“The Mayor’s research showed that the increase in the number claimants over 2002-07 almost exactly matches the shortfall in affordable rented housing .”

Where do these people come from? Politicians that is……

Of course the increase in claimants matches the shortfall in affordable housing!

We’re talking about a benefit which makes unaffordable housing affordable!

How could it possibly be otherwise?

oh – I was about to write the opposite of Tim. Doesn’t the increase in HB claimants reflect changes in number of people eligible for HB, people losing their jobs, getting sick and otherwise losing the ability to pay for their own housing. What is the “shortfall in affordable rented housing” and how is it measured? I don’t understand why the latter has anything to do with the former.

What she actually means is the “shortfall in social housing” because “affordable” and “social” are used as synonyms in certain groups.

But by using “affordable” there she’s fallen over her own rhetoric. If you’ve a payment being made which is aimed at transforming “unaffordable” housing into affordable housing, obviously, the number of people claiming it will be the same as the shortfall in affordable housing.

The basic problem is the increasing number of people who need housing benefits to afford to live in London.

Perhaps they should move to somewhere they can afford. It is considered a normal response in many parts of the country outside London.

The “basic problem” is the idea of paying people to live in one part of the country rather than a slightly cheaper area.

“Perhaps they should move to somewhere they can afford. ”

Well It would be interesting to see what effects a few million low paid workers handing in their notice at the same time would have. It would also be interesting to see the reaction of areas where cheap housing is currently when a few mill people turn up to areas of high unemployment.

Interesting that whenever we are discussing areas of high unemployment (teeside, the valleys etc) the solution is always that people in these areas should move to where the jobs are – london. Yet when we talk about HB the same people come up with the opposite situation.

oh I see – so every household given HB because there is no space in social housing for them counts as 1 ‘shortfall’ of housing. So they are equal by definition.

so if eliminating the shortfall of affordable housing is the solution, does that mean building enough council housing to house everyone and reduce the number on HB to zero? I guess you could have a system whereby if you lose your job or fall ill or whatever you get paid HB for say six months and then if you can’t pay your own wa by then you get moved into social housing. Is that the sort of thing people on the left want, when they talk about the need for more social housing?

Tim, the Mayor’s Strategic Housing Market Assement defines the shortfall in the delivery of affordable housing (social and intermediate) as the amount actually built over the period (net of sales, demolitions etc.) measured against the need calculated by the previous market assessment. It comes out at about 66,700.

The rise in benefit claimants in private rented homes is from a completely different source – DWP stats, showing a rise of about 67,000 over the same period.

They are not (@6) equal by definition.

It’s not exactly rhetoric! It’s simply pointing out that the real reason for the rising housing benefit bill is the shortfall in affordable housing.

ah – so it’s just a coincidence and one has nothing to do with the other.

@8, no, there’s a causal relationship but that doesn’t make them “equal by definition”.

A much better solution would be that supported by the Conservatives, Liberals and Labour pretty much from 1919-1979 – regulate rent, build enough housing to meet need including council housing as a tenure of choice.

Better, that is, than leaving people to a market that all experience has shown doesn’t deliver housing we can afford. That’s something anyone on an average income in London will know about, whether or not you claim HB.

“HB for say six months and then if you can’t pay your own wa by then you get moved into social housing”

I’d like to think we were more ambitious than that, and wanted to design a system that didn’t leave people capable of work unemployed for over 6 months as that is when the difficulties start.

I’m ashamed to say I had allowed myself to be fooled by some of these myths. Thank you for sharing this.

What role has dramatically rising house prices and the concomitant rise in private sector rents had in all of this? Do you or does anyone else have any links to reliable research? I have my own prejudices, anecdotes and experiences but I’d rather hard facts!

“It’s not exactly rhetoric! It’s simply pointing out that the real reason for the rising housing benefit bill is the shortfall in affordable housing.”

Err, my point I think?

The subsidy to those who cannot afford housing rises as the price of housing rises so that the number of those who cannot affrod housing rises?

The solution is to make housing cheaper: which means liberating, liberalising, the planning permission system.

This ain’t rocket science folks. Allow more people to build on land that they cannot currently build on and the price of housing will come down.

You know, this supply and demand shit?

T W

you don’t need to liberalise planning to increase supply, you can just tweak it to allow councils and others to build shed loads of new council flats.

