property Owners. Having had to get on the merry-go-round of usurous mortgages just to buy a shitty bungalow, they’re so terrified of prices falling (“negative equity”) they’ll support any land restriction policy they can find, plus the financial system that has put them in mortgage serfdom.

    I am objecting to the “rentier” lobby, not property ownership, which I clearly stated I support. I have nowhere complained about people having money. I am a free marketeer. I want people to have money so long as they’ve earned it on the free market.

    What I’ve been trying to get at is something like this

  • I am a free marketeer.

    No, you are not – not when it doesn’t suit you.

    I want people to have money so long as they’ve earned it on the free market.

    And given the fact (which you have cited far more than once) that we have never actually had a free market, and that every transaction made between any two private individuals also includes a third player who was never invited to the party (i.e. the state), there are no such people to be found anywhere, and so who can have money under these unfortunate circumstances? In all fairness(!) I think we’ll have to form a committee to decide on that particular matter.

    As to the ‘rentier lobby’, would you propose to limit your offensive to appropriation of some (not all!) of their property, or would you also propose to limit their capacity to lobby? Because I see another committee right there. This is both fun and defeats unemployment!

  • Also Alisa I’m not sure what distinction you’re aiming at with “class based violence”. If you mean the traditional “socio-economic classes” I don’t recongise them as meaningful categories. That’s why I said “coercive class”. I seee only two “classes”; those with coercive power, and the rest of us. Thus in my philosophy a fabulously wealthy businessman who has earned his wealth on the free market is in the same class as a pauper but a different class to an aristocractic rentier (since the aristocrat’s land “entitlement” is State awarded). In my view, Prince Charles[1] does not have a legitimate right to the Duchy Of Cornwall.

    To use a marxist analogy, “exploitation” is not defined as “expropriation by the capitalist”- who has entered into a free and legitimate contract with the employee and there is no “expropriation” occurring. It is “expropriation” by the Coercive Class. This is where I have come to think the Georgists and Mutualists have a good argument for the existence of illegitimate economic rents.

    [1] For whom, yes, I have a particular loathing…

  • And given the fact (which you have cited far more than once) that we have never actually had a free market, and that every transaction made between any two private individuals also includes a third player who was never invited to the party (i.e. the state), there are no such people to be found anywhere, and so who can have money under these unfortunate circumstances? In all fairness(!) I think we’ll have to form a committee to decide on that particular matter.

    Well indeed, an intractable problem. Which is why our Revolutionary Libertarian Government[1] can’t hope to correct for past abuses, merely restructure the system to prevent future ones.

    As I’ve pointed out, this is what Libertarians of a Misesian/Rothbardian stripe routinely advocate in proposals to radically alter the banking system, which we have to recognise would result in a phenomenal economic discontinuity[2]. Disamantling fiat money will break a lot of eggs. The justification is that the eggs that will get broken deserve it, and ultimately much better prospects for the long run.

    [1] Which we hope has been freely elected by the people. Revolutionary in the sense of “very very radical”.

    [2] Anyone who doesn’t realise that what is being proposed is the greatest financial revolution in world history, leading to immense rapid change in economies, with enormous numbers of losers from that, hasn’t thought things through.

  • Ian, OK, if not a pair, at least one? A little one? Come on. Also, I realize people here didn’t pay for their tickets, but still, have mercy! Good night for now.

  • Ian, I really do need to go to bed. You were (quite explicitly) calling for limiting land ownership to half an acre – this has nothing to do with banking reform, and has everything to do with things totalitarian.

    One little one Ian, please – you will feel so empowered and liberated at the same time, I guarantee you. Good night, really this time.

  • So Alisa, you didn’t read the “Looking at least worst options, I’ll take the free half acre and a tax if I’ve got commercial use for more land.” then?

    It wasn’t limiting land ownership to a half acre, it was saying you get a tax free half acre.

  • Ignoring the building stuff, back to Natalie’s original post.

    I think the article makes the point that where it sees the injustice is in remortgaging. It mentions “switching to cheaper deals when interest rates rise”. So the cost of children and the ability to pay the mortgage have absolutely nothing to do with it, because we’re talking about people who are already making the payments and are trying to switch to a new mortgage where they will pay less. In this case, the banks’ aren’t saying “You have kids, so you can’t afford this mortgage, so we won’t lend you the money”; they’re saying “You have kids, so we won’t reduce your payments”. I agree that it’s their money and they can lend it to whomever they like (with a caveat — see below), but don’t try and tell me this is a reasonable way of assessing their customers’ risk. I suspect it is quite the opposite, and the banks are reckoning that parents are less likely to risk repossession and can therefore be stung harder. And it is a sting.

