Tuesday 22 November 2005

Stalinism in the countryside

I was pleasantly surprised to read that some of the locals are speaking out against the proposals to restrict property rights in the Cairngorms National Park:
But Chris Sangster, chairman of the Association of Scottish Self-Caterers (ASSC), said banning outsiders from buying second homes in the Cairngorms would damage the local economy.
By coincidence, I am currently reading The New Rural Economy, the latest publication from the Institute of Economic Affairs. The title of Chapter 4 (by John Meadowcroft) is: "Locals-Only" Housing: The March Of The New Totalitarians.

Among Meadowcroft's points are:

(1) Similar policies lasting many years haven't prevented house prices in the Channel Islands from being higher than on the mainland.

(2) The main cause of high house prices in rural areas is the planning regime and not incoming buyers.

(3) The demand for housing is partly fuelled by the inflationary policies of governments.

(4) "Locals-only" policies can lead to the economic decline of the communities concerned because incomers usually spend more than others in local businesses and are far more likely to start new businesses.

(5) "Locals-only" policies prevent locals from realising the true market value of their homes when they wish to move. He gives the example of a widow in Wales who was prevented from selling her house to an English couple willing to pay £240,000 and who had found no other (local) buyer a year later.

As Meadowcroft says: discrimination against outsiders is generally regarded as immoral in a free society. I agree.


David Farrer said...

Comments made on previous template:

Tom Paine
It has been interesting to observe how such issues have played out in post-Communist societies where state monopolies of land have had to be unscrambled (or de-omeletted if you will). 
Developers complain about poor (sometimes corrupt) systems for land allocation and planning permission, until they have acquired land and permission to develop it. Then they LOVE those same barriers to market entry because they keep competition down and prices up. 
It's the same with housing in the UK. Everyone who is "on the housing ladder" is happy because rising prices in an artificially constrained market make them feel rich. Everyone who is not in the market yet resents the constraints that keep prices high.  
A financial adviser recently told me(despairingly) that he has UK clients who have remortgaged annually for the last five years, each time borrowing the same amount as their annual income. They think they have doubled their earnings and don't care about the indebtedness because it's exceeded by the rising value of their house. They are improvident fools but they think they are financial geniuses. 
A collapse has to come. The more the government intervenes to avert it (e.g. Gordon Brown's latest scheme to "go halves" with first time buyers so as to prop up the bottom end of the market) the worse the crash will be. I could understand if Blair was saying "apres moi, le deluge.." but isn't Brown planning to be "apres Blair?" 
Go liquid and rent would be my advice.

5 December 2005, 15:53:29 GMT
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"Dearieme wrote: 
One prob: if planning permission difficulties result in someone buying a house at a high price, isn't he then robbed if the council arbitrarily removes its restrictions and lowers the value of his house?" 
No, he is not robbed since the high value he previously enjoyed was only a consequence of immoral planning restrictions. He is merely unluckly. It is no different to a shareholder who buys shares in an industry that is sheltered by a tariff and then sees the value of his shares fall when the tariff is removed.

30 November 2005, 11:47:14 GMT
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David Farrer
We can be reasonably sure that the chicken came before the omelette. 
And it depends on one's mortgage status. I'd be really happy if the value of my flat were to fall to £1.00 if it meant that I could rush out and buy somewhere in Moray Place for £3.00. But I'd feel rather differently if I'd taken out a huge mortgage to buy my present property a week ago.

25 November 2005, 08:22:02 GMT
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Neil Craig
The Welsh lady does show part of the problem of solving this. Her house is now worth £240,000 in an unregulated market. However in an unregulated market people would be putting up more houses & her house price would drop anyway. The real winners of deregulation are first time buyers who become actually able to buy.  
The lady herself might well prefer to be able to think herself rich since her property is so valuable than see her house price plummet even though it is only a paper loss. She might get really upset at such a prospect. 
Now multiply that problem by 15 million & you have the UK.

25 November 2005, 00:22:30 GMT
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"It's difficult to unscramble an omelette." No, you just feed it to a chicken. Boom, boom.

24 November 2005, 23:36:07 GMT
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David Farrer said...

Comments made on previous template:

David Farrer
I should have put that differently. It’s perfectly normal and acceptable for individuals to discriminate. But the state shouldn’t discriminate against some of its own citizens. I just don’t think that the state (and that’s what we’re talking about here) has the right to step in and prevent a house sale between two willing participants. 
As for the Welsh lady, she had a willing buyer at a price she was happy with. I’m sure that some (lower) price would have been acceptable to a local. It was only “too much for the local market” if one accepts that the market should only be open to locals. I can imagine that this lady – a widow – may have decided to downsize and use the capital released to provide her with some income, especially if she had been relying on her husband’s earning power. Of course, the principle of freedom to contract should stand (in my opinion) whatever her motivation for selling.

