Yes, We Are Trying To Solve the Too Damn High Rents
SHELTER has a report out showing how rents are just too damn high.
In the majority of areas, typical rents from private landlords are over a third of the average take-home pay – the widely accepted measure of affordability.
From 1997 to 2007, rents increased at one and a half times the rate of incomes. Recent research by Shelter has also revealed that 38% of families with children who are renting privately have cut down on buying food to pay their rent.
OK, let’s accept their research as it is: what are we going to do about it?
Or more importantly, what should we do about it?
Necessary here to have a little look at why housing in the UK is so damn expensive, either to buy or to rent. You can build a nice three bedroom house for about £120,000 these days. Go industrial building, prefab the things in factories, and you can halve that at least.
Land’s not expensive: you can by a hectare of southern England (you know, some patch of scrub, not good farming land) for £10,000. Well, maybe not one on its own but certainly if you buy five or ten you’ll not pay more than that for each hectare. And you can plonk 10 houses on your hectare: that gives you lots of room for nice big gardens (each house and garden would have about the area from the goal line to the 25 yard line, side to side of the pitch). In fact, the government usually insists that you put at least 14 on your hectare.
So, houses should be costing, for nice three bedders in the south of England, £121,000 or so. No, really, things should end up costing about the marginal cost of their production. But as we know, a three bedder with a large garden in hte south of England costs £250,000 and up. So what’s the other part of that cost?
It’s the value of the planning permission. The piece of paper that allows you to build on that piece of land.
So, to make housing cheaper, to get it back down to around the cost of production, we should be issuing more planning permissions. This is fairly simple and elementary economics here, nothing complex. We currently build, houses that is, with the associated gardens, access roads etc, on about 2-3% of England. So we’ve plenty of room to do this.
So, good, we’ve solved the problem, on to the next one then.
Ah, yes, sorry, forgot about this democracy thing, didn’t I? That’s exactly what the current government is doing, liberalising planning law so that more planning permissions will be granted and house prices and rents will come down.
And aren’t people screaming at them for doing it?
It really is true that the largest part of the cost of housing is the permit to build the housing. And until we lower that cost by issuing more permits, houses and rents will just be too damn high.
Posted: 14th, October 2011 | In: Money Comment | TrackBack | Permalink
