March 13, 2014

Olivia Chow and the co-op housing controversy

Filed under: Cancon, Politics — Tags: , , , , — Nicholas Russon @ 07:44

In the Toronto Star, Bob Hepburn looks at how about-to-be-declared mayoralty candidate Olivia Chow will handle the renewal of the accusations that she and Jack Layton were living in subsidized co-op housing (despite earning very high salaries) in the late 1980s:

Chow fully expects to be under constant attack from Ford Nation fanatics and the more vocal supporters of candidates John Tory, Karen Stintz and David Soknacki as a “tax-and-spend” downtown New Democrat who is supposedly out of touch with middle-class and suburban voters.

But the nastiest attacks will centre on a 1990 story about how Chow and her late husband Jack Layton were living cheaply in a subsidized downtown Toronto co-op housing building designed for low- and moderate-income families.

Chow and Layton’s combined income at the time was about $120,000. The rent on their three-bedroom apartment was just $800 a month.

Because the story is now 24 years old, many of today’s voters have never heard of it. Others, though, have a long memory, are still furious about what they call “a scandal” and won’t let it die.

“You mean the Queen of Public Housing, sponging off of the taxpayer,” one reader emailed me last week after I wrote a column about how Chow was all set to enter the race. “I would call that theft,” he added.

“What annoys me about her is how righteous she can be,” a female reader wrote yesterday after Chow had resigned her federal seat, referring to Chow’s background fighting on behalf of the poor while at the same time having lived in housing predominately meant for lower-income families.


In June, 1990, the Toronto Star published a story inside the paper, not on its front page, about how Layton, then a city councillor, and Chow, who was then a public school trustee, lived in a three-bedroom apartment at the federally subsidized Hazelburn Co-operative at Jarvis and Shuter Sts.

At the time, Layton earned $61,900 a year as a councillor plus $5,000 as a University of Toronto lecturer. Chow earned $47,000 a year as a trustee. One-third of their salaries was tax-free.

Their annual income was double what was considered as a “moderate” family income in Toronto. Provincial co-op housing officials said they knew of no other couple in Ontario living in a co-op unit whose income was as high as Chow and Layton’s.

It may have been a “manufactured” scandal, but it certainly tainted Layton’s image in local politics and it’s no surprise to find that Chow’s opponents are eager to bring the issue back to the public debate. Colby Cosh is probably right here:

February 17, 2014

Ultra-progressive agenda to fix California’s woes

Filed under: Government, Politics, USA — Tags: , , , , — Nicholas Russon @ 10:06

Let’s be clear: parts of California are doing fantastically well, but other portions of the state are suffering disproportionally. Here are a few suggested legislative fixes to redress the inequalities of life faced by too many disadvantaged people in the state:

2. The Undocumented Immigrant Equity Act

The “I am Juan too Act” would assess all California communities by U.S. Census data to ascertain average per-household income levels as well as diversity percentages. Those counties assessed on average in the top 10% bracket of the state’s per-household income level, and which do not reflect the general ethnic make-up of the state, would be required to provide low-income housing for undocumented immigrants, who by 2020 would by law make up not less than 20% of such targeted communities’ general populations.

There are dozens of empty miles, for example, along the 280 freeway corridor from Palo Alto to Burlingame — an ideal place for high-density, low-income housing, served by high-speed rail. Aim: One, to achieve economic parity for undocumented immigrants by allowing them affordable housing in affluent areas where jobs are plentiful, wages are high, and opportunities exist for mentorships; and, two, to ensure cultural diversity among the non-diverse host community, bringing it into compliance with the state’s ethnic profile.


