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Monday, 23 September 2013

Britain's Housing Problem

Small wars often continue for many years because there are stakeholders on all sides with an interest in their continuation. Most often, those stakes are financial: people make money out of wars. So if you want to bring a small war to an end, a good strategy is to look for ways of reducing the financial attractiveness of war making.You put the squeeze on the stake holders. Freezing their bank accounts may be more effective than bombing their bases.

Britain has a chronic housing problem - not enough houses, overpriced, in the wrong places, badly built and badly maintained - because there are a lot of stakeholders in the continuation of the problem.

Most obviously, house owners fund lifestyles on  house values which increase faster than the rate of inflation. It is the foundation of debt-financed consumption.

Then there are house builders who sit on building land because it is increasing in value at such a rate that it is profitable to keep it unused for as long as possible. Why build on it when you could make as much money by simply selling it on at a later date?

If you do build on it, no need to build solid, durable houses or sensible apartment blocks. People will buy anyway. They don't have much choice. There are no builders offering well-built moderately priced homes. They all offer Exclusive Developments and Boutique Collections - in other words, Crap.

And as for maintenance, home owners who have bought as far up the price range as they can possibly afford don't have enough money to repair. They chronically underspend on maintenance.

Landlords who buy to rent are happy to treat their properties as a wasting asset because, actually, they won't waste at all however much they are neglected. They will still increase in value however many generations of university students have trashed them.

Faced with this array of stakeholders, it would be a foolhardy politician who would try to confront the problem. The moment you tried to put the squeeze on any of these stakeholders, you would lose votes.

As a result, Britain is doomed to crap housing and not enough housing indefinitely. There is no way that it can break in to a virtuous circle where building more houses and more good houses (or apartments) turns out to be good for every body - as it is in countries like Germany or the Czech Republic

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