Awen Yuan, Milgard School of Business

Being a renter in the UK is incredibly insecure. I lived in a property I like to call The Mold Palace. It was everywhere: walls, ceiling, carpet, bed, sofa… I mentioned it to the landlady a few times, but was scared to push it any further in case she kicked us out. I suffered with severe allergies for 2 years (didn’t realise it as it came on slowly), and ended up with asthma which hasn’t gone away.

Being a lodger is worse. My landlord/housemate kicked me out a couple of years ago because he wanted to move his gf in. 4.5 years living together, 3 weeks notice. I ended up homeless.

Now I live in a housing cooperative (~85 people). We each own a share in the co-op, so we’re both landlords and tenants, and most of us contribute to the co-op in some way. (I put together and type up agendas and minutes for general meetings. It’s really good to feel useful. Anyway.) Barring some kind of severe behavioural nono, I can stay here for the rest of my life. I may just do that. Of course, I’m sharing a house with 5 other people in my 40’s, but I like having people around. I’m disabled, can’t work, don’t get out much, and was very, very isolated before I moved here. 🙂 It’s also incredibly cheap: half the price of any other place I could live here!

While I know that co-operative living isn’t for everyone, I think that co-operatives would be a good thing to invest in. We preferentially take in people who are homeless, in danger of homelessness, on benefits, etc. Of course, one could have a co-op that involved everyone having their own flat, so they could live “normally” if they wanted, but with a central house for big events, things like workbenches, storage, etc. It could still be co-operative in many ways.

I should go to bed. Sorry if I’m babbling.

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Thank you for the kind words!

I was trying to deal with one specific point you had raised.

In my answer, I touched on land reform and I think that if that were to be dealt with in a serious way, then it could have a significant effect on the balance of the economy.

The land-owners (which are as much multi-national, offshore corporations as the likes of Mrs Samantha Cameron’s father-in-law, Lord Astor, the Duke of Westminster, the Duke of Buccleuch, etc.) have been very successful in getting land reform off the political agenda, virtually since the second World War. Things like the land register are now significantly out of date. The landowners, through their patronage of Westminster and Whitehall have managed to keep this off the agenda and have sneaked through legislation to bolster their powers.

There are few politicians who know much about the labyrinthine complexities of land law. One of those who does is the Green Member of the Scottish Parliament Mr Andy Wightman, who has written extensively on this (“The Poor had no Lawyers”. etc) He is currently the subject of litigation by agents of the Scottish Landowners, essentially in an attempt to bankrupt him and thus have him disqualified from Parliament.

If brownfield sites, which are currently exempted from taxation were subject to local taxation, which increased exponentially with the length of time the land was undeveloped, they would quickly be brought back into the local economy. The increased supply would reduce land prices. Small parcels would become more affordable for ‘ordinary’ people, who would then be able feasibly to consider self-buiid or co-operative build. This would probably result in better quality housing since the land price was swallowing far less of the buyer’s money and more could be spent on the actual design, bricks and mortar. (Glasgow City Council’s City Building and the social enterprise, the WISE Group have developed housing designs which are to the highest energy and eco efficiency standards.) Such building would stimulate local economies.

Finally you raise the issue of the wider economy. The economy of almost all of the United Kingdom is being strangled by the rapaciousness of the financial market in the City of London. It is diverting money which, in years past, was used in vibrant local economy centres like Glasgow, Manchester, Leeds, Birmingham, etc. It is sucking in huge amounts of public money. The metropolitan media scornfully brand people in the North East of England, Wales, the West Midlands etc ‘subsidy junkies’ whereas the real subsidy junkies are in and around the City. Per capita public expenditure for London is far in excess of the more economically weak areas. There is a book called ‘The Upas Tree’ by Stanley Checkland, written nearly 50 years ago which describes the effect far more accurately than I can.

One of the main reasons why I support independence for Scotland is to take some degree of control of our Scottish economy, because Westminster’s is almost wholly controlled by the City. Rhetoric about the Northern Powerhouse, is just that – rhetoric. Manchester was, indeed, once a global economic powerhouse, but, like others it was destroyed by the hyenas of London, abetted, sadly, by a centralising Labour Party, many of whose leading figures were seduced (sometimes literally sexually) by the wealthy and powerful. Look at the ridiculous figure Ramsay Macdonald became.

In response to your second point: when Mrs Thatcher’s government introduced the right of tenants of council housing to buy their homes at fairly cheap prices, she initiated the rigging of the housing property market.

