So says the Guardian today.
It also notes that he might:
¬? Encouraging local councils to offer mortgages.
¬? Allowing housing corporations to buy more unsold private properties, which could then be rented out affordably.
¬? Letting council tenants use their discount under the right-to-buy' scheme as a deposit on a private sector home.
¬? Cutting stamp duty to help institutional investors in the private rented sector.
This is economically illogical because there is no coherence in here:
1) This sector has already been over-inflated because it has enjoyed tax relief, especially from Capital Gains Tax. Why make the mistake again?
2) Where are local authorities to get the funds from to offer mortgages, and what qualifies them to do so when banks are failing at the job? Who will pick up the bad dent bill, or is this a secret business plan for Northern Rock?
3) Helping institutional buyers into the private rented sector will only exacerbate the excess supply of two bedroom flats that already exists.
The credit crunch is a complex issue that requires coordinated economic action. This is random, scatter gun action and cannot help.
If we want to a) help home buyers already in distress rather than encourage more to become distressed b) support banks so more do not end up on the government's books and c) support the social housing market then I have already offered a coordinated (and probably cheaper) policy response. It's cheaper because it uses the bank's own money for starters.
Surely it makes more sense to help those having a problem than throw more people at it?
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Richard,
Perhaps the reason no one is buying the “coordinated policy response” you keep shamelessly flogging is that it lets the individuals who willingly entered into these financial agreements off the hook.
Maybe they should be “carrying the can” as well?
Imaginative though your proposed solution is, it still leaves deficit financing and credit intermediation in place.
I believe that it is possible to design a simple mechanism to bring together investors in property “Peer to peer” directly with investments in property.
Opromark – which morphed to the Property Investment Market, and eventually ran out of money – had the idea of forming a separate Limited Company for each house and then allowing investors to invest directly in the house by buying shares, and obtaining a return from rentals and capital growth (from property price inflation).
Interesting, but neither particularly practical nor scalable, as it turned out.
Real Estate Investment Trusts (“REIT’s”), on the other hand, using trust or partnership-based vehicles or frameworks could give rise – I believe – to viable alternative mechanisms which would enable a “Debt/Equity” swap on a countrywide scale.
ie simply “Unitise” property rentals, and bring in long term investors to acquire the units in the property “Pools” that result.
This wipes the floor with any debt-based solution since there is no need to repay capital (albeit a property maintenance provision must be built in).
Also, if the rentals are index-linked, then the rate of return would be below the rate of a conventional return based on arbitrary bank rates.
The truth of the matter is that credit intermediaries – including Central Banks – are obsolete in the age of the Internet.
Perhaps both you and your colleagues on the “Green New Deal” project – which suffers from precsiely the same defect IMHO – might benefit from taking seriously these emerging possibilities inherent in “asset-based” finance, rather than pitting yourself against the existing system with a conventional “deficit-based”approach.
Georges
Some of us believe in supporting victims
You clearly believe it appropriate to punish them
I guess it’s a Left / Right thing
Richard
Richard,
“Victims” of what? They willingly signed on the dotted line. The individual consumer is a party to the contract.
As I am on neither the Left or Right, I do not “get” the reference made.
Georges
No doubt your reference to not being on the Left or Right is another of the many games the Right play. Once upon a time the more extreme Left played games arguing about who was the perfect Marxist / Leninist / Trotsykist. It was boring, and irrelevant. They remained on the unacceptable Left.
Now the Right play games arguing about who is the Perfect Right: in or out of the Washington Consensus, libertarian or not, it remains the same: all are on the Right and unacceptable.
I can’t be bothered to read your material on your blog. But I presume you argue for libertarian causes and that each person is a free agent.
That’s rubbish in this context. The sub-prime crisis proved people did not know what they were signing when buying houses, they were the victims of mis-selling, banks knew that as did those re-packaging the debt. But to get a house they felt they had no choice because the option of social housing has been virtually eliminated for many.
In that case to argue these people were free agents is absurd and anyone with an open mind knows it. They also see those who argue as such as out of touch with reality.
You are exactly that . It’s why most of your links to this blog are deleted.
Richard
Richard,
“It was boring, and irrelevant.”
So why did you bring it up?
“…no choice…”
For individuals capable of ration, logic, thought, and proper planning, there is always a choice. Some better than others, but always a choice. In the end, no one is forced to do anything. The individual may choose to do something (eg. sign a contract) but they are never forced to do so.
Force comes into play when the state compels an individual. Usually at the behest of those who feel the state should compel the individual into some sort of collectivised “solution”.
A pity those on the Left hold their fellow citizens in such low regard.
Georges
You display all the crassness of the Right. You assume there is choice and you assume there are fully informed individuals and you assume there is perfect knowledge and you assume there is infinite time to find out and you assume anyone can command the resources needed to undertake a planned course of action.
The reality is we have a constrained and flawed model: constrained by government and the building industry on the supply side and with prices set by the banking sector’s willingness to lend at levels beyond people’s general capacity to repay.
And people need to house themselves and their families. So they behave as if in a herd: they do what everyone else does: they sign on the dotted line because there is nowhere else to go.
You can assume choice, but that doe snot make your model valid. It’s just a flawed assumption.
No further comments from you on this thread will be accepted.
Richard