24 November 2005, 12:38:17 GMT
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Andrew Duffin
Mr. Dodge, the situation you mention ("people who were denied planning permission to build a house for their grown farming children on their own land") is one of the few where British people CAN get permission to build new houses in the countryside. 
It's a common ruse - farmer retires and hands over to son, who needs a house. Naturally the farm house itself is occupied by the old folk, so they get permission to build another one FOR THE FARMER.  
Once it's built, father and son swap. 
This goes on all the time, there are many examples near where I live in the SW of Scotland. 
If your anecdote is true, then either the people were incompetently advised - unlikely, since the farming community is very well-connected when it comes to lawyers etc - or they had upset the officials and were therefore guilty of lese-majesty which is the worst offence one can commit against a powerful bureaucracy. 
Of course none of this is a defence of the planning system, which sucks dead bunnies, as most commenters have already pointed out.

24 November 2005, 12:27:31 GMT
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David Farrer
Dearieme wrote: 
One prob: if planning permission difficulties result in someone buying a house at a high price, isn't he then robbed if the council arbitrarily removes its restrictions and lowers the value of his house? 
Yes, that's correct. It's difficult to unscramble an omelette. All the more reason for not having these interventions in the first place.

24 November 2005, 12:20:50 GMT
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You are right of course David. Our absurd planning laws in rural areas - not to menion commercial land banking - leads housing in Scotland to be ludicrously high. Liberalisation would surely lead to a decline in prices. 
Given that this would inevitably lead to a huge increase in mortgage defaults, as a year spent bankrupt could save homebuyers hundreds of thousands of pounds. Banks and building societies, not to mention housebuilders left with frictional stock, would also be in serious trouble. 
You can see why the best possible option is sometimes avoided at all costs.

23 November 2005, 19:43:40 GMT
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David Farrer said...

Martin Kelly
I'm not sure what you mean when you say discrimination against outsiders is generally regarded as immoral. If communities have no right to regulate who lives within them, then neither do nations; and the whole concept of the sovereign nation state falls apart. 
Are people who might be bound by ties of kin and community in the one place, whose efforts and husbandry have probably made it an attractive place for incomers to seek to live in, to have no say in who can share their way of life? Or does absolutely everything about life in the UK now have to boil down to an economic decision about whether incomers will spend more in the shops or be likely to start new businesses? 
Your points 4 & 5 are well-taken, and perfectly plausible - however, the author has had to qualify them. I'm sure such policies could lead to the economic decline of communities. I've not read the book - does the author produce any evidence that it ever has? Similarly, the lady in Wales - how much is she asking for her house? Is she looking for too much in the local market? Is it in area of high unemployment where there used to be active industries which have had to close down in the face of liberalised foreign competition? There are too many questions about that scenario to be able to draw a definitely negative conclusion about the overall morality of 'locals only'.

23 November 2005, 15:19:47 GMT
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Andrew Ian Dodge
Dave F is entirely correct. While helping in the G.E. I encountered several people who were denied planning permission to build a house for their grown farming children on their own land. If these people were allowed to build on their own land for their own farming children they would not draw on housing stock in the local area. I mean how dim can anyone possibly be to deny them permission?

23 November 2005, 12:57:02 GMT
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Rebellion Coffee Co.
Hi David, 
Thank you for providing international non-US libertarian news. We enjoy keeping up on the libertarian movement around the globe, and have added your link. 
Please keep up the good work. 
Rebellion Coffee

23 November 2005, 01:57:20 GMT
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Trade enriches. That'll include the trade in houses. One prob: if planning permission difficulties result in someone buying a house at a high price, isn't he then robbed if the council arbitrarily removes its restrictions and lowers the value of his house?

22 November 2005, 23:14:35 GMT
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David Farrer
I've just remembered this article that deals with the problems that "Scotland's chaotic planning system" causes the tourist industry.

22 November 2005, 20:22:12 GMT
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David Farrer
I don't think there's necessarily a contradiction. The planning system affects the price of housing in all areas - i.e. both inside and outside the "locals-only" zones. But prices will be higher (other things being equal) in those areas where everyone and not just the locals are free to buy. In other words Meadowcroft is using the term "market value" within the wider context of the existing planning regime. As Dave Fordwych points out, house prices would decline across the country if the planning rules were to be liberalised.

22 November 2005, 20:01:58 GMT