4. The Silicon Valley Transparency and Fair Jobs Act

This “Google Good Citizen Act” would set up a regional board to monitor commerce in the San Francisco, San Mateo, and Santa Clara tri-county area. The state regulatory commission would monitor offshore investment, outsourcing, and unionization. All commercial entities, with over 100 employees, would be in violation and face state fines if: 1) the number of a firm’s employees overseas accounted for 10% or more of the workforce currently employed within the tri-county Silicon Valley area; 2) more than 1% of the current capitalization of a Silicon Valley company were deposited in banks outside the United States; and 3) more than 50% of a tri-county company’s workforce were non-union. Aim: To ensure progressive Silicon Valley commercial businesses are caring progressive state citizens.

5. The California Firearms Safety Act

The “No Guns for Grandees Act” would forbid private security details to be armed with handguns or semi-automatic long guns. It would allow private security personnel to be armed only with paintball, BB or pellet guns. Aim: To prevent unnecessary armed deterrence by private security units in the hire of the affluent.

6. The Fair Housing Adjustment Act

The “Everywhere an Atherton Act” would tax all private residential square footage in excess of 1800 square feet at four times the current per square foot assessment. Aim: It would ensure state resources are equally distributed and not inordinately siphoned off to a small minority of the state population. Would encourage existing large homes to downsize through reverse remodeling.

January 26, 2014

Moving the definitional goalposts – adolescents

Filed under: Britain, Economics — Tags: , , , — Nicholas Russon @ 10:53

In Spiked, Tom Slater talks about the constantly moving concept of “adulthood”:

The spike in young people staying and moving back home, although undoubtedly exacerbated by the floundering economy, nevertheless marks a profound cultural shift in the attitudes of young people towards independence. And it doesn’t take much digging to grasp the roots of it all.

The value of adulthood is battered out of young people nowadays. When last year psychologists announced they were extending the clinical definition of adolescence to 25, it felt sadly appropriate. Indeed, in all corners of society, young people are being fretted over and micromanaged with all manner of initiatives to help them negotiate the adult world. From university wellbeing services to the recent attempts of one charity to rebrand youth joblessness as a mental-health crisis, young people are imbibing the idea that they are essentially overgrown children in need of constant support and intervention.

The sense of victimhood is bolstered by the ‘jilted generation’ brigade, who insist that young people have been undone by the avarice of their baby-boomer forbears. As a result, so we’re told, young people will never be able to achieve the same success their parents’ generation enjoyed. Moving out into less-than-lush surroundings has come to be seen as a kind of concession to the oldies wot wronged us. The bizarre focus on house prices in this discussion is particularly revealing on this point. Young people have been led to believe that their parents skipped renting and started buying up houses when they were barely out of school – an idea which Grace Dent gave a thorough rinsing in the Independent this week. In this sense, Generation Y have begun to conceive of themselves as the victims of an illusory, more prosperous past, to the point where even renting a box-room in a mould-ridden house-share is an inconvenience they’re not prepared to endure.

With all of this in mind, you can almost see why they choose to stay at home and spend their disposable income on other things. If things are indeed so bleak, why not buy a car or, as is increasingly becoming the norm, save up your wages and go travelling? Young people seem to forget having your own wheels or jetting off around the world are luxuries that were never within the grasp of their supposedly cash-rich parents.

October 16, 2013

US wages and personal mobility

Filed under: Economics, USA — Tags: , , , , — Nicholas Russon @ 08:07

Coyote Blog looks at the widely touted flattening of income growth in the United States and wonders how much mobility (people moving from one state to another) might play a part in the overall picture:

All of this is a long introduction to some thinking I have been doing on all the “Average is Over” discussion talking about the flattening of growth in median wages. I begin with this chart:

Click to see full-sized image

Click to see full-sized image

There is a lot of interstate migration going on. And much of it seems to be out of what I think of as higher cost states like CA, IL, and NY and into lower cost states like AZ, TX, FL, and NC. One of the facts of life about the CPI and other inflation adjustments of income numbers is that the US essentially maintains one average CPI. Further, median income numbers and poverty numbers tend to assume one single average cost of living number. But everyone understands that the income required to maintain lifestyle X on the east side of Manhattan is very different than the income required to maintain lifestyle X in Dallas or Knoxville or Jackson, MS.

