Monday, 8 June 2009

Housing construction data tells the truth about Labour and Conservative

Taking a long view of housing construction and it is hard not to be struck by the modest levels of construction since 1980.

Whether it is Labour or Conservative, neither party felt inclined to increase the quantity of housing. Since Thatcher was elected in 1979, on average just 200,000 new homes were built each year. Over a thirty year period, this restriction of supply pushed house prices up, and made middle class home owners very wealthy at the expense of younger, non-property owning workers.

There is a popular myth that suggests that the town and country planning act of 1947 made it difficult for construction firms to increase their housing completions. Data from the 1950-60s suggest that the planning act wasn't an insurmountable problem. If the government were determined enough, it could push through large scale housing construction.

Over the last week, the UK electorate drifted away in huge numbers from the traditional governing parties. It was mostly working class voters that defected. It would be a bit of a stretch to argue that the lack of housing construction was behind this defection. Nevertheless, the data does reveal something about the priorities of both parties.

Both Labour and Conservative chased the middle class home-owning vote, who were easily appeased so long as property prices were rising. This also explains why Brown and Darling hijacked the Bank of England, paving the way to zero interest rates and massive government guarantees designed to revive mortgage activity. In the UK, house prices determine economic policy priorities. Jobs, inflation, fiscal sustainability all come a poor second.

Working class voters may not be aware of long term housing construction trends. Nevertheless, they see enough to understand the true nature of both parties. It is therefore any wonder that traditional Labour voters should abandon Brown when they see him pump in around 90 percent of GDP to save the bankers, while at the same time allow the Birmingham van maker - LDV - go bust for the want of a few million quid. They also know that Cameron would do the same thing.

Last week's elections told Westminster that working class voters feel cheated and betrayed by both Labour and Conservative. They have come to understand that a vote for either of them is a wasted vote.

20 comments:

powerman said...

You might be right, but are you sure this data set supports this conclusion ?

You could just be looking at a postwar construction boom.

The luftwaffe's efforts had to be repaired after all.

Alice Cook said...

Powerman,

It was a construction boom that continued into the mid-1970s.

My point is a simple one; for many, homeownership has become an impossible dream. If Labour and conservative cared, they would prioritize home building. They choose not to.

Alice

Mark Wadsworth said...

Powerman, in the 1950s and 1960s, Labour & Tory competed to see who could build more social housing and/or allow more housing to be built - that was back in the day when more housing (rather than 'higher prices') was seen as A Good Thing (and rightly so).

Which partly explains why the two really big house price bubbles were late 1980s and 2000s (we also still had Schedule A taxation of imputed rents and domestic rates - the first smallish bubble kicked off once they scrapped Schedule A and the next one co-incided with getting rid of Domestic Rates).

Alice says: "Both Labour and Conservative chased the middle class home-owning vote, who were easily appeased so long as property prices were rising...In the UK, house prices determine economic policy priorities. Jobs, inflation, fiscal sustainability all come a poor second."

Exactly! They are just the blue wing and the red wing of The Home-Owners' Party! It's only those nutters, the Land Value Taxers who would flip this round and tax land (or property) more heavily and productive incomes more lightly, or not at all.

dearieme said...

Perhaps my father was a proto-Waddy supporter. "Is it good to scap Schedule A, Dad?" "Good for us, son, but probably not good for the country".

Anonymous said...

Prior to universal franchise (the fancy way of describing the vote), your value in society was judged on how much property you had and your stored wealth. For a very brief period, this was disturbed when everyone got the vote. But since the 70s, the elite have been working night and day to return human value to property value. And they have: if you don't have property, you are nothing, you don't exist. That's why Gordon pulled out the entire nation's wealth to save homeowners and is why he is robbing my savings to help them. He is a Grade A scumbag.

Anonymous said...

£30m Cameron will write the next chapter in a similar style.
At least Brown has attempted some wealth redistribution by stealth tax.

DBC Reed said...

Between 1933 and 1939 (ie during the Depression) the private sector built three million houses: all those suburban semis along the A3; all those places Louis Macneice moaned about in his classic "Birmingham".These seem to have come about through the combination of low interest rates
(from coming off the Gold Standard);industrialised building methods with unskilled labour and cheap land as a rsult of the agricultural depression.I have no time for market forces on their own,but the question is why the difference now?
Definitive account of current madness from Alice Cook

Mark Wadsworth said...

Dearieme's Dad nailed it as well.

electro-kevin said...

"...working class voters feel cheated and betrayed by both Labour and Conservative. They have come to understand that a vote for either of them is a wasted vote."

And it is a waste. Each of those parties know full well the simple manifesto which would deliver a landslide victory; neither party will deliver it. For that abrogation of duty to the good people of this country both deserve to be abandoned.

Mark Wadsworth said...

@ DBC, land and housing has nothing to do with 'free markets' - it's a state regulated but privately-owned local monopolies with subsidies.

