| by Kenneth Chase | 37 comments

One Reason Homes Cost So Much


In the UK and many other countries houses are expensive very expensive prices have been rising consistently for many decades In England, prices rose by 4255% between 1971 and 2011 If the price of a supermarket chicken had inflated by the same rate, It would cost 51 pounds and 18 pence by now Around 1950, you could get a 3 bedroom house in northwest London on the northern line, between West Finchley and Woodside Park for just £1050 This was 2.5 times the average wage of £400 a year The head teacher of the local school could very comfortably have bought this kind of house with a total mortgage somewhere around twice their annual salary Today, a similar house, in the same area, would cost close to one million pounds, forty times the average income. It’s nearly ten times the salary of the local head teacher house prices in the UK haven’t just increased, they have skyrocketed But why is housing so expensive? The cost of houses has very little to do with the building materials The value is almost all in the land on which the house sits So why does land cost so much? One reason is that demand for housing keeps growing. The UK population increases by between 300 and 400 thousand people a year And also, the number of people in each household is getting smaller More people live alone or just as couples without children So the demand for accommodation is growing all the time In order to keep up with the demand the UK would need about 240 thousand new flats and houses a year It’s building less than half of this That’s not just a UK problem. France is building only 330 of the 500 thousand new homes needed per annum Major cities fair worse London will face a shortfall of over 700 thousand homes by 2031 In response to the cost of housing crisis governments have tried to intervene to help people to buy their own home In the US there are schemes like the federal home loan banks and the community reinvestment act In the UK, there is “Help to Buy” and there are interest-free loans in France The underlying idea is that the people would buy houses if only they had the money But really, most governments are just crying crocodile tears about high property prices. They know that the bulk of their voters actually like expensive houses a lot The number of people who want new houses at any time is very small, only 10% or so. In relation to the huge numbers who already have a home. And therefore, the property-owning side of society has a vested interest in seeing the value of homes go up Creating easy credit doesn’t actually make housing more affordable, the real issue is one of supply if we simply ease credit without increasing supply, you’ll just stoke house inflation, which is precisely what’s happened It’s the same with the big expansion of mortgage lending You may be able to borrow more, but so can other people You’re all chasing the same limited number of homes so this just pushes prices up and up So why is building houses so difficult? Well, because there is enormous opposition to the building of new homes and great restrictions on the use of land There are lots of immediate answers to do with planning regulations and zoning, but dig deeper and what we have really are society-wide fears of new housing For one large reason above all others, because almost all new housing development are very, very ugly And no one in their right mind wants a new development anywhere near them Most of the large housing developments built in the southeast of england in the last 25 years share one common, generally undiscussed feature they’re very ugly. Or, to be more precise, they’re far uglier than the countryside that they’ve replaced In the mid 18th century, people looked on without dismay, as the hills around the little town of Bath were given up to Queens Square, the Royal Crescent and Somerset Place Likewise, a little further back, when the wetlands, scrubby weed beds and sandy islands at the mouth of the river Po were sacrificed to urban expansion, few people were likely to have raised protests, given what would come to replace them, the city of Venice History shows us that people don’t object to new housing per se, They object when the houses are less beautiful than the natural landscape they have devoured. This starts to isolate the cause of expensive houses, as well as point the way to a solution to the issue It is, literally, ugliness, that is largely to blame for the current social catastrophe of high house prices What seems like negative and entrenched nimbyism (not in my back yard) is at heart an inarticulated, disguised but understandable plea for grace, elegance and a touch of grandeur in architecture We love towns and cities, when they’re attractive. But we’ve no confidence we can make today the kinds of places we actually really like. And the reason for that has nothing to do with prices The argument isn’t that we should build replicas of Georgian crescents let alone rows of canal-sided gothic palaces anymore than it would be an idea for someone who loves the english language to begin addressing strangers in shakespearean dialect The answer is to create housing developments in the best architectural idiom of our times Places like, for example, the exceptional Accordia housing scheme in the suburbs of Cambridge to which, unsurprisingly, no one objected Solving the housing crisis requires that we get better at grasping the nature of the problem we’re facing The issue isn’t stopping selfishness it’s a longing that we shouldn’t build unless we can build beautifully Crack that and no one will mind a fell trees to much, and mortgages will come down too So, what’s the solution? It’s to stop thinking that creating credit for house purchases does anything: it just stokes house inflation What we should be doing is creating not-for-profit housing corporations that are incentivised by volumes, rather than prices reached And most importantly, we should build so beautifully that no one minds a patch of land near them being developed Tantalizingly, all this, could be done.

