And what should we do about it?

Household wealth in the UK has increased by almost £10 trillion in the past 25 years, from just £4.9 trillion in 1995 to £14.6 trillion by 2017 (all in 2017 money). This is a staggering explosion of wealth. No wonder that at a time when the public finances are under pressure, as they have been since the financial crisis, political interest has grown in the idea of a wealth tax — an annual levy on the value of a person’s wealth. …

A new version of the interactive Total Covid Cost model

*An improved version of the model is now available to download here. For the associated blog see here and here*

Unfortunately new figures from Imperial College’s REACT-1 project and the ONS suggest that we’re not yet getting the second wave of Covid under control. With warnings that the whole country may be heading for Tier 3 lockdown measures before long, the debate about the costs and benefits of suppression measures will continue to grow.

Two weeks ago I blogged about a spreadsheet model that allows users to play around with different policy approaches to dealing with the second wave and…

All models are wrong but some are useful

**An improved version of this model, modelling test and trace, and vaccine rollout, is available for download from here**


The second wave of Covid cases is gathering pace. And so is the debate about how policymakers should respond. One side asserts that lockdowns are needed while the other says the cure is worse that the disease and we should ease restrictions to save livelihoods.

Beneath this polarised debate lies a variety of assumptions about things like the economic consequences of the virus or the suppression measures that would control it, the infection fatality rate and value of a life. …

What happens if the music stops?

Just before Christmas, the Bank of England delivered housing nerds an early present in the form of a new paper on the determinants of UK house prices. Authors Victoria Monro and former MPC member David Miles conclude that, relative to incomes, the rise in house prices between 1985 and 2018 “can be more than accounted for by the decline in the real risk-free interest rate observed over the period”. Stop me if you’ve heard that before.

Following on from my paper for CaCHE in the summer, and work presented by Fergus Cumming and John Lewis of the Bank in September…

Professor Paul Cheshire of the LSE recently wrote a festive broadside directed against my paper for the UK Collaborative Centre for Housing Evidence (CaCHE) from August. It’s unpersuasive.

In the blog he correctly claims that my case rest on two pieces of evidence:

  1. the stock of dwellings has grown consistently faster than the number of households since (at least) the house price nadir of 1996; and
  2. market rents - the price of ‘housing services’ - have grown substantially slower than median household income since 1996.

In the subsequent analysis Professor Cheshire makes four claims by way of rejoinder. One is…

Let’s get the facts straight on what’s happening to rents

The use and abuse of data governs the housing debate and the entire policy response. The housing supply numbers commonly used and, until recently, the housing need numbers bandied about, have long been wrong or misleading. Given the importance of rent — the ‘price’ that tells us whether demand for housing services is outstripping the supply — using the right measure of that is particularly vital.

I suspect most followers of the housing debate in the press would agree with the statement: ‘the cost of renting a house has risen faster than general inflation and average incomes in recent years’…

Liam Halligan is always a man you’d want to have on your side in a debate. Unfortunately on housing he disagrees with me. But his rebuttal sidesteps the central case I’ve been making: that benign day-to-day housing costs and 25 years’ growth in the surplus stock of housing tell us that a lack of houses is not the reason why house prices have become unaffordable. He focuses instead on what increasingly seems to be the only piece of circumstantial evidence that housing shortage proponents have left to point to: the evidence of increasing numbers of ‘hidden’ households.

Also referred to…

Last week the Ministry for Housing, Communities and Local Government (MHCLG) published an important document entitled ‘Analysis of the determinants of house price changes’. It gives details of the department’s house price model, including figures showing how sensitive prices are to the supply of additional housing.

Those figures have important implications for the likely effectiveness of the government’s proposed solution to the housing crisis: to build 300,000 houses per year. This blog sketches out the stark quantitative implications of those results.

Reversing the house price boom?

Average house prices in the UK have risen by about 150% in real terms since 1996. This is what…

Professor Paul Cheshire of the LSE’s Spatial Economics Research Centre recently wrote a post seeking to rebut the evidence I’ve been presenting on whether inadequate housing supply is the cause of high house prices. However, the central case I have been making is left conspicuously unaddressed in his piece, which invokes house prices as indicative of a housing shortage.

This raises an interesting issue at the heart of this debate. There is an established body of economic theory in this area yet most housing commentators and policymakers, and some economists, appear to ignore it. It seems like we’ve forgotten what…

This post appeared first on the Resolution Foundation blog on 23 March 2018.

At a time when politics has rarely been more divided, one major policy issue is a matter of cross-party consensus: we have a housing crisis. House prices were broadly unchanged from the mid-70s to the mid-90s, but have since exploded, rising by around 160% in real terms in just over 20 years. Almost everyone, from the Prime Minister down, agrees that ‘decades of undersupply’ are to blame for stratospheric prices.

Yet since house prices began their vertiginous ascent, new housing supply has comfortably outpaced household formation for…

Ian Mulheirn

Exec Director and Chief Economist at the Tony Blair Institute. Formerly Oxford Economics, SMF and HM Treasury economist. These are personal ramblings.

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