Property Prices and Jon Henley

I meant to blog about Jon Henley’s essay in the Guardian the other day about the housing market but didn’t get round to it. However, watching the second half of the first part of his TV series on Channel 4 last night has spurred me into action.

Generally, I was disappointed with the article and disappointed with the programme. The latter was a very cosy fit with Channel 4’s usual output of Housing Porn, only with a guilty edge. The entire programme was spliced together with gorgeous aerial views of housing estates and London skylines. When Henley visited a £40m home, the tone was positively orgasmic. I’m not suggesting that Henley himself felt this way, but clearly someone on the production team is a Location, Location, Location refugee. Fundamentally though, the programme didn’t really say very much. I’m amazed they are spreading this out over several weeks – there simply isn’t enough content to justify it.

Happily the article itself is much less vaseline lensed and to the point. Henley’s analysis of the problem is entirely sound and will sound familiar to readers of this blog. The problem is, he doesn’t really go into the solutions, is dismissive of the the most important one and misunderstands the nature of the eco-towns debate.

Adam Sampson, the Chief Exec of Shelter, does a pretty spot on analysis of what the problem is:

“Essentially, what has happened in this country is that we’ve confused home ownership with the acquisition of wealth. Those two concepts, which should be distinct, have become irrevocably yoked together. It shows plainly in the reasons people give for wanting to buy: 30 or 40 years ago, you bought a home for security, stability, status, to gain control over your life. Now you do it to acquire wealth. And that has been encouraged as an article of faith across the political spectrum. It really has been the equivalent of the South Sea Bubble, or the Dutch tulip bulb hysteria.”

He then provides Henley with a pretty spot-on analysis of what should be done about it:

“There’s nothing intrinsically wrong with home ownership, particularly if the alternative is expensive private renting with a maximum of six months’ security of tenure, or increasingly residual social housing. Home ownership encourages stability and social stakeholding. But in recent years my house has earned far more than I have. I work and am taxed; it doesn’t and is not. Is that justifiable?”

But rather than really engage with this issue, Henley retorts:

There are problems with this option. If you tax the profit made on selling a primary residence, what do you do about a loss?

But this isn’t what Sampson and Shelter are proposing at all. They aren’t saying that only profits should be taxed after a sale, but property values on an ongoing basis.

It’s a shame he doesn’t explore the option of a property tax (or even land tax, which Adam Sampson has indicated support of in the past), because it may provide an answer to the problem he sees with protests over eco-towns:

But no matter how valid the arguments, it’s hard to believe that [the anti-eco town campaign in Stratford-upon-Avon’s] opposition is not also reinforced by nimbyism. Protesters here do fear for their house prices, and several sales have fallen through since the ecotown plan was announced. “Fundamentally, it’s about preserving our existing environment,” confesses Clive Moy, a retired chartered surveyor. “Most of us chose to live here, in this wonderful countryside, and the last thing we want is a new town in the middle of it.”

As I’ve grown older, I’ve become less tolerant of the dismissal of anyone who opposes a development as being a “nimby.” As a former resident of Warwickshire, I’m pretty sceptical of the area’s ability to support a major new development as well (the commute from Leamington Spa to Stratford by public transport was a bastard…), and how can they become anything but dormitory towns?

Fundamentally, it is entirely reasonable for someone who chose to live in X to not want X to change – that’s why they moved there in the first place. And having your property values take a dive is a very rational reason to object to the building of a development. It is a question of compensation. A proper land value tax would provide that compensation in two ways: by reducing tax bills from people whose properties have lost value and by collecting tax from new the new properties. The problem is that because our current property taxes are so low (and only tangentially related to value), the benefit of more housing to a local community is pretty minor and largely dependent on the benevolence of national government. There is no direct benefit, so no wonder people are sceptical. Inversely, when we build new infrastructure such as new schools or rail links, local people who had made no investment into the project unfairly benefit.

So instead of dismissing anyone who objects to a new development as automatically being a nimby, it’s high time we started looking at things from their point of view. Local people are stakeholders and should be treated as such.