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Samizdata quote of the day

I asked my friends how they’d voted last year. Sanjit’s a Tory, but hard-working Annie and Marion, highly trained and usefully employed, said “Labour” without a pause for reflection. I wasn’t surprised, but I am fearful. Think what they’ll do when their generation puts a Marxist like Corbyn into power, eyeing up those assets we prize, those homes we once took for granted. What would be your instinct, if you’d never been able to buy a house, while the generation above you were getting richer by £35 a day, just by sitting in the home they refuse to let you afford?

Graham Archer.

The issue of the housing supply/demand problem has been noted several times before here at Samizdata, such as here, here and here.

38 comments to Samizdata quote of the day

  • …just by sitting in the home they refuse to let you afford?

    I love this canard. As if a whole generation – all of us, a whole fucking generation – is deliberately refusing to let a later generation – all of them, mind, a whole fucking generation – buy houses, because we made them unaffordable. Utter nonsense. We have done no such thing. I bought a house and I have lived in it, which is why I bought it. Its value is of no practical meaning and I am not “growing rich” by living in it. The next generation, however, will when they inherit…

  • Stonyground

    Some thoughts. Many of those who have been priced out of home ownership seem to have a colossal amount of disposable income but prefer to spend it on frivolities. Or am I being unfair in that assessment? If it is not the case I would be happy to be corrected.

    I do consider myself fortunate in that my wife and I bought our house in 1993 just after there had been a bit of a price crash, so it was a bit of a bargain. I don’t really see how we are making money in any real sense if it increases in value though, because if we were to liquidate our assets we wouldn’t have anywhere to live. I can’t see how it is my fault if house prices are high at the moment, whatever the causes, they are outside my control and influence.

  • …just by sitting in the home they refuse to let you afford?

    So sitting in a home is responsible for vast swathes of state planning regulations that keep supplies artificially low? Fucking morons.

  • Texas Pete

    Perry, They are indeed fucking morons. And they are baizuo baichi.

  • pete

    The middle class have long told those less well off to look to themselves for solutions to their problems like shortage of money, joblessness and availability of amenable housing.

    But as soon as they find themselves unable to afford a nice house in a pleasant area of town just like mum and dad could they plead for help from the government.


  • James Hargrave

    Please, just morons. I doubt they have the ability to fuck. And I had to move (north-south) in 1991, and have all sorts of experience of interest rates, moving countries at not the best time in terms of foreign exchange rates, etc. And what? Things happen. Why should we search to pin blame? The real problem is the infantilisation of generations exposed to expensive tertiary ‘education’ over the last 30 years or more – I was exposed to it longer ago; and I did not ‘inhale’ the nonsense that now permeates it. As I discovered, housing in Australia is expensive, precisely because of the state planning – hardly through a land shortage!

  • bobby b

    Fly over the USA, and you’ll be impressed by how little sign of people you see. It’s empty.

    Chalk it all up to land use planning, and zoning, and density limits, and large-lot requirements – all government schemes to keep us boxed up in Bladerunner-dense little enclaves.

    They tell us it’s for our benefit, to decrease the cost of water and sewer and power delivery, to cut down on travel energy use, etc.

    Try to go out in the middle of nowhere and build homes and communities so that people can get out of the crush and live more relaxed lives in affordable homes. It’s darn near impossible because of government regulations. I have several money-people signed on to back the development of mini-communities of 50-100 small affordable homes – we’d sell out in a week – but government doesn’t allow it.

    That’s why existing homes appreciate so much. That’s why my kids and their peers despair of home ownership. The “haves” have taken over government to keep their own investments valuable.

  • JonnyA

    I worked my fucking arse off to afford a house – 70 or 80 hour weeks even when my children were small. I’ve also ducked in and out of the housing market to take advantage of price fluctuations, the only way I could upsize. Nobody’s got the right to lecture me about this.

  • JadedLibertarian

    The fact of the matter is that in a country with an average income around the 27k mark, average house prices around a quarter of a million pounds are absolutely mental. Now you can deal with this on the demand side by abolishing help to buy, cutting immigration, or incentivizing marriage (my wife’s not using her tax allowance, can I have it please?), and/or you can attack the supply side problem by relaxing (or preferably abolishing) planning laws, building codes and other regulatory burden on building new homes and repurposing old buildings.

