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"the asset holding class decides to buy up as much land is necessary, as soon as it becomes available, in order to protect their price-gouging, upfront-rentier investments."

Geary my man, you are almost a member of the Cetacean Communist Party even if you don't know it yet.

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Jul 26, 2021Liked by Geary Johansen

Good topic. Home ownership is foundational to a free society and should be encouraged by government policy. Problem is, when you give government the opportunity to make policy, they generally hose things up worse than they found them.

Whether US or UK shortage drives price and shortage can be natural or artificial. Zoning drives shortage as does large scale land banking and house banking as a number of corps are doing in US. Not a good trend. Do I trust government to find a solution? Nope.

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Jul 26, 2021Liked by Geary Johansen

I think Geary is correct and he’s not advocating socialism either. The largest building companies and the banks are drip feeding land at a massively inflated rate.

It is harder to build houses now because the plots suddenly catapulted in price around thirty years ago. At that point a small builder in some cases could break out of sole tradership and into the bigger league.

Most building work is sub-contract to housing firms. It is labour only. the wages are good but they are limited and capped by tax brackets and vat.

This is incredibly difficult to explain. Ok. So firstly you have say 90% of builders that work the sites. They will earn between 750£ and 1500 per week. Taxed at 20% until in the 40k mark then their taxation is around 40%. Given there is no actual profit and the builders can’t afford to outlay for a plot and materials and labour and other costs they fill up their ambition on ok to decent wages exclusively to these big corporate builders.

Let’s go to the sole traders and small limited builders, most of whom are sole traders and capped at 85k vat. They never wish to turn over more than 85k as they then must charge 20% more when the tender for work and the sole traders will capture all their work. It makes being vat registered extremely difficult unless you have vat registered businesses directly passing you that work.

So back to a sole trader wishing to get rich building. First thing he’d need to do is have his customers pay his subcontractors directly so that he could take his turnover right up to the 85k threshold without it drawing him into vat land and maximising his own space within that cap. There is nothing illegal about taking out a contract but having the customer pay each tradesman individually. Given that building materials are factored into the turnover and factoring the trends of the percentages of builders who in the private sector who are sole traders and not vat registered builders it is easy to see that they are happy enough to average annual pays between 30k and 60k.

What I did the last time I got rich was to buy the worst house on the best street and for cash. Then do it up. Then save out of that 60k and buy another, do it up and rent it. After having a few houses the process speeds up. Once I had a number of houses, I had twelve. I then sold 4 to fund building 3 houses on a plot which I bought. I profited about 40% minus capital gains tax, which was 240k on that one build. The 2007/8 crash wiped me out and it’s taken me 13 years to get back to 7 houses. What I did was extremely risky to do. There is a semblence of a free market but it isn’t what most people think. 30 yrs ago I could of bought a plot for 20k, but now they’re 100k plus and that’s in the cheapest area in the UK. But the banks won’t lend us the plot and development costs, we have to self fund. You’d think they would in a free market? But we’d be able to undercut the big boys and that isn’t allowed.

The trend now is house shares.Young people are renting a house between them to reduce costs. Many people simply can’t get on the housing ladder. People that easily would of a generation ago. Some just say it’s the market and it is what it is, well fair enough, but let’s try and imagine this situation in another twenty years time following current projections. Well I’ll be 72, the 20yr olds now who will be 40 will still be renting and the house purchases will be for renters. What about 50 years from now?

Please note that the renters I’m speaking about aren’t unemployed and on government handouts, these are people who 30 years ago would have had enough surplus money to have funded a mortgage and still had a social life, people who’s own parents often did this relatively easily. Either the banks start offering better terms and/or lifetime mortgages or else in time only the very wealthy will own houses. Jeremy Corbyn turned many people toward socialism using this very argument. People who’s parents were often naturally inclined to conservatism. I find it easy to understand why. Disenfranchisement, inflation and the high cost of living. Owning your own home ought to be much more than a dream.

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Jul 26, 2021Liked by Geary Johansen

Geary, loved your posts on Quillette but this is a recipe for a massive meltdown in the wealth of homeowners. You need to fine-tune this attack so that you pick up land bankers etc.

You and Liam Halligan seem not to have considered who would support these homeowners suddenly far poorer due to the unintended consequences of this well-meaning but simple solution to a complex issue.

It is a common complaint from young people who refuse to save, I know two of them intimately, yet even they have finally bought into the housing market, in the middle of a boom?

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