@12/13
In the inner cities where both housing waiting lists and uptake of HB are highest, there’s no space for shedloads of flats. The left might bear it in mind that we’re going to have to have flight to the suburbs whether we build or tweak HB.

Only 4% of households recieve move than 20k p/a and only 139 recieve more than 50k….

I suppose thats ok then….seems perfectly sensible to give people much more than the post tax median wage for nothing.

F**king joke.

Liberalisation, social housing… the point is that the UK needs more homes. Part of the problem is the incredible aversion within Britain to flats and apartments. Everyone aspires to owning their own house – even though the UK is a very densely populated nation. High rises can be great places to live, but in the UK they are tarnished with the stigma of the brutalist monstrosities of the post-war era. So instead we have professionals unable to get on the housing ladder living in a former council house that’s been turned into a house of multiple occupants, whilst lower income families are unable to afford accommodation without state assistance.

@ 9….”regulate rent”?

Like that worked so well, eh? Rent control?

I thought you said you wanted to increase the supply of low cost housing?

It really is the most obvious economic point that if you artificially cap the price of something below the market clearing rate then you’re going to get a shortage of it.

“It really is the most obvious economic point that if you artificially cap the price of something below the market clearing rate then you’re going to get a shortage of it.”

You should read Paul Sagar’s review of your book, it contains lots of helpful advice and good insights. For example:

“My point here is to draw attention to the fact that he doesn’t bother to make any of the difficult arguments in his book, or to treat his opponents as anything other than simpletons who haven’t grasped economics 101…

What rapidly becomes tiring is Worstall’s scorn and caprice being directed at very clever people who cannot reasonably be lambasted for failing to grasp economics 101…

The result is a tired, boring and uninsightful mantra of how awful and thick politicians are – as presumably contrasted with the wise author, who sees things so much more clearly than the stupids he is constantly insulting in his long-established play to the gallery.”

http://badconscience.com/2010/11/22/jaw-droppingly-rude/

In this particular instance, for example, housing policy is much more complicated than your arguments would suggest – any government which followed your solution of just liberalising the planning system and letting people built wherever they wanted would very quickly be voted out of office, to take just one example.

@17 well yes, you’re right that an alternative would be to liberalise planning to allow people to build anywhere with far fewer restrictions… open the floodgates, as it were, to increase supply.

But I don’t think many people would support a planning system that looks more like Nevada, where you get sprawl, poor quality urban design, environmental damage, etc.

If you accept the need for a strong, efficient planning system to negotiate the many demands on our small isle, you also need strong, efficient regulation or intervention to prevent the bottleneck driving up prices. Unfortunately we’ve had one without the other for several decades now.

Well done Don. Can’t you manage to make up your own critiques of me?

And as to the point actually at issue. Do0es reducing the price of something below the market clearing price increase or reduce the supply of said item?

Yes, Econ 101 is sufficient to answer this question.

Ignoring Econ 101 generally doesn’t work out that well, does it?

Please do explain how forcing rents lower will not decrease the supply of property for rent?

Though, question for Tim, might not that reduce demand for properties from potential landlords reducing home prices thus making purchase more affordable?

(Though presumably not enough?)

Don

I think it’s a mistake to say that because housing policy is much more complex that econ 101 that econ 101 predictions (concerning the effect of price controls on supply) don’t hold water. The effects of rent control are quite well studied.

if you want more subtle studies google “evidence rent control economics”

17 – What, no Lindbeck quotation?

“In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

“Ignoring Econ 101 generally doesn’t work out that well, does it?”

Nor does devising a policy that ignores politics 101 (no political party wants to weaken planning laws that may have the effect of more low cost housing being built near middle class suburbs), sociology 101 (removing green and recreational spaces in cities has numerous negative social consequences), or finance 101 (a slight fall in house prices almost bankrupts the financial system given how dependent it is on house prices being sufficient to cover debt).

“Supply and demand”

Yes, so how is it we never hear anything about the demand side of the equation here?

I can think of at least 3 policies that would drive down house prices in London; (1) relocation of much of the civil service to areas of high unemployment, (2) different regional tax rates that are set nationally to encourage re-location of businesses to poorer regions away from the south east, and (3) greater regulation of private landlords to discourage speculators and bad landlords from obtaining buy to let mortgages.

Planeshit @24 is spot on.