37 Comments

Lackadaisical

Apr 4, 2019, 10:48 am Reply

ugliness is the reason cost so much ? not because wealthy businessman from to Tokyo , Russia, Arabs …who buy them for speculation and never live in them? next video…

Tien Doan

Apr 4, 2019, 9:27 pm Reply

It's not that housing prices are going up, supply production is being blocked by regulation and the dollars are becoming more and more worthless. In the U.S, housing price have only gone up by 0.2% from 1950 to now adjusted for inflation

Jeff polara

May 5, 2019, 11:03 am Reply

Because people only look at monthly payment amount and not actual price. Banks offering low interest allow Sellers to ask far more than a home is really worth. Imagine if paying cash was only option in home buying. You would suddenly see homes priced at their true value same with cars…..

Christine S

May 5, 2019, 4:38 pm Reply

Spoken like a true architect.

Gold Digger Dave

May 5, 2019, 6:14 am Reply

A well articulated video, however misleading. The reason why house price ratio between earnings and cost is to do with manufactured entrapment, not because they are ugly housing there is a free for all of new builds and what are they building cheap small houses for the masses? No 4-5 bedroom detached homes 14-16 times more expensive than the average wage. We have 100,000's of home that would be very easy to modernise but the banks would not make anywhere near as much return so they build new homes, sell for a lifetimes worth of debt under these subsidised government schemes, nail the new owner for maintenance and trap them as a holding company owns the lease for the land which doubles every 10 years…….Look if anything needs to be subsidised it means its does not work in the real world, in a decade from now and people will only just wakeup to realise just how much they have been ripped off.

Nancy Smith

May 5, 2019, 5:32 pm Reply

We need to go back to buying a place of land and put a tiny house on it. Contractors have lost their minds.

LovelyPolishPerson

May 5, 2019, 7:13 am Reply

it would be perfect if uk only had 10 million people, when i see women with 1+ kids, i wanna puke; why can't they stop breeding

Ammar Mousali

May 5, 2019, 8:03 am Reply

I see Scrutopia all over your thoughts

Neo

May 5, 2019, 8:00 pm Reply

Actually, if beautiful houses start to emerge in my neigborhood I will probably have to leave it, because de value of the neigborhood will increase. That unless I get a better job, but that's not a certainty.

Pablo Quirós

May 5, 2019, 5:35 am Reply

Controversial. But it makes sense.

perfect stranger

May 5, 2019, 5:38 am Reply

I think prices are so high because the government can obtain a lot of taxes, developers obtain high profits, banks obtain high profits. Look at taxes:

https://www.gov.uk/stamp-duty-land-tax/residential-property-rates
Property or lease premium or transfer value SDLT rate

Up to £125,000 Zero

The next £125,000 (the portion from £125,001 to £250,000) 2%

The next £675,000 (the portion from £250,001 to £925,000) 5%

The next £575,000 (the portion from £925,001 to £1.5 million) 10%

The remaining amount (the portion above £1.5 million) 12%

Example

If you buy a house for £275,000, the SDLT you owe is calculated as follows:

0% on the first £125,000 = £0
2% on the next £125,000 = £2,500

5% on the final £25,000 = £1,250

Total SDLT = £3,750

Asim Malik

Jun 6, 2019, 6:26 pm Reply

GREED!♡♤◇♧

N. D

Jun 6, 2019, 11:34 pm Reply

I agree with the ugliness reason.twice my council took the developpers of an VERY ugly development block to stop its construction. The council lost twice. Now the whole population has to put up with an absolute horrible eyesore. Burwood. NSW
australia

Gavin Hudson

Jun 6, 2019, 4:00 pm Reply

Australia should look at this. Some of the housing developments and apartments certainly show a distinct lack of imagination. At least with the coming property deflation, it should make housing a bit more affordable at least.

Eddy Hooden

Jun 6, 2019, 12:31 pm Reply

How can everyone want expensive houses. Does not explain how wages have stagnated and houses gone way up

Fingers Crossed

Jun 6, 2019, 1:47 pm Reply

sometimes these videos miss the mark…

Modulize Commerce

Jun 6, 2019, 12:56 am Reply

Stop letting so many immigrants into the UK every year, and housing shortages wouldn’t be the norm. This is done on purpose by your government.