Don't blame the house price bubble on 'free markets' - asset-price bubbles only happen where there is massive state intervention/over-regulation/subsidies etc.

Anonymous said...

Some thoughts on the chart.

Perhaps all the available land is already built on. I have seen one industrial site after another turned into houses for maybe 20 years.

The increase in population is predominately imported labour, few of whom I would expect to be entering the owner occupier market soon after arrival. Perhaps the real political issue is not the number of housing starts, as the apparent allocation of available social houses to new arrivals. That seems to be causing social tension.

A lot of the houses built in the 60's and 70's replaced slum housing torn down. My granny lived in such property. The war took a long time to reconstruct from. I can take you to houses in suburban Glasgow which were temporary post war houses, but are still occupied.

The chart tells us very little of real value. Its an easily manipulated chart without detailed analysis.

I would argue that the rise in house prices is all to do with excess supply of money, rather than shortage of housing stock. Lots of BTL buying went on.

Mark Wadsworth said...

@ Anon, "Perhaps all the available land is already built on"

Nope. Out of a surface area of 60 million acres in the UK, barely 2 million are homes/gardens, plus mayeb as much again for roads, pavements, parks & playgrounds.

I agree that "allocation of available social houses to new arrivals [is] causing social tension", but the figures are quite small in absolute terms.

As it happens, the gummint put out some figures a year ago that were supposed to refute this, but actually the figures proved what we all suspect.

Anonymous said...

And don't forget the poor quality of UK building. Not only not enough houses, but not good enough houses, and too small to boot.

By international standards, the build quality of UK homes is very poor - especially since the 80's, UK build quality went down rapidly by any reasonable comparison with our major industrial competitors (US, Germany, Japan).

We have poor quality, cynically speculative fast-buck building based on a low-grade, fast-buck financial system, rubbish building regulations, rubbish application of building regulations, and rubbish craftsmanship, and, from as far back as Heath-Barber, all on cycles of unsustainable, excessive credit and collapse.

B. in C.

Anonymous said...

I have lived one year in the south of England, and the place looks as overcrowded as Bangladesh. there ain't much room to build left in hampshire

Mark Wadsworth said...

What, are you all living in little tin and wooden shacks at the side of the road?

Anonymous said...

I agree with what you all say, and I think chasing expensive houses is a fools errand. I think housing supply has been artificially suppressed to the detriment of some.

But, on the other hand, I think that surely if price fixing into housing has been going on, and that price fixing is above what you might consider a normal price, then the consequence would be oversupply...
As in fix the price of bread too low, like Zimbabwe, and then run out of bread, the converse being fix the cost of housing too high, and end up with an oversupply.

powerman said...

We have no shortage of homes, we've had an excess of credit and a massive over-concentration in the south east.

Parts of the northern UK are depopulating and social housing having to be knocked down.

Trimalchio said...

Mark

Hmmm... we could build on all the available land, I suppose, including highland regions in Wales, Scotland, Dartmoor...

I can see two problems here: first, hardly anybody really wants this because it would lead to a massive reduction in utility for us all (i.e. we like green spaces) and secondly, no-one really wants to live in these places because there is no employment. If you want to see this problem illustrated, go to Liverpool and have a look at all the unoccupied property, not to mention that keeping anyone living there at all depends on huge state support.

Maybe we are just overpopulated. The UK is not a big country and most of its people live in a small part of its land area (a very broad south-east, a band across northern England and another across lowland Scotland).

Overall, there may not be a shortage of land but there isn't much left where anyone wants to be. Have a look at the South East on Google Maps.

Anonymous said...

In Scotland house prices rose across the board. The population has been stable for a long time. Prices rose in towns with industrial decline - for instance Kilmarnock where in 2006 prices leapt 25%. There was no population boom to justify this, it was excess credit and a casino housing market.

If there was a chronic shortage of supply leading to higher prices, then why did rents not climb? All the houses being bid up and bought on BTL caused an excess of supply of rented property. People have to live somewhere, and if there's a house shortage they have to rent. It was possible to rent houses for less than the comparable mortgage - giving no return other than potential capital growth to landlords.

I posit again that the supply of houses is not the problem, its the supply of credit that hyked the prices.

And I know Mark, that not all land is built on. I see bare hillsides and farmers fields from my windows. There is heavy planning regulation of land use which affects availability. I cannot see why those fields should get stripmall housing when there are boarded and derelict properties all over my County.

Powerman is right.

Trimalchio said...

Anon - Yes, thank you. The point about rents was one of the ones that I came back here to make! The house price bubble was just that - an asset bubble caused by easy credit.

I also must respond to Mark's assertion that all bubbles are due to governments. This needs some kind of justification. I can't imagine why this would be the case. Here are two suggested test cases: last year's oil price bubble and the 19C railway bubble. If you can explain those as the result of government action, you can try Tulipmania as an encore.