Politics Thread!

[The ghost of raids past]

Its not a good thing. Tying rents to Inflation is a strange move, Mortgage rates are not set by the rate of inflation. The situation could develop that the mortgage cost of the Landlord exceeds the rent being taken in. If that was the case then money to keep the property up to standard would dry up.

All I can see the proposed change doing is to artificially hold rents low for the tenancy period and then the rent would sky rocket as 3 years of price increases get applied at once.

The only way to fix this would be for social housing to be built and allocated to people who needed it, but critically once they were no longer in need they should move out to allow others access. The current scheme where once you get a house you keep it for life seems deeply flawed. Although judging when someone no longer needs the housing would be contentious.

[pogo]

More incentive for landlords to make sure their properties are fit to live in, else face a fine.
Less unscrupulous agencies taking payments from the people renting AND the landlords.

I missed those points. Yes, because the best way to encourage owners to release their homes onto the market is by threatening them with fines, or by making life harder for agencies that many owners rely on.

The problem with the UK housing market is lack of supply. Not enough properties for those who need them. The remedy is simple: build more houses and homes. Making it less profitable, more expensive and more difficult for owners is precisely the wrong way to go about it. At best it will achieve nothing. At worst it will make things worse if it deters owners from making their properties available to rent.

Arguably the measures other than rent control are more significant. For many landlords, especially the non-professional ones, it’s the sheer hassle of being a landlord that puts them off doing it. The safety regulations and work that needs doing. Problem tenants. Finding and vetting new tenants. Thats why so many turn to letting agencies despite their price gouging. Doing anything to jeopardise that, no matter how well intentioned, might backfire badly.

[VNVObit]

Its not a good thing. Tying rents to Inflation is a strange move, Mortgage rates are not set by the rate of inflation. The situation could develop that the mortgage cost of the Landlord exceeds the rent being taken in. If that was the case then money to keep the property up to standard would dry up.

Unlikely as debt on a property for rent is limited to the level of debt that can be serviced from net rent (usually cover mortgage payments by up to 125%) not the value or a property so tends to be capped , in London at least, below 60% of market value. So rents would have to fall significantly rather than remain static

If you’ve lived in London you know a lot of the rental stock consists not of private houses and flats leased out as-is but conversions: office blocks converted to flats, warehouses converted to flats, houses and flats converted to flats through subdivision. These decisions are being made all the time, because the return on doing such conversions are high due to high London rents. If rents are artificially held down then such conversions may make less sense – properties may be subdivided less, or not at all and left as offices or larger units – and over time less properties come on the market.

The other effect is on non-controlled rents. If rent control is not complete then there will be some properties not covered by it. And with the same amount of money chasing properties to rent in the market (e.g. London) it can push prices of non-regulated properties even higher, so having no overall effect on average rents: some people pay less, some more. Those paying more are likely to be disadvantaged in other ways: recent immigrants for example, or those unable to hold down a steady job. Including many on benefits including housing benefits so the cost to government could be higher.

Conversions are usually done by developers not landlords as landlords don't tend to have the expertise for development. The only reason a commercial landlord would sell an office block is if the returns on refurbishment and relet were below their expected levels. Commercial property is valued differently to residential and relates entirely to the rental achievable (something that is unconnected in residential properties). Changing use of property requires planning permission, which is time consuming (9-12 months on average depending on how controversial). Developers don't normally develop for landlords (less of a return) unless the cashflow is advantageous (absolute price isn't the key here but timing of payments, the earlier the better).

Housing benefit is capped at the Local Housing Allowance (LHA) which is the 30th percentile of market rents with absolute limits for different property sizes (based on number of bedrooms). Rent control would be beneficial in many ways as it would limit the increase in housing benefit (something pogo has conveniently ignored). This is not dissimilar to the arrangements with housing associations where rent increases are limited no more than CPI + 1% per annum (at least for the next 10 years).

It is fairly common to see, in central London, signs in letting agents windows stating no HB recipient need enquire as they will only accept people able to pay without benefits.

as for the rent controls pogo appears to be running with the tories on this rather than actually assessing things like this article which points out that controls are not new in the UK and existed in the 60s. The biggest indicator that this is a good thing is the positive reaction from generation rent (see article for details) as ultimately they vote and pay the rent.