Could it be that even with a flat average median wage, that demographic shifts to lower cost-of-living states actually result in individuals being better off and living better?

For some items one buys, of course, there is no improvement by moving. For example, my guess is that an iPhone with a monthly service plan costs about the same anywhere you go in the US. But if you take something like housing, the differences can be enormous.

Let’s compare San Francisco and Houston. At first glance, San Francisco seems far wealthier. The median income in San Francisco is $78,840 while the median income in Houston in $55,910. Moving from a median wage job in San Francisco to a media wage job in Houston seems to represent a huge step down. If you and a bunch of your friends made this move, the US median income number would drop. It would look like people were worse off.

But something else happens when you take this nominal pay cut to move to Houston. You also can suddenly afford a much nicer, larger house, even at the lower nominal pay. In San Francisco, your admittedly higher nominal pay would only afford you the ability to buy only 14% of the homes on the market. And the median home, which you could not afford, has only about 1000 square feet of space. In Houston, on the other hand, your lower nominal pay would allow you to buy 56% of the homes. And that median home, which you can now afford, will have on average 1858 square feet of space.

September 23, 2013

The growth of Canadian cities in the postwar era

Filed under: Cancon, Economics, Government — Tags: , , , , — Nicholas Russon @ 09:23

Caleb McMillan has a brief history of the Canadian city after World War 2:

The end of World War 2 marks a good beginning point for this history. North American society went through some big changes and the cities reflect that. In Canada, The Canadian Mortgage and Housing Corporation was created and with it came the regulatory framework that vastly increased the government’s presence in housing. Government intervention — however — always has its unintended consequences. Post WW2, the Canadian government expanded its highway system, got involved in the mortgage business, and allowed provincial and municipal governments to plan and amalgamate city communities. Through monopoly power, central plans have a tendency to hollow out downtown cores that serve the interests of the market. The “Suburban City” is the result of government control over zoning laws and highway construction. These types of communities are sometimes very different from ones created by market means.

While high urban density can be viewed as good or bad, in terms of city functionality, density is a prerequisite for prosperity. City downtowns are market centres. Resources from the periphery are brought to market centres for trade, and within these centres live the people who deal with this market everyday. It has always been the rural farmers and trappers who were the ones on the edge of poverty — surviving the bare elements of nature to reap the rewards later in the city. The city was the centrepiece in the division of labour; a place to go to make a name of ones self. “Simple country living” that suburbia is supposed to reflect was always a Utopian dream. That somehow one could live out in the boonies yet receive the luxuries of a city.

The very idea of “simple country living” was probably an aristocratic notion that somehow took hold of the middle class imagination, because until the 20th century, only the upper classes could afford the luxury of maintaining a residence well outside the cities, yet still well-supplied with the comforts otherwise only available in the city.

This Utopian dream became a reality with the advent of the car. And with government roads, the possibility of suburbia became technically possible. But just because something is technically possible, doesn’t mean that it should necessarily be done. Market signals are the best means of discovering this information. Individual prices revealed through exchange embody information entrepreneurs use to discover consumer demand and determine scarcity. A major factor in Post WW2 Canada was exempt from this process. Roads, and the whole highway system, were already monopolized by the centralized state. The sudden profitability found in developing rural lands for residential purposes was aided by the non-market actions of building government roads.

Critics of suburban life (usually urban types themselves) are at least somewhat correct in their criticism of the suburbs:

But markets in the Suburban City are, in a way, non-existent. For many, the suburban home is an island of private life surrounded by other private islands. Everyone commutes somewhere. The suburban neighbourhood offers nothing more than residential homes, ensuring that streets remain empty and void of commercial activities. Children may play in the streets, but there is no natural adult supervision. Contrast this to a city neighbourhood, where the streets are the best places for children. With a mixture of commercial activity, residential homes, apartments and other city neighbourhoods immediately adjacent to either side — the presence of people is always guaranteed. There is a natural “eyes on the street,” where people ensure law and order through their everyday actions.