Ab Abc

Jun 6, 2019, 1:57 am Reply

Abolish central banks then we can see the real free market work without currency being created out of nothing

yasmani martinez

Jun 6, 2019, 2:00 am Reply

That is why the economy as a whole will not get better, there's your answer.

haggiss

Jul 7, 2019, 5:38 am Reply

ONLY ONE REASON: IMMIGRANTS

WAKE UP SHEEPLE

John Lamb

Jul 7, 2019, 7:58 pm Reply

There is no need to build on the greenbelt there’s plenty of unused urban of wasteland that we can develop in Stead of destroying the countryside!!!!!!!!!!!!!!!

anglekan

Aug 8, 2019, 6:48 pm Reply

Western world is a shit hole.

ashref salem

Aug 8, 2019, 9:15 pm Reply

I would say people aren't earning enough, it's a debt and usery economy, there's a notable and unjustifiable congestion of wealth accumulated through debt, could it be the financial system itself is rigged? idk

Scott

Aug 8, 2019, 11:49 am Reply

Most Americans believe that more development will lead to more traffic, which is usually the case. You didn't mention another economic reason housing prices keep going up, it's because people are still willing to pay higher and higher prices.

Maria The Temptress

Aug 8, 2019, 4:07 am Reply

Government, politicians, land developers are the real cause of properties getting so expensive. The government taxes you a percentage of your home or property value. The more that your property value goes up, the more government can tax you. For example, say if you have a home that's worth $100,000. Then land developers build 5 big mansions next door to your $100,000 home. Then the government can raise your property value. Therefore, now your $100,000 house is now worth $350,000. Then your property taxes skyrocket along with rents.

HOMER ALONZO

Aug 8, 2019, 4:06 am Reply

Excellent Proposal

Libertad o muerte

Aug 8, 2019, 9:44 pm Reply

Ok I got the idea so why the hell are houses so expensive in us or even more y Australia like for real Australia?
Do you guys know how much land per capita those guys have?

I H

Aug 8, 2019, 1:36 pm Reply

I think is more simple than that. Real estate is a Ponzi scheme. People don't mind spending too much in a house because they expect that they can sell it for more money than they paid to someone else if they need to.

The state and the banks take a piece of the cake, so it also encouraged.

May the Science be with You

Aug 8, 2019, 5:03 pm Reply

Old people have too much money to throw around

Dariune

Aug 8, 2019, 8:53 pm Reply

Crowded is worse than ugly, I dont like when they build right outside my window, plus the never ending noise and filth of build site

scott left

Sep 9, 2019, 6:13 am Reply

It's purely because the people who want to profit from this pyramid sceme and the estate shysters that sellvthem the "dream', support massive immigration to prop it up, regardless of the amount of native born homeless….greed is back with a vengence.

Liberty AboveAllElse

Sep 9, 2019, 2:04 pm Reply

I rarely disagree with a video like this but this guy's totally off here. Most people who live in an established area object to new housing because it brings PEOPLE and commensurate crowding/traffic/competition for local resources. Additionally given the new demographic shifts, it brings people UNLIKE OURSELVES from foreign lands with different values and behaviors. It has nothing to do with aesthetics.

Brenda Drew

Sep 9, 2019, 12:09 pm Reply

"Beauty is in the eye of the beholder" even when it comes to architecture! So while someone may think one form of architecture is beautiful another person may think it's ugly and we can't please everyone so that's another problem as well! While I agree in part with the not designing using the "Shakespearean dialect" analogy, one should also remember to maintain the integrity of a place, and remember to have a sense of history. Contemporary architecture has a place among more traditional architecture, but who is to say which is beautiful and which is not ..hence, the aforementioned famous quote says this professional artist/designer.

Rajesh Upadhyay

Sep 9, 2019, 11:09 am Reply

Nice blog. Very nicely explained

Pixel Martyr

Oct 10, 2019, 9:56 pm Reply

In America, we have a different and ever changing problem with housing. The housing bubble came and went. It was devastating. I think I can confidently say no one recovered from it and it has led to a new mess. Consumers have to compete with large investment firms for housing. A good bit of the money they are supplied with is from foreign investment. So Americans have to compete for housing with people from everywhere in the world. I think I can confidently say many of them are from China and the oil rich middle east where citizens of those countries are born with a salary granted to them by their government and the have never had to work a day in their lives. The US government will allow it because it draws money into the country, increases competition for residential real estate, hence increasing property values and taxable value. Which in turn, feeds money into our already too large government to pay for pensions and other overly generous benefits most government workers do not deserve.

No Hope Equals no fear

Oct 10, 2019, 1:39 am Reply

I think thats not why homes are expensive

5,000 year low interest rates are. People can borrow lots of money

allon33

Oct 10, 2019, 6:02 am Reply

Never talks about 'land barons' nor people buying houses to sell later to earn money. Lame.

Snapso

Oct 10, 2019, 10:42 pm Reply

Loved this till you showed those Cambridge houses that were ugly af

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