Personally think rent control is overdue as impetus to invest over the last 2 decades has been capital growth rather than steady income stream (the latter is more important and sustainable over the long run as the former is only bankable upon disposal).

[pogo]

From that Guardian article:

However, there is no evidence Miliband is taking his inspiration from ancient Rome. Many countries in the developed world have some form of rent controls, including places that can hardly be called bastions of leftwing economics such as New York and Switzerland.

Many other countries, in fact all I’ve seen statistics on, have far higher housing vacancy rates, often many times the rate of the UK; i.e. they are much worse at getting people into empty homes. In some cases there are other reasons for this – in Spain they simply built far too many houses in their housing boom. But that’s not true of France, or Germany, or Italy. Which suggests using them as models, if we are concerned primarily about finding homes for people, is not a good idea.

All these schemes, from both Labour and the Conservatives, seem concerned primarily about moving money around. From landlords to tenants in the case of Labour, from taxpayers to new home buyers in the case of the Tories. Neither will do anything to address the housing shortage. At best they will achieve nothing except redistribution, and not to anyone especially deserving of it. At worst they will distort the market, driving people out of it and/or driving prices up as the extra money flowing in/costs of the extra inefficiencies drive up prices.

[pogo]

Here we go: Labour are getting on the “free money for first time buyers” bandwagon too:

Ed Miliband says Labour would exempt first-time buyers in England and Wales from paying stamp duty when buying homes below £300,000, for three years.

Locals would also get "first call" on half of new homes in their area while foreign buyers would face more tax.

This will overwhelmingly benefit those buying the most expensive properties as they pay the most tax (the tax on e.g. a £300k house is ten times that on a £150k house). But of course those on incomes around £100k (assuming a 3x multiplier) need the most help from taxpayer subsidies. Or at least that must be what Mr Miliband thinks. As with most subsidies it will long term have no benefit as any extra money that makes houses more affordable will allow prices to rise more, cancelling out savings and making the subsidy a direct benefit to home owners/sellers.

The second point is even more ludicrous. You can’t tax foreigners more. EU law says you cannot discriminate on the basis of nationality, in anything. Unless he has a secret plan to leave the EU taxing “foreign buyers” more is not going to happen.

[gravy]

The second point is even more ludicrous. You can’t tax foreigners more. EU law says you cannot discriminate on the basis of nationality, in anything. Unless he has a secret plan to leave the EU taxing “foreign buyers” more is not going to happen.

Do you read the stuff you link to?

It would be funded by a clampdown on landlords who avoid tax, a cut in tax relief for landlords who fail to maintain properties and increased taxes for foreign property investors - with stamp duty on buyers from outside the EU rising by at least 3%.

It's not like cons making immigration promises they couldn't keep because they forgot they had no control over EU citizens coming here.

[pogo]

The problem with that is that’s probably a very small fraction of foreign buyers. Not only are many from within the EU but even those from outside often have an EU passport, if not a British one. All this does is gives them an incentive to get EU citizenship sooner, or to buy a house in the name of a relative who has already, or even to buy sooner. A sudden rush of buyers before the new rules come in ? Yet another contribution to the bubble.

The other part of their plan is likely unworkable too.

Labour says it will change national planning policy to give councils the power to ensure local first-time buyers have priority access to a share of the homes built, with a window of about two months for them to register their interest.

The problem is the housing market isn’t local now. Not long ago house hunting involved visiting estate agents, trawling local newspapers and touring the area. You naturally restricted yourself to a small or handful of small areas because of the time it took. But now you can do all that online: visit local estate agents’ sites from anywhere, visit national aggregator sites that advertise all properties, do virtual tours in Google Streetview.

Force sellers to keep properties off estate agents sites etc. for two months and you’ll mostly just delay sales. Sellers will have no interest in keeping the price down, they will set the price at whatever the market can stand and if the small number of “local” buyers can’t pay that they won’t worry. Meanwhile restricting supply, even temporarily, will only increase demand for those properties not subject to delay and so push up prices.

[gravy]

The problem with that is that’s probably a very small fraction of foreign buyers

Really? What's the split then between EU and non EU buyers?

I'm pretty sure you have no idea and will now frantically google for an article you won't read and then paste it here.

[pogo]

Exactly I have no idea, but as you mentioned the large jump in immigration, starting under Labour but which so frustrated Tory plans to control numbers, was from the EU. The same surge in immigration which has put so much pressure on housing.