    But either way, sooner or later, Britain needs a massive housing price drop (well, a crash really) in order to avoid turning into a pseudo-feudal rentier nation. I assume it is agreed this outcome would be undesirable, and I’m afraid I can’t think of a way for this to be averted that won’t steamroller some poor sod. Those that buy at the top will lose their shirts.

    (I will now channel Paul Marks and argue with an invisible interlocutor. The following is only half serious.)

    What’s that? You don’t want to pave over the green belt? Well you should of thought of that before flooding the country with immigrants.

    I’m sorry? Oh you like the immigrants, I see. Well then say bye bye to your green belt.

    Wait, what? You want the green belt and the nice diverse immigrants? Ah, I see. You’ve already got your nice house and don’t give a shit if everyone else ends up paying off the Feudal lord’s mortgage for twice what it costs him each month (if only you could afford the 100k deposit).

    There’s no reasoning with some people.

  • bobby b

    ” . . . and/or you can attack the supply side problem by relaxing (or preferably abolishing) planning laws, building codes and other regulatory burden on building new homes and repurposing old buildings.”

    Building codes were supposed to make houses safe from electrical fires, collapse, sewage contamination, steep climbs . . . then they turned into ways to make sure new houses would add value to the nearby existing houses.

    That’s how size requirements came into being. Some code writer decides that “4 people need 2000 square feet to live in MY community” and prices skyrocket.

    I can build 800 square foot houses that can very nicely contain three or four people, on 1/4 acre lots that provide plenty of space, for less than $65,000 in small midwestern USA communities. That leaves a house payment of less than $700 monthly, with a minimal down payment. That’s less than half the normal rent payment that would be required for the same number of people in the same area.

    Our current building codes do not allow this to happen.

    Yay, government.

  • JadedLibertarian

    Indeed bobby.

    I don’t ask for much. I’d be quite happy with a small house, providing there was a decent sized garden for my kids to run around in.

    In fact a redneck double-wide in the woods would be pretty much my dream. But both the trailer home and the plot in the woods are completely illegal in the UK for reasons I can’t quite grasp.

    Nice new build winterised trailer home in the woods = totally illegal as a main home in the UK.

    Mould infested flat above a paedophile drug dealer = totally legal as a home, and commonly available with the government as your slumlandlord.

    Honestly what is better?

  • Runcie Balspune

    … sitting in the home they refuse to let you afford?

    Once you’ve paid off your mortgage there is no good reason to buy another house, regardless of how “rich” you think you are getting.

    That’s the problem, the soviet style thinking of governments trying to address the “crisis” (of their own making) is constantly aimed at benefits for first time buyers, but if the older generation of non-mortgaged (and looking at, or in, retirement) were encouraged to downsize it would have a much bigger effect on the whole housing market, not only first timers, but all the buyers in between.

    Governments have no issue with tempting the “already rich” with bonuses, look at the EV industry for example, so why not houses?

  • the other rob

    While bobbyb is correct about government being the root of these problems, there are ways around them.

    I was not at all well off when I bought my first place in England, but I seized the moment when a temporary crash bought home ownership within my grasp.

    Over the years, I traded up, better properties, better locations, but always within my means. Then we moved to the USA. The dice fell exactly wrong – the “value” of our last place in England dropped like a stone, while values in our part of Texas barely fluctuated.

    You win some, you lose some. We scaled back and bought a more modest house than the slightly extravagant one that we’d planned on. We still live there – we like it, we like the neighbours and there’s no reason to move.

    Government interference in the housing market is a thing. And it’s not a good thing. But I’m not much interested in whining from people who won’t expend the effort to figure out a way around it.

  • JadedLibertarian

    Government interference in the housing market is a thing. And it’s not a good thing. But I’m not much interested in whining from people who won’t expend the effort to figure out a way around it.

    May I ask what’s your nice little starter home going for now and could you have afforded it had it been its current price?