August 14, 2013

Ignore the inconsistencies in official Chinese statistics at your peril

Filed under: China, Economics — Tags: , , — Nicholas Russon @ 08:40

It’s been a while since I reminded everyone that the official Chinese government statistics can’t be trusted. Here’s Zero Hedge on the same topic:

How Badly Flawed Is Chinese Economic Data? The Opening Bid is $1 Trillion

Baseline Chinese economic data is unreliable. Taking published National Bureau of Statistics China data on the components of consumer price inflation, I attempt to reconcile the official data to third party data. Three problems are apparent in official NBSC data on inflation.

    First, the base data on housing price inflation is manipulated. According to the NBSC, urban private housing occupants enjoyed a total price increase of only 6% between 2000 and 2011.

    Second, while renters faced cumulative price increases in excess of 50% during the same period, the NBSC classifies most Chinese households has private housing occupants making them subject to the significantly lower inflation rate.

    Third, despite beginning in the year 2000 with nearly two-thirds of Chinese households in rural areas, the NSBC applies a straight 80/20 urban/rural private housing weighting throughout our time sample. This further skews the accuracy of the final data.

To correct for these manipulative practices, I use third party and related NBSC data to better estimate the change in consumer prices in China between 2000 and 2011.

I find that using conservative assumptions about price increases the annual CPI in China by approximately 1%.

This reduces real Chinese GDP by 8-12% or more than $1 trillion in PPP terms.

Regular visitors to the blog know that I’ve been rather skeptical about the official statistics reported by Chinese government and media sources.

August 10, 2013

Counter-productive attempts to ease the housing crisis for the very poor

Filed under: Government, Politics, USA — Tags: , , — Nicholas Russon @ 12:26

Sometimes the very tools employed to solve problems can make the problem worse:

Progressives routinely deplore the “affordable housing crisis” in American cities. In cities such as New York and Los Angeles, about 20 to 25 percent of low-income renters are spending more than half their incomes just on housing. But it is the very laws that Progressives favor — land-use policies, zoning codes, and building codes — that ratchet up housing costs, stand in the way of alternative housing options, and confine poor people to ghetto neighborhoods. Historically, when they have been free to do so, poor people have happily disregarded the ideals of political humanitarians and found their own ways to cut housing costs, even in bustling cities with tight housing markets.

One way was to get other families, or friends, or strangers, to move in and split the rent. Depending on the number of people sharing a home, this might mean a less-comfortable living situation; it might even mean one that is unhealthy. But decisions about health and comfort are best made by the individual people who bear the costs and reap the benefits. Unfortunately today the decisions are made ahead of time by city governments through zoning laws that prohibit or restrict sharing a home among people not related by blood or marriage, and building codes that limit the number of residents in a building.

Those who cannot make enough money to cover the rent on their own, and cannot split the rent enough due to zoning and building codes, are priced out of the housing market entirely. Once homeless, they are left exposed not only to the elements, but also to harassment or arrest by the police for “loitering” or “vagrancy,” even on public property, in efforts to force them into overcrowded and dangerous institutional shelters. But while government laws make living on the streets even harder than it already is, government intervention also blocks homeless people’s efforts to find themselves shelter outside the conventional housing market. One of the oldest and commonest survival strategies practiced by the urban poor is to find wild or abandoned land and build shanties on it out of salvageable scrap materials. Scrap materials are plentiful, and large portions of land in ghetto neighborhoods are typically left unused as condemned buildings or vacant lots. Formal title is very often seized by the city government or by quasi-governmental “development” corporations through the use of eminent domain. Lots are held out of use, often for years at a time, while they await government public-works projects or developers willing to buy up the land for large-scale building.