Selling council houses to tenants is defensible, provided that the price reflects the public investment in the building of the house (although a discount is reasonable to take into consideration the amount of rent paid).

The rigging of the market came in because Councils were not permitted to use the receipts to build more council housing. These new houses would have had two price effects – they would keep the supply of houses high and thereby curtail the huge property price inflation we have seen in the past 4 decades, and they would also keep the rents for private rentals at a reasonable level.

Some of the council houses which tenants bought were in areas which were not seen as ‘desirable’ and so, were difficult to resell. Many of the purchasers were also unable to afford the maintenance of the fabric. Within around two decades, many of such houses were in poor condition and a burden on the owners, who sold them cheaply to property speculators who demolished them, thus further reducing supply and forcing prices higher.

Finally, you express some scepticism about buying houses and keeping them empty. This does, indeed happen. There are many unoccupied houses in London and our cities, which are simply being kept off the market, to make the property market ‘buoyant’. There are many brownfield sites in our cities which could be used for house building which are simply left by the owners, many of them house building companies, who are not developing them and preventing potential self-builders from having access. This introduces an artificial land shortage and forces up land prices, thus further excluding self builders from participation. Undeveloped land is exempt from council and other taxes, so there is no running costs accruing to the speculators. Indeed, when such land suffers problems such as burst pipes which cause localised flooding, the public purse usually has to pick up the cost and is unable to recoup it because ownership is usually obscured via a web of shell companies, usually offshore.

The Scottish Government introduced a right for Councils to double Council tax on unoccupied ‘second homes’, as a way of forcing such houses back on to the market. It is also reestablishing the land register, which both Conservatives and Labour had allowed to fall into desuetude, so that beneficial owners can be identified. This is part of a wider policy of land reform.

Ambitious and redistributive land reform would go a long way in dealing with the power inequalities which the author has so clearly set out.

There is no fee, I’m simply trying to add more content divewrsity for Writer Beat and liked what you wrote. I’ll be sure to give you complete credit as the author. You can learn more about the site by checking out my Disqus profile (my email and the website address are in the upper left hand corner) or just reply “sure” and I’ll handle the rest.

More generally I agree that measures of one country’s wealth relative to another are distorted by relative supply of goods by the state vs by the private sector, and other factors. But few are really concerned with that. Rather the argument is that people in capitalist societies receive what they produce, and that is generally true except where state power has distorted the market.

Opportunity O costs 5 per attempt. O is risky, and only 1-in-5 attempts will be winners, but one winning attempt has a payout of 30. So with 100 attempts at O (total cost 500) you would expect ~20 winners (total payout ~600) for a net payout of ~100. On average, the expected value of O is ~1 per attempt …

… but only on average. You might easily fund 2 losers (total cost 10) before funding a winner. In fact, the probability of two-losers-before-a-winner is about 64% (0.8 first loser x 0.8 second loser) and the probability of three-losers-before-a-winner is 51.2% (0.8 x 0.8 x 0.8). So … more often than not … if you start funding O, you’ll pick at least three losers before you pick a winner.

Now, if you start with 500 … it’s extremely likely that you will profit by funding O, because your risk-of-ruin is very small.

But if you start with 15 … it’s more likely than not you’ll go bankrupt by funding O, because your risk-of-ruin is very large.

When free market ideologues say the current system “rewards risk-takers,” they mean the current system rewards people with enough wealth that their risk-of-ruin is very small. And that creates a near-gravitational wealth effect.

If those who suffer a loss of opportunity are not compensated by those that cause it, we bake in excessive inequalities and resource misallocation.

This is why we pay wages and for goods and services. We all argee now that slavery and theft are a bad idea.

Yet this logic is not extended to natural resources. As land is supplied for free by nature/God, when it becomes valuable, those excluded from its use suffer a loss of opportunity equal to its rental value. As we are all equally excluded, we should therefore be entitled to an equal share of the total rental value of all land.

As this does not current happen, there is a net transfer of incomes from those that own little/no land by value, relative to the taxes they currently pay, to those whom the opposite is true.

There the selling price of land is but a measure of economic injustice. If there was no net transfer, it’s selling price would be zero.

So not only does a typical working household have to pay much more to by a house, they need to do so from a reduced disposable income.

Furthermore, as the incomes of some in society are higher than they should be, this leads to over consumption and misallocation of housing.

The housing crisis is just one symptom of economic injustice. It along with many other issues can in principle be easily solved by the application of a 100% tax on the rental value of land.

It just needs enough people to stand up and say so.