And even those born outside the EU can obtain EU citizenship, especially if they are wealthy. Money helps them overcome the many costs associated with applications (it’s an expensive process now), or if they are rich enough they can buy a passport. Cyprus for example which despite the bailout which cost many Russians their savings in Cyprus’s banks is still popular with Russians as they can get citizenship via an investment visa.

The rich foreigners making their home here are not coming here for the food, shopping or weather. They are coming for the security of robust property rights, the rule of law and a free society. But they can only fully benefit from those as an (EU) citizen.

[VNVObit]

Typically developers (London based ones) go to the south east Asia for sales trips. Buyers there look for properties with good capital appreciation prospects.

Doubt they ever visit these shores though.

[(o)(o)]

For shame..

http://www.theguardian.com/politics/201 ... ss-leaders

[merman]

From that Guardian article:

However, there is no evidence Miliband is taking his inspiration from ancient Rome. Many countries in the developed world have some form of rent controls, including places that can hardly be called bastions of leftwing economics such as New York and Switzerland.

Many other countries, in fact all I’ve seen statistics on, have far higher housing vacancy rates, often many times the rate of the UK; i.e. they are much worse at getting people into empty homes. In some cases there are other reasons for this – in Spain they simply built far too many houses in their housing boom. But that’s not true of France, or Germany, or Italy. Which suggests using them as models, if we are concerned primarily about finding homes for people, is not a good idea.

All these schemes, from both Labour and the Conservatives, seem concerned primarily about moving money around. From landlords to tenants in the case of Labour, from taxpayers to new home buyers in the case of the Tories. Neither will do anything to address the housing shortage. At best they will achieve nothing except redistribution, and not to anyone especially deserving of it. At worst they will distort the market, driving people out of it and/or driving prices up as the extra money flowing in/costs of the extra inefficiencies drive up prices.

Yet again you miss the point.

Tories - SELLING OFF HOUSING ASSOCIATION AND COUNCIL HOMES will reduce the amount of social housing, force more people into private renting and force up prices. Oh, and they have not fully costed the proposal. There is even some thoughts that it could be illegal to force a housing association (many of which are registered charities) to sell its property.

Labour - helping first time buyers, helping people struggling with rent, AND INCREASING THE AMOUNT OF SOCIAL HOUSING. Labour announce how it will be funded, but as usual you swallow the Tory propaganda and say it won't work.

[pogo]

You may not of noticed but I’ve been as critical of some of the Tories’ measures as of Labour’s. Subsidies to people able to afford £100,000+ for a new home, or to those with well-paying jobs in London, are hard to justify and will just raise costs for others elsewhere where the subsidies don’t apply, cancelling out any benefit.

I should point out that although they won’t reduce house prices overall the subsidies probably won’t raise prices measurably overall either. The UK housing market’s worth a couple of trillion pounds. A few hundred million, even a billion pounds of subsidy is under 0.1% of that, and will hardly move the market. Other things might, such as making things more difficult for landlords so some choose to give up renting their properties out – these might make a difference by limiting supply.

Both parties have plans to build more houses. We’ll see how that works out. Every government seems to announce bold plans every few years to address the housing shortage, but these plans always seem to get bogged down.

I do have particular criticism for how Labour will say they will fund their plans. And apart from raising money from landlords they seem to have announced yet another ways to target rich foreigners. As well as abolishing nom-dom status, and introducing mansion tax, they now want to extract more stamp duty just from them. But there’s a limit to how much you can tax small groups without them changing behaviour to avoid the tax, especially groups without strong ties to the UK. Ed Balls said in January that abolishing nom-dom status would "end up costing Britain", and these extra taxes on the same people are likely to just multiply that effect.

[The ghost of raids past]

Cutting Stamp duty on propeties below 300k for first time buyers wont reduce prices. Now if you have a first time buyer interested you can just raise the price as they wont be paying stamp duty that money can go to you the seller. If they dont like it then you simply sell to someone else.

One other option would be since first time buyers now have more available cash they will simply pay more to out bid non first time buyers. I just dont see how this policy has any impact on the initial steps of the housing market.

[Ollie]

For shame..

http://www.theguardian.com/politics/201 ... ss-leaders

It's a good deal worse than that: https://sturdyblog.wordpress.com/2015/0 ... lectorate/