July 23, 2013

The real aftermath of Iceland’s banking collapse

Filed under: Economics, Government — Tags: , , , , — Nicholas Russon @ 09:01

Simon Black contradicts the media narrative that Iceland has “recovered” from the melt-down of their banking sector:

It was a spectacular collapse. And the first of many. Ireland, Greece, Cyprus, etc. were soon to follow.

Yet unlike the bankrupt countries of southern Europe, Iceland dealt with its economic emergency in a completely different way.

Politicians here are proud that they never resorted to austere budget cuts that are so prevalent in Europe.

They imposed capital controls. They let the banks fail. And, as is so commonly trumpeted in the press, they ‘jailed their bankers and bailed out their people.’

Today, Iceland is held up as the model of recovery. Famous economists like Paul Krugman praise the government for rapidly rebuilding the economy without having to resort to austerity.

This morning’s headline from The Telegraph newspaper sums it up: “Iceland has taken its medicine and is off the critical list”.

It turns out, most of these claims are dead wrong.


Meanwhile, the government ended up taking on massive amounts of debt in order to bail out the biggest bank of all – Iceland’s CENTRAL BANK.

This was a bit different than the way things played out in the US and Europe.

In the US, the Fed conjures money out of thin air and funnels it to the government.

In Iceland, since the Kronor is not a global reserve currency, the government had to go into debt in order to funnel money to the Central Bank, all so that the currency wouldn’t collapse.

As a result, Iceland’s state debt tripled, almost overnight, in 2008. And from 2007 until now, it has increased nearly 5-fold.

Today, the government is spending a back-breaking 17.3% of its tax revenue just to pay interest on the debt.

And this is real interest, too. Iceland’s central bank owns very little of the government debt. The rest is owed to foreign creditors… putting the country in an extremely difficult financial position.

At the end of the day, the Icelandic people are responsible for this. They were never bailed out. They were stuck with the bill.

Meanwhile, although unemployment in Iceland is low, wages are even lower. And the weak currency has brought on double-digit inflation.

So while people do have jobs, they can hardly afford anything.

This is most prevalent in the housing market, most of which is underwater. Interest rates have jumped so much that many Icelanders are now on negative amortization schedules, i.e. their mortgage balances are actually INCREASING with each payment.

July 3, 2013

Kathy Shaidle’s “Dispatch from Canada”

Filed under: Cancon, Economics, USA — Tags: , , , , , — Nicholas Russon @ 09:21

Kathy will be writing a weekly column for our American friends, updating them with whatever’s up here in the Great White North. Given how little actually ever happens in Canada, it might be just a weather report or the latest style change for Justin Trudeau’s hair. However, to start it off, yesterday’s column attempted to correct a few common notions about Canada:

Because a lot of what you think you know about Canada is probably decades out of date.

As investment bigwig and journalist Theo Caldwell recently noted:

    But Canada is far from American stereotypes of socialism, centralization and obeisance, at least in relative terms. By almost any measure, Canada is a freer country than the U.S.A.

    Economically, the contrast is stark, for those who care to see. While folks reflexively state that Canadian taxes are higher than those of the United States, corporate and personal rates are lower up north.

How much lower are those corporate taxes? Canada ranks 6th lowest out of 185 nations. America came in at a shocking 69th place.

Believe it or not, Canada’s average household net worth is higher than America’s.

We also have lower unemployment, and our economy is holding steady, thanks in part to our ingenious refusal to give mortgages to welfare bums.

We have fewer divorces, fewer traffic fatalities, and way fewer tornadoes.

We’re skinnier, too. (Seriously: your restaurant portions are freakishly huge.)

But what about “the American Dream”?

According to one (Canadian) economist, “a son born to a poor father in the U.S. is twice as likely to remain poor throughout his life than if he had been born in Canada.”

[. . .]

We’ve got our flaws too, of course.

We literally have no abortion law, which means it’s easier to get one than a gun, even at the nine-month mark.

There’s no death penalty. And try getting an MRI, unless you’re a cat.