    Unless the market crashes (or we leave the country – frankly I’m considering it) there is no way round this problem. The government is doing everything it can to keep this bubble inflated. My only comfort is that governments are incompetent and won’t succeed indefinitely.

    So excuse me for whining Rob. I’m a 34 year old with a wife and children, and despite earning a perfectly reasonable 34k a year, home ownership is nothing but an impossible dream for us. After saving for years I have £5500 in an ISA to put towards a deposit, which is far more than my parents ever needed and yet it’s not even close to being enough.

    Yes the crash will come, but when? 6 months? A year? 20 years? How long do we have to put our lives on hold and pay someone else’s mortgage rather than our own? How late will I have to retire because of this?

    I really do apologise for the tone of my reply but I’ve grown very weary of being told that its my fault I’m stuck renting, apparently for having the temerity to be born since 1980.

    Everyone of our generation that we know who has got a mortgage has used the “bank of mum and dad” in a big way to make it possible. That’s not an option for me.

  • Eric

    IMO this is partially a symptom of people having families later in life, when they’re more established. Millennials expect a higher standard of living because they grew up (on average) in a more established family than previous generations. They missed the years their parents struggled to come up with a down payment and could just barely make ends meet.

    They also have fewer siblings.

  • Mr Ecks

    If “highly trained” Annie and Marion vote ZaNu–without a second thought– because they think that the Czech Spy and his gang are going to do anything to facilitate their lovely London Bubble lifestyle then they have been highly trained to be morons.

    Apart from bringing in another 5 million beards or so to ensure he will never be voted out–not helpful in any area with house prices being the least of the problems–economic wrecking might see their high levels of training being of far less value–unless they have trained in how to hunt down, kill and cook their former pets.

    Whatever answer might exist to the problem–it isn’t voting for ZaNu. Anyone who thinks it is–is a prime fool.

  • To afford a house, my wife and I are only havingour first child now at 37.

    Housing is going to have to get cheaper, but landlords pay a huge amount of tax in their earnings that inflates rent.
    Government intervention via stamp duty, planning rules and currency manipulation benefitting CGT take when landlords sell houses are better where to point your anger than people who just managed to catch the bottom rung of a very slippery ladder.

  • djc

    My grandparents lived in a leasehold house which, when the lease expired, because a council property. My parents lived with my grandparents for nearly ten years before they could afford a new build house in the suburbs. I was three when we moved there and was thirty before I could afford a place of my own. My brother also. My niece lived back with here parents after university. Now, age 26 she has just bought a place of her own. Four generations who saved and made do and eventually ‘got on the housing ladder’. So who are these poor millennials who find life so hard?

  • staghounds

    Who was it who said that all of socialism can be encapsulated in,

    “Look at the little house, look at the big house. It’s not fair.”

  • JadedLibertarian

    Djc, I don’t think you’re listening.

    Previous generations had many struggles we don’t have today. War, polio, rationing, Clement Atlee and so on.

    Wages were lower. Let’s say £15,000. House prices were also lower. Let’s say £50,000. The multiplier is 3.33. Saving for a house was hard.

    The millennial generation is spoilt. The millennial generation is entitled. They’re generation snowflake. Cheap consumer electronics dominate their lives. Wages are higher. Let’s say £30,000. House prices are higher too. Let’s say £225,000. The multiplier is 7.5. Saving for a house is borderline impossible.

    Millennials have it easier in many, many ways. Affordable housing is not one of them.

  • Am I right that house prices (i.e. prices too high for newbies to get on the ladder) are very much solely a London (and home counties) problem? For the price of a house in the north-east of England (or of Scotland) you could buy a broom cupboard in a desirable part of London – and vice-versa.

    Maybe Graham Archer should advise friends Annie and Marion to notice this is not a national problem that should influence their vote in a general election but a more local problem that might rather affect e.g. whom they vote for as London’s mayor.

  • djc

    Jaded Libertarian, you are not listening.

    The multiplier was 3.33 on the assumption of one income perfamily, today DINKY. And interest rates are not the 10% I knew, nor even the ~4.5% my father paid (a benefit of his employment at an insurance co.)
    It’s not impossible to get on the housing ladder, it doesn’t even take a bank of mum&dad, it does require effort and priorities.