Which, incidentally, is the same point Don is making, and the same one I make in my review of Tim’s book: that economics is never applied in isolation. Thus whilst it may be important and useful to apply economic logic and modelling (indeed this will often be imperative) that is not the end of a story, but at best the beginning of one. And it’s Tim’s tendency to treat Econ 101 as though it is the end of the story that means he frequently fails to offer insightful political analyses.

“Can’t you manage to make up your own critiques of me?”

When Paul has done it so well? What would be the point?

“And as to the point actually at issue. Does reducing the price of something below the market clearing price increase or reduce the supply of said item?”

That, however, is not the point actually at issue. We are discussing different policy proposals around aspects of housing policy. As Planeshift points out, this is a mix of economics, politics, sociology and much more. What you’ve attempted to do is reduce this to a single question of economic theory and then call everyone who disagrees with you stupid. While putting forward a policy solution which would be absolutely impossible to introduce, and which would lead to disastrous outcomes for any politician daft enough even to attempt to introduce it.

“What you’ve attempted to do is reduce this to a single question of economic theory and then call everyone who disagrees with you stupid. While putting forward a policy solution which would be absolutely impossible to introduce, and which would lead to disastrous outcomes for any politician daft enough even to attempt to introduce it.”

Eh? Not introducing rent control would be impossible to introduce?

Que?

But to the meat of your point. You agree that my economics is correct but that the political system is so screwed that an economically rational solution cannot be introduced?

Puts a bit of a dampener on any enthusiasm for politics really, doesn’t it?

“ou agree that my economics is correct but that the political system is so screwed that an economically rational solution cannot be introduced?”

More that real life is a lot more complicated. What you regard as economically rational would be sociologically disastrous, environmentally disastrous and probably bankrupt the entire financial system to boot.

Look, go and look at the policy proposals, research documents, publications etc on all the charities dealing with housing and the various things relating to housing, plus the output of academics etc – do any one of them simply state “de-regulate the planning system”?

No, they may mention it somewhere, but it will never be the whole story. It will be part of a series of measures proposed. And that isn’t because none of them have never read an economics textbook either, it’s because decades of experience and knowledge have meant they understand real life is a bit more complicated.

Here I’m trying to talk solely about the lunacy of rent control.

We do all agree on the insanity of the economics of that, at least?

You knowm Canute’s point? That just because someone terribly important and powerful demands that something be so in the real world that doesn’t make it so?

“The basic problem is the increasing number of people who need housing benefits to afford to live in London.”

But why do they *need* to be in London in the first place ? A lot of people can’t afford to live in London, especially the decent parts so they move out or commute Why shouldn’t people on low wages/ benefits not have to make the same trade off that working people make routinely ?

Perhaps the alledged labour shortage that will result from the reforns will force employers in the capital to pay higher wages, or perhaps economic growth will spread out ?
This sort of argument always sounds to me like middle class Londoners terrified that the price of lattes and cleaners will have to go up unless the rest of country effectively subsidises the capitals menial labour market.

“We do all agree on the insanity of the economics of that, at least?”

Well to play devil’s advocate, lets consider what will happen. All of a sudden the rate of return on housing goes down which reduces the demand for buy to let mortgages (which in turn reduces demand to buy houses). At the same time, existing landlords find housing a less attractive investment so sell their properties so they can invest the cash eslewhere. So we have a decrease in demand, and an increase in supply.

But that is the short term only, and in reality I agree there are better ways to do it. Although its worth pointing out that limits on housing benefit are a form of rent control, and you support that……..

5. “Well It would be interesting to see what effects a few million low paid workers handing in their notice at the same time would have.”

One effect would presumably be their employers having to offer them more money, if they wanted to keep employing them.

“Well to play devil’s advocate, lets consider what will happen. All of a sudden the rate of return on housing goes down which reduces the demand for buy to let mortgages (which in turn reduces demand to buy houses). At the same time, existing landlords find housing a less attractive investment so sell their properties so they can invest the cash eslewhere. So we have a decrease in demand, and an increase in supply. ”

Erm, yes, we’ve just had a decrease in the supply of rental housing.

This reduces the price of rental housing in what manner?

Do refer to Econ 101 if you’d like.

“Erm, yes, we’ve just had a decrease in the supply of rental housing. ”

In the long run. In the short run we get more houses on the market being chased by fewer buyers. Econ 101 says something about that leading to a drop in the overall price of housing.