Our cops are increasingly corrupt, if not downright fascist. (Don’t be fooled by the propaganda about the noble, virtuous Mountie…)

We have this unelected Senate thing (long story) and a dorky constitution, especially compared to yours.

And don’t get me started on Quebec.

May 16, 2013

The causes of the “Great Recession” by Tyler Cowen

Filed under: Business, Economics, Government, USA — Tags: , , — Nicholas Russon @ 09:11

According to Professor Tyler Cowen, the Great Recession was caused by a number of different factors. Cowen outlines 4 distinct and complicated problems which led to the downturn:

• A drop in the aggregate demand (http://en.wikipedia.org/wiki/Aggregat…)
• A “horribly” performing banking sector
• Problems with monetary policy
• An increase in the “risk premium” (http://en.wikipedia.org/wiki/Risk_pre…)

Prof. Cowen explains why one economic model isn’t sufficient to explain the economic downturn. He shows how several different economic models can be used to explain both the cause and the effects of the recession.

February 3, 2013

Bureaucracy and the would-be small business owner

Filed under: Bureaucracy, Business, Cancon, USA — Tags: , — Nicholas Russon @ 11:40

It took me less than a day to start my own business — and it was all done online. We have it good: Canada is at the top of the league table for ease of starting a new business. Americans don’t have it as easy as we do:

Last week, having read my own writing about how it’s cheaper to buy a house than rent one in most markets, I decided to take my own advice. My wife and I bought a new place, and instead of selling our old condo, we’re going to rent it out. And thus I became a small-business man.

Or, rather, I’m becoming one. Entrepreneurship — even on the smallest and most banal scale — turns out to be a time-consuming pain in the you-know-what. My personal inconveniences aren’t a big deal, but in the aggregate, the difficulty of launching a business is a problem and it may be a more important one as time goes on.

[. . .]

The striking thing about all this isn’t so much that it was annoying — which it was — but that it had basically nothing to do with what the main purpose of landlord regulation should be — making sure I’m not luring tenants into some kind of unsafe situation. The part where the unit gets inspected to see if it’s up to code is a separate step. I was instructed to await a scheduling call that ought to take place sometime in the next 10 business days.

Not that I expect your pity. I don’t even pity myself. Going through the process, I mostly felt lucky to be a fluent-English-speaking college graduate with a flexible work schedule. But the presence of a stray pamphlet offering translation into Spanish, Chinese, or Amharic seemed like it would be only marginally useful to an immigrant entrepreneur. A person who needs to be at her day job from 9 to 5 would have a huge problem even getting to these offices while they’re open.

The bureaucratic hassles of entrepreneurship turn out to vary pretty substantially from place to place. The World Bank has a fairly crude measure of how easy it is to start a business in different countries and ranks the United States 13th. North of the border in Canada (ranked third), there’s typically just one “procedure” — a paperwork filing, basically — needed to launch a business. In America, it takes more like six.

January 16, 2013

When Kafka met Sandy

Filed under: Bureaucracy, Government, USA — Tags: , , , , — Nicholas Russon @ 09:53

In the Wall Street Journal, Roger Kimball talks about the experience of trying to put your life back together after a major storm damages your home:

Like many people whose houses were badly damaged by Hurricane Sandy, my family and I have been living in a rented house since the storm. Unlike some whose houses were totalled, we could have repaired things and been home toasting our tootsies by our own fireplace by now. What happened?

Two things: zoning (as in “Twilight Zone”) and FEMA.

Our first exposure to the town zoning authorities came a couple of weeks after Sandy. We’d met with insurance adjusters, contractors and “remediation experts.” We’d had about a foot of Long Island Sound sloshing around the ground floor of our house in Connecticut, and everyone had the same advice: Rip up the floors and subfloors, and tear out anything — wiring, plumbing, insulation, drywall, kitchen cabinets, bookcases — touched by salt water. All of it had to go, and pronto, too, lest mold set in.