  • JadedLibertarian

    No Niall. It’s nationwide.

    I live in one of the cheapest parts of the country. My brother in law just sold a relatively modest 3 bedroom house for £196,000. It would’ve been £500,000 if it was in London.

    Either way it’s unaffordable.

  • JadedLibertarian

    To quote Cathy Newman, so what you’re saying is families need to go from living in their house to living for their house? That they need to do a lot more for less? That what could be done on one income can now only be done with two? Because that sounds like things have got… worse!

    Bricks and mortar are nice to have, but if I have to choose between having a life, and having a house, I choose a life. It wasn’t either/or for my parents.

    Now it may well be that the aspirational home ownership open to boomers was a historical blip never to be repeated. That may well be true, but from where I’m sitting it looks engineered, or at least demonstrably caused.

    If you think this state of affairs is normal, sustainable or desirable, you’re kidding yourself. All it will take is a modest interest rate rise for this whole thing to collapse, because the levels of debt people are taking on are not safe nor sustainable.

  • bobby b

    “My brother in law just sold a relatively modest 3 bedroom house for £196,000.”

    Wow. That’s $275,000. In the USA, if you get out of the cities, you can buy a nice (older) home for $70,000.

    (But, that £196,000 house on a 30 year mortgage at 4% would yield a monthly payment of close to £1000. On your £34,000 salary, that’s still eating about the same proportion of income as I paid when I bought my first home 30 years ago. It was painful, but got better as my income rose – which is what homebuying is all about, really. And doesn’t your rent in the real estate bubble approach £1000 per month anyway?)

    I’m not arguing with you about your basic point – buying a home during a thirty-year bubble is very tough. I pointed out to one of my kids how little money we had left over every month when we bought our first house, and he was amazed. After thinking it over, he said that the difference was that his generation has so many other things to spend money on that living a money-deprived life is simply more devastating now than it used to be. Whereas we had to do without restaurants and new cars, he’d have to forego smartphones with unlimited gigs and cable and bigscreen TVs and new clothes and bars and . . .

    In other words, he says that it was painful for my generation to buy a house, but there was nothing else worth spending money on anyway. No lost opportunity cost, as it were.

  • JadedLibertarian

    It’s not just getting the mortgage bobby. If you can find a way to swing the down payment, you can get a mortgage. Even grumbling old me will be in a position to do that in a few years. A first time buyer at 40 🙄

    But what happens to that £1000 a month if interest rates go up? Even one or two percent would see us ruined. Once upon a time owing 3.5x your annual income was “mortgaged up to the hilt”. Now it’s 5, 6, 7 even 8x. Historically low interest rates are a reason to avoid debt because there’s only one way for them to go.

    The only “extravagance” in our lives is we have children, and yes they can be expensive. But in my eyes they’re what make life worth living. What would I do with a house without kids to put in it? Beyond that we spend very little and save a great deal.

    Personally I think this has the possibility to explode. Those who have kids at the same age as their parents by and large find they’re shut out of the market, and those who wait so they can buy a house often find they’ve waited too long so are left childless. Either way the realisation that they won’t be able the match the family setting they grew up in will be (and increasingly is) a source of considerable anger.

    Who knows what an amoral and opportunistic demagogue could do with it?

  • bobby b

    “But what happens to that £1000 a month if interest rates go up?”

    Now I’m confused. It’s the possibility that interest rates will rise that makes it imperative that you buy now while they’re low.

    Or are mortgages over there all adjustable rate? Here, most mortgages are fixed – sign on at 3.5%, and that’s your rate for the full thirty years. If your mortgage rates can all be bumped upwards following the market, then, yeah, that’s scary.

    (And if you’re referring to the drop in value that you might see when new buyers have to pay the new, higher rates and thus can afford less actual house because interest eats up more of whatever payment they can afford, that only matters if you need to sell.)

  • JadedLibertarian

    Fixed rates only stay fixed for part of the mortgage life here bobby.

    My sister’s fixed rate I think was 3 years. Thereafter you need to renegotiate the terms or they bung you on a variable rate.

  • bobby b

    “Fixed rates only stay fixed for part of the mortgage life here bobby.”