    The caveat I mentioned is the bailout. I was against it and still am, but, given that banks took taxpayers’ money either directly or indirectly and didn’t exactly kick up a stink about it at the time, no, it’s not all their money, and no, they can’t do merely what they want with it. They were given our money on the proviso that they lend it back to us (and Jesus wept, it makes me angry just typing that). So they can bloody do so.

  • It wasn’t limiting land ownership to a half acre, it was saying you get a tax free half acre.

    You know as well as I do that it amounts to the same thing.

    ‘The least bad’???!!! As in, “pay this tax I say you should pay, or else”? Seriously, can you be honest for at least one comment?

  • It wasn’t limiting land ownership to a half acre, it was saying you get a tax free half acre.

    You know as well as I do that it amounts to the same thing.

    Of course it doesn’t amount to the same thing. If you assert that the two things are the same, it’s now your job to explain precisely how instead of hurling insults in lieu of reasoning.

  • Copying and pasting (and blockquoting, and bolding – this is getting boring):

    We need to find a way to make it economically worthless to lobby for land use restrictions that force up prices, and one important aspect of that would be snatching the land from the large-scale owners. You can send in the war veterans, or you can use a punitive tax. I prefer the more peaceful latter.

    Limiting land ownership was the original, clearly-state purpose of your proposal – I am merely agreeing with you that it would work.

    Back to insults now: what bugs me most about you Ian is not your collectivist-totalitarian streak: most of us, if not all, are guilty of it, albeit to widely varying degrees. What bugs me is that you have no balls to openly stand behind your convictions. Would it be terribly sexist of me to tell you that you behave like a girl? (To any girls present: I apo…oh, just get over it:-)).

  • Limiting land ownership was the original, clearly-state purpose of your proposal

    No, the purpose was to limit land rental in order to extend land ownership. I apologise for the war veterans joke, it gave quite the wrong impression.

    The intended purpose to this is to prevent economic rents, which are damaging to the economy, since they have the same harmful effects on individuals and the economy as taxes. We’ve been over this a zillion times in the Georgist threads. My added twist is the “free half acre” to ensure enough tax-free land for the aged widow to live on. We’re after snatching the large-scale rented land here. That’s the point. I’ve never denied that. I’ve repeatedly stated it.

    Now can we stop talking about my supposed character flaws and stick to the issues?

  • The second point is, any transition is going to be “collectivist totalitarian”. How else, as I’ve pointed out, are we going to stop fractional reserve banking, impose a gold standard, introduce a Constitution or, in the anarchist model, abolish everything?

    The State is a “collectivist totalitarian” institution. Anything you do with it is thus the same.

    If we’re after a more straightforward solution, an alternative to all this with taxes would be to just confiscate all the land and hand it out by lottery in half acre lots. Anyone who doesn’t want one can sell it on the internet to someone who does. Probably more effective than messing with taxes. I’m open to discussion. This isn’t a manifesto, it’s mulling over how to start a free market.

  • Ian, your words are there, quoted and bolded for all to see and to make up their own minds, so I think that my work here is done. I think the same goes for your character (or the lack of it, as the case may be). Til next time.

  • Well Alisa, you always go for this character assassination narrative when you’re wrong, so I’m used to it I guess. Bit disappointing though. And rather dishonest, too.

  • I’d suggest to stop digging, Ian, as it is getting rather cold and wet:-)

  • Johnathan Pearce

    It wasn’t limiting land ownership to a half acre, it was saying you get a tax free half acre.

    Well in practice, of course, land is not tax-free at the moment, if one takes into account things such as stamp duty on transactions, and the like. Rental income on property is taxed as income, and so on.

    Remember, that a lot of advocates of LVT – at least not those who are basically communists in drag – make out that it is a simple, easy-to-collect and rational tax. But if we start creating exemptions, loopholes and conditions, that simplicity gets seriously compromised.

  • Well, for sure some of the larger firms are now doing this. I work in the space and there are many (many) nonsensical rules and changes being sent down the pipe to us. This is one of them; clearly, this would have been factored in before now and the fact that it is now being factored into the calculus in such a way as to make it harder to get a loan or remortgage your home is no coincidence. But…the fact that we let them get away with it is why they do so.