Yet it wasn’t until the workmen we hired had ripped apart most of the first floor that the phrase “building permit” first wafted past us. Turns out we needed one. “What, to repair our own house we need a building permit?”

Of course.

Before you could get a building permit, however, you had to be approved by the Zoning Authority. And Zoning — citing FEMA regulations — would force you to bring the house “up to code,” which in many cases meant elevating the house by several feet. Now, elevating your house is very expensive and time consuming — not because of the actual raising, which takes just a day or two, but because of the required permits.

Kafka would have liked the zoning folks. There also is a limit on how high in the sky your house can be. That calculation seems to be a state secret, but it can easily happen that raising your house violates the height requirement. Which means that you can’t raise the house that you must raise if you want to repair it. Got that?

“A paradox, a paradox, a most ingenious paradox. Ha, ha, ha, ha, ha, ha, ha, ha, this paradox.”

H/T to Monty for the link. Monty also has this meditation on bureaucracy:

This is where Leviathan does the most damage, I think. Tyranny is always a danger in centralized governments, but a greater danger is the proliferation and growth of bureaucracies. The rules become ever more Byzantine, ever more contradictory, ever more pointless, and ever more expensive (both to implement and comply with). The bureaucracies themselves achieve a life outside the body politic: they persist, age after age, irrespective of their political origin. Their sole imperative (regardless of their ostensible purpose) is to perpetuate themselves. They are an amoeba, growing to engulf everything they touch — not because they are evil, necessarily, but simply because it’s in their nature to do so. They cannot help themselves. Bureaucracies — lethargic, slow, risk-averse, rules-bound, pedantic, expensive, often causing more harm than good — are perhaps the very worst creation of human society.

July 14, 2012

Flood policy and personal responsibility

Filed under: Britain, Environment, Government — Tags: , , , , , — Nicholas Russon @ 00:03

James Delingpole on the British government’s latest announcements on flood policy:

Yesterday it was reported that the Coalition had decided we should all be liable for the cost of flood damage, regardless of where we live. This puzzled me, as the Coalition’s decisions so often do. The only way it would make any kind of sense would be if you believed a) flooding is a new and unnatural phenomenon resulting directly from late 20th century Man Made Climate Change or b) that everyone is now so stupid they cannot be trusted to act in their own best interests and that it is therefore government’s job to hold their hands and wipe their bottoms for them from cradle to grave.

To discount a) you only have to go somewhere like the River Severn, just below Worcester Cathedral, and look at the flood marks on the wall. Many of the most dramatic inundations happened in years long before “man made global warming” was even a sinister glint in Al Gore’s eye. This isn’t to say that the cost of flood damage hasn’t risen to unprecedented levels these last few decades. But that has more to do with our insane practice of allowing property developments to be built on flood plains, together with our unfortunate habit of paving and tarmacking everything (such as the front gardens we would once have kept as front gardens) which means that in times of high rainfall floodwater is likely to accumulate in drains more rapidly. Plus, of course, we’re all richer — so there’s more expensive property for flooding to damage.

But it’s the b) aspect I find more worrying because of the way it rides roughshod over the most basic principles of free market economics. Can we really assume that when anybody buys a house by a river — or near a floodplain — they don’t do so in the full knowledge that flood-risk is one of the prices they pay for their pleasing waterside ambience? The very idea is a nonsense. Buyers, being rational, will factor this into their calculations: “OK, so it will be great for fishing and swimming and boating. But getting insurance will be a bugger and we’d better not keep anything too precious on the ground floor.” These complexities will be reflected by the market. While the value of the property may be enhanced by its attractive location, it will simultaneously be decreased by its flood-damage potential.

