No, prefabs are not the housing crisis solution

There’s a short answer to this question posed in the Telegraph:

Are prefab boxes the answer to Britain’s severe housing shortage?

That answer being “No”.

There’s a longer possible answer as well: “No way”.

Because, as the article itself goes on to point out, the problem is not in fact the cost of housing:

“The nature of London property prices in particular makes moving house impossible. We want to prove prefabs can be cool – if you have spare land, why not have an extra bedroom. And you can take it with you if you do move, “ said Lee Thornley, co-founder of Bert & May.
He adds that prefabs are a cheaper alternative to costly extensions, as planning permission isn’t required for structures that are counted as mobile homes.

That “cheaper” part isn’t quite right:

Bert & May Spaces, which launches its units next month at design show Decorex, will sell three types of units. The smallest will be a one-roomed box retailing for £25,000, a one-bedroom unit will be available from £75,000, while the most expensive will be the two-bedroom option at £150,000.

Because any form of volume building operation will have a build cost of better than £150k for a two bedder. However, accepted, the total cost, when including that planning cost, might well be lower. But at this point we need to note that it isn’t the cost of building houses that is the problem. It’s the cost of negotiating the planning system.

That is, prefabs, classed as mobile buildings, are an arbitrage around the planning system. Meaning that our problem is in that planning system, not in building nor the cost of it. Our solution must therefore be to do with the planning system as that is the root cause of our problems.

It’s possible to be reformist here and suggest minor changes and tweaks to the system. But we are increasingly of the opinion that that’s just not going to work. We’re not entirely convinced that incremental reform is impossible but very nearly so. Thus the solution is simply the wholesale shredding of the Town and Country Planning Act of 1947 and all the subsequent updates to it.

The real importance of this solution is that we know that it would actually work. It’s said that we need 250,000 new homes a year: the last time the private sector managed this was in the 1930s, before planning became so constipated restricted. And what was constructed was exactly what gains a significant premium in today’s market: the 1930s suburban house, the very thing which people fight over to buy in the Home Counties.

That is, the last time the market was left free to build houses for the people the industry built the houses that the people wanted, where they wanted them. Our current system does not manage that so why not blow up that current, nonfunctional, system and retreat back to the last one we had which actually worked?

Andy Burnham’s very strange £11 minimum wage

Gosh, isn’t Andy Burnham showing himself to be a strong leader?

Firms have been warned by Andy Burnham that they could face penalties including higher national insurance payments if they failed to pay a proposed new higher living wage of around £11 an hour.
In a fresh push to make up ground on surprise left-wing Labour leadership frontrunner Jeremy Corbyn, the shadow health secretary said he would seek to use a “carrot and stick” approach to force up wages if he led the party to power in 2020.
At the start of the final 10 days of campaigning, Mr Burnham will set out his proposals at a campaign event in Pudsey, a Yorkshire constituency that Labour failed to win at May’s general election.
The national rate – which would rise to over £12 in London – would apply to all age groups and be adjusted for the loss of tax credits and linked to the cost of housing, food and household items.

Such a strong leader that he can simply divine the price of something and 65 million people and the markets that are their interaction will simply buckle under and obey. Sadly for such price fixing games that’s not in fact how things work.

More specifically, the level of the minimum wage has an impact upon how many people actually have jobs to earn a wage from. It’s entirely true that low minimum wages have little effect on employment: simply because very few people earn very low wages. The higher that minimum is compared to the general wage level the greater the unemployment effect. There’s no cut and dried limit here, but the rule of thumb is that a minimum wage higher than 50% of the median will have substantial such unemployment effects.

Currently the median wage is around £13 an hour meaning that the proposed £11 is around 85% of that median.

This isn’t going to work out well, is it?

“It will be based on the simple principle that the same hour’s work deserves the same hour’s pay, regardless of your age. So I will abolish the youth rate minimum wage, apply the higher rate to everyone and give incentives for companies to go even further.”

And there is where the real effects will be felt. For those the minimum wage is most binding upon are those who are young and untrained. And if someone fresh off the educational production line must be paid that same £11 an hour as someone with a decade of experience of turning up to work on time and sober then that teenager just isn’t going to get employed is she?

We thus return to our long stated position. Which is that if we are going to have a minimum wage, something we don’t think should exist at all, then whatever that minimum wage is must be the same as the tax free allowance for both income tax and national insurance. For if there is, as is claimed, some moral amount that an hour’s work is worth then there can be no justification for the state taking some of that amount to pay Andy Burnham’s salary.

Or, if you prefer, if you’d like the working poor to have more money then stop taxing them so damn much.

Much as it pains us to say it, Tony Blair was actually right about the Third Way

Not that we agree with the goal: a high tax and large welfare state society is not something that we desire. Rather, a low tax and richer one where welfare isn’t needed to the same extent. But we do find ourselves agreeing with Tony Blair in a manner that we don’t with the Corbynites or the Sanderistas. If a higher, or large, welfare state is what you desire it is that third way that can deliver it. Other options, from predistribution through to market rigging just don’t work.