    Yuck. No certainty. Without a fixed rate, yeah, I doubt I’d have taken the plunge when I did. I’d venture to say that that part right there is the root of your problem.

    Bankers do tend to find the ways to suck the profit out of every situation.

  • Paul Marks

    Sorry – but if someone is prepared to vote for the Marxist Labour Party under Jeremy Corbyn and John McDonnell, then turning what is left of the South East of England into a vast housing estate will NOT convince them not to vote Labour (Mr Archer’s hardworking friends knew exactly what they were doing in 2016 – and my view of such people is the same as Mr Ed’s view of them).

    First of all this proposed house building orgy is NOT free market – because it depends on vast GOVERNMENT SUBSIDIES, for roads, drainage, utilities, and on and on…..

    Politically? It will not make anybody vote Conservative who would otherwise vote for the Marxists – people who vote for the Marxists know what they are doing, turning what is left of the south east of England into a housing estate will NOT change their minds. What it will do is make some Conservative voters STAY AT HOME (in disgust) as they do not want yet more housing estates.

    I have been knocking on doors in every election (national, local – whatever) since 1979. I know what I am talking about – I was out knocking on doors only this morning (as I have done every week this year). I repeat – I know what I am talking about in relation to what will gain the Conservative Party votes and what will LOSE us votes. And this idea of yet more housing estates will LOSE us votes.

    There are already lots of new housing estates – and they are already LOSING (not gaining) us votes.

  • Pat

    A few observations.
    Half of today’s twenty somethings are burdened with student debt, which must make mortgage repayments more of a problem. Is it really advantageous for half the country to go to university?
    If you plan to move on in a year or two renting is cheaper than buying (no solicitors or estate agents) and it doesn’t take six months to get in and another six months to get out. There must be a fair number of twenty somethings who prefer renting to buying on solid sensible grounds.
    How do you you count the number of households? Is an adult living with their parents still part of the parent’s household or is he/she a household without a house?
    We can’t tell directly whether there are more houses than households or vice versa since we can’t count households. But we can infer from the law of supply and demand that housing land is in short supply and hence we should increase its availability. Preferably by repealing the Town and Country planning acts and taking a critical view of building regulations.

  • Snorri Godhi

    Interesting to find this SQotD just before a SQotD about the NHS. In my experience, British people are even more delusional about the quality of British housing than they are about the quality of care provided by the NHS.

  • Monty

    @Jaded Libertarian

    Back in 1977 when my salary as a graduate engineer with a blue chip company was £1200 pa, the cheapest house (20 miles away on the gridlocked M1) was £10000. Despite being both earners, we couldn’t afford it. We lived in one room, a bedsit, for a couple of years to build up our savings and eventually moved to the North West, where we were able to afford to become first time buyers. Then we worked all the overtime we could get for many years to pay off the capital, and that saved us from the worst ravages of the ERM crisis and the negative equity crisis, when interest rates hit 15%. Many of our generation lost everything. Eviction, with enormous debts still to pay.
    Praying for house prices to crash, will only inflict the same disaster on those of your generation who have not yet built up their equity in their property. And seeing thousands of repossessions will turn you right off any notion of buying a house, lest the same fate befall you.
    What is needed is a steady gradual uplift in the new-build stock, so that prices level and then reduce at a manageable rate.

    Oh and a halt on inviting the whole world to come live in our council houses, claim benefits, and overload our schools and NHS would help too.

    The retired generation who are now mortgage-free have no financial interest in a property price boom or bust. The value of our properties will not be realised in our lifetimes, and when our heirs do inherit, their bounty will still be a share of a house-worth, regardless of the level of house prices.

    In fact, the prevalent attitude among your generation, for mine to hurry up and die, might even be counterproductive. You should be lobbying us to die at the top of the market….

    Finally I’m glad that you have children to your name, and I hope you get established as a homeowner. About 30 years from now, your little brood may well be giving you the Logan’s Run treatment. Ah Bless….

  • morsjon

    I think Paul is right on this. If the Tories had a manifesto commitment to abolish the green belt and all planning restrictions, with a promise of cheap housing, and Labour just avoided the topic, then Labour would win in a landslide.