July 9, 2012

The constipated British housing market

Filed under: Britain, Bureaucracy, Business, Economics, Government — Tags: , , — Nicholas Russon @ 09:33

Tim Harford’s weekend column on the state of Britain’s housing market and a possible solution to the disconnect between supply and demand:

The chief obstacle to house building in the UK is the planning system, which, 65 years ago, did away with the idea that if you owned land, you could build on it, and replaced it with a system where planning permission was required. Permission to build houses is severely rationed, and such rationing can be seen clearly in the gap between the value of agricultural land without planning permission (a few thousand pounds a hectare) and the value of such land once permission has been granted (a few million).

The difficulty is that local authorities have the ability to grant planning permission but have little incentive to do so, because it tends to be unpopular with existing voters. The huge windfall from winning planning permission falls to whoever has managed to speculate on land and navigate the tangle of planning rules. These serve as nice barriers to entry for existing developers, while driving up the price of building land and so driving down the size of new homes.

Tim Leunig, chief economist at CentreForum, a think-tank, has proposed a two-part system of land auctions to get around this problem. Local authorities would buy land at auction, grant planning permission on it and then sell the land on to developers — with some strings attached, if they so choose. The profits would be enormous, and enjoyed by existing residents in the form of lower taxes or better public services. This isn’t the only way to liberalise planning, but it retains local control and democratic accountability — while dramatically increasing the incentive to develop.

Restoring a free market right to build on property you own would also be a fast solution to the diminished housing supply, but when have governments at any level willingly given up power?

May 22, 2012

Lucasfilm fires Parthian shot in “retreat”

Filed under: Media, Politics, USA — Tags: , , , , — Nicholas Russon @ 10:14

In the New York Times, Norimitsu Onishi reports on recent developments (if you’ll pardon the expression) in Marin County, California:

In 1978, a year after “Star Wars” was released, George Lucas began building his movie production company far from Hollywood, in the quiet hills and valley of Marin County here just north of San Francisco. Starting with Skywalker Ranch, the various pieces of Lucasfilm came together over the decades behind the large trees on his 6,100-acre property, invisible from the single two-lane road that snakes through the area.

And even as his fame grew, Mr. Lucas earned his neighbors’ respect through his discretion. Marin, one of America’s richest counties, liked it that way.

But after spending years and millions of dollars, Mr. Lucas abruptly canceled plans recently for the third, and most likely last, major expansion, citing community opposition. An emotional statement posted online said Lucasfilm would build instead in a place “that sees us as a creative asset, not as an evil empire.”

If the announcement took Marin by surprise, it was nothing compared with what came next. Mr. Lucas said he would sell the land to a developer to bring “low income housing” here.

“It’s inciting class warfare,” said Carolyn Lenert, head of the North San Rafael Coalition of Residents.

It’s lovely to see NIMBY-ism spiked on its own hypocritical underpinnings. Just the threat of allowing “the other” into their lovely 1% outpost will be enough to rattle cages and upset the (self-nominated) “great and the good”:

Whatever Mr. Lucas’s intentions, his announcement has unsettled a county whose famously liberal politics often sits uncomfortably with the issue of low-cost housing and where battles have been fought over such construction before. His proposal has pitted neighbor against neighbor, who, after failed peacemaking efforts over local artisanal cheese and wine, traded accusations in the local newspaper.

The staunchest opponents of Lucasfilm’s expansion are now being accused of driving away the filmmaker and opening the door to a low-income housing development. That has created an atmosphere that one opponent, who asked not to be identified, saying she feared for her safety, described as “sheer terror” and likened to “Syria.”

Update: Jesse Walker comments at Hit and Run:

Lucas hasn’t always been a force for good in land-rights fights: His same statement that complains about the barriers to building on his property also complains that he wasn’t able to put up similar barriers himself when a developer built a neighborhood nearby. But that’s forgiven now. You have to appreciate a move that will simultaneously achieve four worthy goals: making housing more affordable for the poor, showing up the hypocrisies of the local limousine liberals, taking revenge (whether or not Lucas wants to call it that) on the people who restricted his property rights, and setting off a reaction that promises to be far more entertaining than any of the director’s recent movies.

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