  • PeterT

    Well, I probably don’t agree with Ian in this case.

    I mention from time to time that in my view libertarianism is a sort of pacifism that permits violence only in self defence. Causing immense disruption to people’s lives in order to move from a society the rules of which are not upheld through coercion to a society that is more conducive to freedom; a society the rules of which are potentially upheld by coercion, is not strictly speaking libertarian (or at least it is not very anarcho capitalist). I think this is one of the problems of libertarianism. I probably would wish to live in a state that did, as part of its minarchist duties, keep a watch on would be private sector collectivists and authoritarians. But I think confiscating all land and redistributing it according to lottery is not just one step to far, but rather a long hike worth of steps to far.

    Ian mentioned the changes that we envisage to fiat currency as being similarly radical. I do not think that this is correct. When Argentina dollarised they simply looked at how many dollars they had in reserves, how many bank notes they had outstanding, and divided the two to get an exchange rate at which all oustanding currency would be fully backed by dollars. This can also be done against real assets such as gold if that takes your fancy. You will say that the central bank simply does not have enough real assets. That is true. However, there is a conceptual distinction between cash and credit. Credit is an investment; it is the grain you sow. Cash is not; it is the grain you keep in your pocket (lets assume you can eat it). In fractional reserve banking the two are confused. However, it is possible for banks to simply divide their outstanding liabilities (cash, savings accounts) into accounts that match the maturity and credit profiles of the bank’s assets. Only the pure cash would be backed by real assets. Many bank customers may find that their savings are rather less liquid than they previously were. I am not saying that it will be completely easy to make the transition but I think less akward than Ian suggests. I think the fact that we have managed ok’ish with such an imperfect monetary system for such a long time suggests that we could manage ok’ish at least with a better system.

    Very off topic I know but I like this topic and couldn’t resist the opening offered by Ian’s comment.

  • But I think confiscating all land and redistributing it according to lottery is not just one step to far, but rather a long hike worth of steps to far.

    Alisa would no doubt believe this is “denying” again, but I realised after I’d typed that I should have clarified it. I meant not all land, but all the landed estates, e.g. Duchy Of Cornwall and nationalised reserves, e.g. the “national forests”. Tenanted parts could simply be awarded to the tenants, or sold to them for a small admin fee, or something.

    It occurred to me that one way of looking at this is to imagine an anarcho-capitalist scenario. The AnCap government is voted into power, and promptly abolishes the State, having given all the land to its current owners. What happens? Well, picking on Prince Charles again (he deserves it), as owner of the Duchy with many tenants, he now becomes King of it. The tenants become his subjects. Except, sans a constitution, democracy, etc. Their former rents now become taxes paid to Charles.

    Nothing has changed economically or geographically, except the names of things; a property becomes a nation, an owner becomes a King, and a tenant becomes a subject. I think this illustrates how, economically, the rents act identically to taxes, which every libertarian agrees are exclusively a harmful drag on production and prosperity. If taxes are bad, then so must be land rents to the same degree.

    I think that makes a good case for some kind of reform, even if the particular ideas I’ve suggested are cranky. I’m not emotionally invested in any of those particular ideas, just in looking at the issue.

    As it happens, I started down this line of thought (having been a strict propertarian) because I’ve been attempting to construct some explanatory models of the economy that could be rendered e.g. as flash animations on youtube videos, which would clearly demonstrate the movements in production and money in the economy and it suddenly became very apparent that taxes and rents were operating in exactly the same way and are economically the same thing. If one is a Bad Thing, so must be the other.

  • PeterT, on your main point, I think many people understimate the degree that over the past century, particularly the last few decades, the entire economy has become dependent on Keynesian big government finance. A return to sound money would IMV devastate the “prosperous” economy of the South East, which is heavily dependent on the City’s bubble blowing industry.

  • Laird

    Ian, your analogy of turning owners into kings and tenants into subjects depends upon the fundamental premise that the government owns all the land. Only this permits you to posit that rents are equivalent to taxes. I reject that premise, and thus dismiss the analogy as fatally flawed.

    Taxes are a cost we all share (or should share, in an equitable system) to pay for the necessary functions* of government (i.e., the protection of persons and property). Property itself, however, is merely a species of capital, the cost of which** must be factored into the cost of production (or, indeed, of simply living). A democratic government’s assessment of taxes is not a claim of ownership, but merely a mechanism for allocating (more or less fairly) shared societal costs. Rent, however, is an owner’s return on his investment. The two are fundamentally different. Any attempt at equivalence is specious.