    Like it or not, those who have houses feel entitled, not necessarily to the house price, but to amenities, such as population density, traffic etc.

    Once you do have a house you realise to what extent the quality of your living environment depends on politics. Nimbyism is a reaction to this. The solution is to refine property rights, have restrictive covenants and so on, and for these rights to be tradable.

    By the way, it is not just a matter of planning laws. I bumped into a property developer the other day, and he had his planning application sunk by the council, due to a twitter campaign against him. Whilst I only have his word on this, he claimed that if he took it through the courts he would most likely win, as the regulations were clear that his development should be permitted. However, he had by that point run out of money. Sad really, as the design was aimed at providing relatively low cost housing for young people, a bit like a halls of residence but for graduates.

  • JadedLibertarian (February 17, 2018 at 7:13 pm), £196,000 would indeed be tough for new starters but in “one of the cheapest part of the country” you should be able to find a ready-to-move-in two-bedroom house, located in an acceptable neighbourhood, for less than half that sum.

    New starters start modest and work their way up. In London, there is a problem – literally getting started is very hard. In the genuinely cheapest parts of the UK, the prices do not start at £196,000. So my question stands; how far out of London (and home counties) is there a “cannot get started” problem?

  • Rob Fisher

    bobby b: You can get fixed rates in the UK for various periods of time. What’s available depends on loan-to-value ratio. You pay a premium compared to variable rate mortgages. This all makes sense to me: the bankers need to price in risk of default (cost of which is affected by loan-to-value ratio) and risk of central bank interest rates going up (which is the fixed rate premium).

    So if, in the USA, 30-year fixed rates are the norm, presumably USA borrowers are paying the same premiums and variable rate mortgages could be had cheaper. What am I missing?

  • bobby b

    Rob Fisher: It has to do with how incredibly cheap loan money is right now. Currently, with good credit, one can get a 30-year fixed-rate mortgage for == 4.2%, while an ARM (adjustable rate mortgage, which adjusts automatically once per year based on the prime rate) is available for == 3.6%.

    Back when rates were higher, the difference in actual monthly cost between fixed and adjustable mortgages made it more acceptable to take an ARM. Now, the difference in monthly cost is so low that it makes no sense to take the risk.

    So, ARMs are mostly used here in cases where a buyer’s credit is not good. In fact, this was one of the driving forces behind the housing crisis ten years ago – many subprime borrowers had signed on to freely-available ARMs, and when rates rose, defaults skyrocketed. Our government had decided that getting poor people into houses was a value, and so the FNMA and the FHLMC (Fannie Mae and Freddy Mac) had pushed lenders to increase such risky loans. Oops.

  • Laird

    bobby b has it exactly right (I’ve been in the mortgage business for 20+ years). There is a spread between fixed and adjustable rates, but today it isn’t huge. A decade ago there actually were loan products which had an interest-only period (a few years) before amortization kicked in, and there actually were negatively amortizing loans (the monthly payment was less than the accrued interest) which were extremely toxic because once the neg-am period ended and the loan started to make “real” payments the combination of adding the shortfall to principal, adjusting the interest rate, and beginning to amortize increased the monthly payments by a huge amount. (We called those “time-bomb ARMs”.) Countrywide was especially evil in pushing those.

    The whole purpose of these sorts of products was to make the monthly payments as low as possible, so people could qualify for larger houses (and loans) than they otherwise would. It would all work out in time, went the argument, because the house value would increase and the borrower could simply sell it and pocket the profit if he couldn’t meet the eventual higher payments. Of course, 2008 showed us all the fallacy in that logic.

    What is especially interesting to keep in mind was that until the 1970s ARM loans were almost unknown. The GSEs (Fannie Mae and Freddie Mac) were prohibited from offering them, and few banks or other lenders did either. It wasn’t until the Carter years, when inflation spiked to previously unimaginable levels and interest rates followed, that ARMs became necessary. But with interest rates as low as they are now, there is almost no circumstance (a few rare exceptions) where an ARM makes sense. It’s a stupid financial decision. And indeed, not many are being made today (I’ve read that they were only about 5% of all loans in 2017).

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