Another way of putting this is that if National Review have got it then Scott Sumner’s message is being heard:

Socialism has two relevant features: Central planning of the economy by political powers and the public provision of ordinary goods (as opposed to public goods such as national defense and judicial systems). This is distinct from welfare-state policies such as those found in the United States, Canada, and Europe. Sweden has a large and expensive welfare state, but it has a robustly capitalistic trade-driven economy that in many ways is more free-market than our own, with lower corporate taxes and fewer trade barriers. The difference between welfare programs and socialism is the difference between food stamps and the state-run groceries that were the bane of the common people’s existence in the old Soviet Union and in modern Venezuela. The former is imperfect, the latter catastrophic.

We would, of course, prefer perfection, as far as that is possible in any human endeavour. A low tax, low welfare society in which the general level of wealth makes public provision for any other than the truly incapable unnecessary. But our message to those who disagree with that idea is that Tony Blair really was still right about that third way. If you do want to do it then you really do have to do what the Nordics have done. Let markets rip (entirely different from allowing capitalism to run amok) and then tax it to produce the transfers.

Another way of putting this is that those who insist that others should have more of what they have should be put to the test. Are you willing to give up what you have that others may have it? If not then perhaps you don’t quite believe your rhetoric then, eh?

And a third way of putting this is that redistribution has to be redistribution: the taking from some to the giving to others. And our intuition on this is that those being redistributed from tend to object when it’s put in such stark terms. When members of the 1% change their minds on this perhaps we will too.

Or, you know, maybe we won’t.

The death of the solar subsidy

This looks like a good idea:

Britain’s solar boom is over after ministers announced they would offer virtually no subsidies for people to install panels on their homes.

For there’s no actual reason for the UK to offer such subsidies. Despite these claims:

Alasdair Cameron, from Friends of the Earth, said: “From California to China, the world is reaping the benefits of a solar revolution, yet incredibly in the UK David Cameron is actually trying to shut rooftop solar down.
“These absurd solar cuts will send UK energy policy massively in the wrong direction and prevent almost a million homes, schools and hospitals from plugging in to clean, renewable energy.”
Dr Doug Parr, from Greenpeace, said: “The timing couldn’t be worse as the young and potentially booming solar industry is on track to go subsidy free but if these cuts happen, it will be too sudden, too soon and too dramatic. It is highly likely to irrevocably damage the domestic solar industry.”

Solar power has indeed been getting cheaper at a remarkable rate. But it’s been absolutely nothing at all to do with any subsidies being offered by the UK government nor any feed in tariffs gouged out of the energy consumers of Britain.

This is not, by the way, anything at all to do with the arguments over global warming exists, whether we need to do something about it nor anything else like that. It’s a simple public goods argument. Let us assume that the problem is real and we do want to do something about it. That something being, well, we’d like solar power to become cheap enough to use effectively.

So, should British people have to pay more for their electricity to make this happen?

Nope, they most certainly don’t need to at least. How cheap solar becomes will be driven by technological breakthrough. And that will be driven by the wall of money that countries like China, Germany and the US are throwing at it. The technology, when it arrives, will be a public good: we Brits will be able to use it when it arrives just like everyone else will.

So, the correct thing to do is let everyone else spend their money on such subsidies and we install it when it actually works. The removal of the British subsidies makes no difference at all to the date at which this wonder-technology will arrive but it makes us all better off while we wait for it. Thus a good decision.

Taking Corbynomics seriously…and stop giggling at the back there

One of the joys of Corbynomics is that it’s all largely the invention of Richard Murphy. We therefore know that it is wrong on any specific subject, we’ve just got to work out how it is wrong on any specific subject. Which leads us to the idea that this peoples’ quantitative easing will be able to replace the private finance initiative. The idea being that if the Bank of England just prints money with which we can do nice things then we won’t have to go off and borrow expensively from the hated bankers and kittens will ride sunbeams once again.

The problem with this being that PFI really has very little to do with the price of the finance used to build these lovely things. Sure, bankers get their cut of the interest, as do investors, but that’s really just not the point of it all. Instead, the point of PFI is to get some people into state run projects who are worried about losing all of their money. That is, it’s really about getting equity partners in.

The point of that being that we all know how projects work out if they are funded by the magic money tree. They come in late, vastly over budget and thus waste vast amounts of real resources. And the only way we’ve ever figured out how to introduce some rigour into the management of these sorts of projects is to make sure that someone is indeed sweating over the idea that they could lose all their money. PFI is thus far more about bringing the strictures of value for money, completion on time and to budget, into public procurement than it is about either gaining the finance to build something or the price that is paid for that finance.

Thus, changing the price paid for the finance doesn’t change the argument in favour of PFI at all. Yes, it’s superficially appealing to pay nothing to the Bank of England for the finance rather than 5% to hte City, but compared with things like the 276% cost over run of the Humber Bridge it’s not the point at all.