    * That’s why I reject as fundamentally immoral the concept of a graduated income tax; the wealthy my indeed benefit more from the existence of government, but not at a higher percentage than do the less well off.

    ** Either in the form of rent paid to another or as a return on your capital if it’s owner-occupied; any property owner who doesn’t factor that into his costing calculations is a fool.

  • No Laird, you’ve missed my point, which is that the économic effects of rents are identical to the economic effects of taxes, and my AnCap analogy was one way of demonstrating that.

    Please note I’m using “rent” in the strict economic sense, not the general “any money paid to hire something” sense. The former are not productive but the latter are. As I said earlier, if I require you to pay me money just to stand on some land, I’ve brought nothing new to market. The rent just transfers some of your production from you to me- as taxes do. If I hire you a crane, I’ve saved you the cost of buying a crane. Your production has risen. It’s an economic good.

    On the matter of return on investment, we see the difference. I had to invest in a crane to hire to you. But the land… that’s just there. No investment required [1].

    The equivalence is not specious. It is economically sound under free market theory. Whether or not taxes or rents are morally justifiable is a distinct issue to discussion of their economic effects.

    [1] You could make an exception here e.g. to land reclaimed from the sea and which requires extensive maintenance to preserve its existence e.g. by dykes, but that doesn’t generally apply to most land. By reclaiming and maintaining the existence of that land, you have indeed brought something new to market.

  • Paul Marks

    I see that David Ricardo has returned.

    Not on the labour theory of value (that is still with Kevin Carson) but with the theory of land and rent.

    To cut a long story short…….

    Various other people (first the “Ricardian socialists” then Henry George and his followers) took Ricardo’s theories on land and rent and used them for stuff he would not have liked.

    But leave that for now.

    Are the theories themselves correct?

    No they are false.

    For the details see Murry Rothbard’s work on Henry George (which really covers Ricardo also).

    As for the philosphical side.

    Land belongs to the owner – tautology actually (like most truly important things – who ever uses the words “it is just a truism” has not thought very deeply, truism are the most important truths).

    Do people “deserve” their land? Have they created something new for the market?

    A tottally false question.

    “Deserve” has got naught to do with justice.

    Justice is to each his own – whether he or she “deserves” it or not.

    And if some lazy bugger owns some land and will not let you work it without paying him rent.

    Well – it sucks to be you (or me).

    But that is his property.

  • Paul Marks

    As for the economic side of stuff.

    I repeat – see Rothbard on Ricardo and Henry George.

    Man, Economy and State (make sure you get the edition that has Power and Market in it – there was an eight year gap in publication).

    Plus Rothbard’s history of economics – the second volume (on the Classical School).

    Trying to deal with all this in a comment thread is barking.

  • Paul, I’ve read all that. This is a long thread, but I addressed Ricardo further up the thread. What I have actually asserted is that under certain conditions- as exist at the moment- a Ricardian effect will occur in the economy; analogously in a managed economy Keynesian effects will occur even though Keynes’s theory is not correct.

    One economic question is this: the population of Britain has risen by only around 20% since 1950. If you have said yourself that hundreds of thousands of homes have built since then. And yet, the price of this commodity rockets ever skyward, such that despite people being far more economically productive than they were then, buying a first home becomes ever harder. Why is that?

    I assert that it is due, among other things, to land use restrictions.

    The question of justice isn’t what I’m addressing in regard to rents damaging the economy. It’s the practical economics of it. The more rent people pay, the more it harms production, for the same reason that taxes harm production. Because rents and taxes operate identically in the economy, transferring production from producers to non-producers. The wealth of the country would be greatly increased by the selling off, or giving away of nationalised land, including the monarchic and aristocratic estates[1] and removing all land use restrictions; particularly, by allowing unrestricted residential property construction. Land prices and rents would fall significantly, greatly reducing for most of the population an enormous and unnecessary economic burden.

    Having read and written a lot on this thread, I’m at this moment coming to the view that that would be ample and far less effort than fiddling about with taxes.

    [1] The aristocracy are a State institution.

  • PeterT

    Here is at least a partial solution to Obama’s deficit problem

    http://bigthink.com/ideas/21343