...or why we must not base all our assumptions about housing and how to solve our needs on Gordon Brown, Yvette Cooper and Kate Barker's diktat that "we must simply build more to supply the demand".

In last weekend's Sunday Times, Simon Jenkins in Housing crisis? What crisis? The most puffed up panic in the land hits many nails on the head:

"There is no housing crisis. There is just a housing market. There is no housing “need”, unless you are sleeping in the street. There is just housing demand and housing supply. There is also housing panic, housing lobbyists and housing stark raving madness, the last much in evidence last week.

"The news that the government wants all children to learn economics is fine but ministers should go to the head of the queue.

Most especially, he floats the idea of Land Value Tax:

Need in an open economy is demand and demand is a function of price and supply. This demand for 40,000 unavailable and affordable homes a year could vanish with a change in interest rates or a tax on underoccupancy or encouragement to students to live at home. All might be sensible policies but none is mentioned.

Get that? A "tax on underoccupancy" - that's Land Value Tax. It encourages people to consider whether remaining at their current location after their need for all the particular unique benefits of that location have gone is justified. Do you still need to be in that school catchment area once your kids have grown up? Do you really need to be within walking distance of of the rail station for your 50 minute commute to Marylebone once you've retired? All of these, things over which you have no say or influence as merely the owner of a prime location benefitting from a good school or nearby rail station feed into the land value of your property. If that land value were taxed, instead of your income for example, you might decide voluntarily that paying a relatively high tax compared with your new needs and financial circumstances for holding onto something you no longer absolutely need while others clearly do is not worth it and you can move to a lower tax area - where you'd be freer to spend your newly increased income on luxuries and "nice to haves".

And let's not underestimate the extent of underoccupancy in the UK. I actually found Jenkins' article Googling for a report from 2006 mentioned in another housing article, this time in the Observer, this weekend that claimed that:

36.4 Percentage of English houses that are under-occupied , according to a 2006 local government survey.

2.5 Percentage of English houses that are overcrowded , according to the same survey.

I would quibble with a couple of things in Jenkins' article though. First...

The assumption that every adult citizen has a “right to a decent home” that they can “afford”, courtesy of the government, must be the last hangover of postwar socialism and a brainless basis for policy.

Well, he might be right that we should not expect housing "courtesy of the government" but there must be an absolute right to somewhere to "lay your hat", derived merely from the fact that we only have this one planet on which to be born, live, work and die. And since location is a quasi monopoly, there is a role for the community as a whole, call it government if you will - though I'd prefer to take the politics out of it by making it automatic - to intervene in that natural monopoly. Else eventually, when someone else owns everything (as they already in fact do) those without ownership of land have no means of self-ownership - the ability to keep what you toil for, because the land owner can charge you what he likes for access to somewhere to base yourself in order to earn your crust. Even John Locke agreed with that.

And secondly...

Owner-occupation in the United Kingdom is now 70% of housing tenure, against 42% in Germany and roughly half in most comparable countries. The private rented sector, the most fluid and efficient form of housing, is ridiculed and persecuted with red tape, comprising a mere 12% of the market, against 23% in France and 53% in Germany.

The first part of this is trotted out with monotonous regularity - that Britain is somehow unique in high rates of home ownership. But actually we're about slap bang in the middle, sharing 69% with the US, and while France and Germany are low (but catching up, in Germany at least, partly because of government allowing a lot of flexibility in the way municipalities plan and develop increased housing) Ireland (at 77% off its peak of 80%+ a few years ago), Spain (85%), Greece (83%), Hungary (a whopping 92%), Italy (70%), Norway (77%) and so on are all ahead of us in ownership... Sweden is an interesting one, where there is only 42% home "ownership" but 40% of urban homes are in a type of mutual tenure much as some of us here want to develop in Community Land Trusts. But it's not actually terribly relevant - housing should be a cost of living, and a fairly predictable cost of living at that - not an alternative living...

...which is where my criticism of the second part of that comes in - that private rentals are efficient. This is not necessarily the case - private landlords, just like owner occupiers, are mini monopolies at the location of their "investment" so the majority of their rental income comes straight from the land values that they have done nothing to contribute to - and are, as in Oxford, actually seen as having a negative impact on. Land Value Tax would also mean that they had to consider the quality of their property, the "improvements" on the land value, because that's what their income would be based on after the tax for the location value was taken into account. Yes, private rental provides liquidity in the market but it's reaping what it does not sow.

But there are other snippets of wholesome goodness in Jenkins' article pointing towards a thoroughgoing change in the way we understand housing and policy to make best use of the land we already have:

Even so, if we can tear our eyes away from crazy headlines about London prices, the rate of house price inflation has not wildly outstripped other forms of saving. Only in the past two years (of cyclical boom) have houses caught up with the 10-times rise in equities since 1980. Terrorising the British people out of lending to the productive economy into oversupplying themselves with living space has been the stupidest thing this government has done. Then to claim a “housing shortage” is absurd.

Nor is there anything exceptional or “critical” about present housing costs. Political attention focuses on first-time buyers. For them the key figure is not the purchase price of a house, which they will probably sell long before they have paid for it, but the cost of finance. Lower interest rates have led to this plummeting. Median housing payments for first-time buyers were 16% of income in 1975, 18.4% in 1980, a savage 27% in 1990, 14% in 2000 and 16.8% last year. That is why banks will lend five times income today as against three in the 1980s.

The "Eddie George" effect - low interest rates kept us borrowing more and more against land so that we didn't go into recession in the mid-late nineties. Who pays? We all do - in artificially inflated house prices and now in higher interest rates to try to stem the flow before it becomes too inflationary - the price-earnings ratio of buying a house has been artificially ramped up because the dividend cover was so high, but now comes the crunch, and both must inevitably fall.

The housebuilders’ lobby argues that prices are high because of a shortage of developable land. There is no shortage of land any more than there is of houses. The prime minister might care to join me on a tour of Portsmouth or the Thames Gateway, of the west Midlands from Solihull to Wolverhampton, of Derbyshire and South Yorkshire from Chesterfield to Barnsley, of the Merseyside M62 corridor, of Wearside and Tyneside.

A sound planning policy would encourage all new developments towards city and town centres, expecially in the Midlands and north, for the simple reason that this uses roads, sewers, schools and shops more efficiently, discourages car use and promotes community. Urban Britain is woefully underdeveloped but this is reversible. In a matter of five years, the population of inner Liverpool has risen fivefold simply by good planning of private sector activity. It could rise another fivefold.

Exactly - we just need to encourage that land to be developed up to its optimal market use - presently housing in most places - by levying Land Value Tax so that owners again are forced to look at whether they are making the best use of their asset given the tax due on it. And establish a corporate taxation policy that encourages business to locate to underused areas - for housing is no good without work and economic activity. But again - that points to replacing Corporation Tax with Land Value Tax.

If such effort, backed by land clearance grants, were repeated across Britain, Brown’s new homes would emerge overnight.

Don't give them grants though - why do you now argue for subsidy? Just make it financially attractive to redevelop land based on the tax payable on it!

But the message is clear - we need, no must, look beyond Barker, beyond the crude supply and demand calculations and the very crude "finger in air" centralised/regional planning. Yes, we can build our way out of a crisis, for a while, but it will return one day, in another round of blighted areas (now called "Housing Pathfinder" areas) and another round of pressure points of unaffordability. The answer to all of Simon's points is, unequivocally, Land Value Tax. Until we have that, we will never, literally, have a level playing field.

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