Brexit and the waning days of the United Kingdom

[Josquius]

Terraces are criminally overlooked these days. Detached seems to raise the value a few notches so you get su per jammed together crowded estates of detached houses.

[Sheilbh]

Is there any particular reason why you can't build townhouses with 6 to 8 floors in London?

I think probably economics but I'm not sure.

Developable land is expensive in London. Planning permission is expensive to get too. I imagine the best return for a developer is a large tower (there's 250+ towers over 20 storeys either built or approved - Boris, especially, was very keen) and they can convince the planning officers that they're creating public space at ground level which is normally underwhelming and reduces the density. Towers definitely have a part to play but I think you need a diversity of developments.

[Gups]

Is there any particular reason why you can't build townhouses with 6 to 8 floors in London?

Because there aren't many already here. Planners don't like six storey buildings in streets where the rest of the buildings are 3 storeys. There will also often be rights of light issues which makes it more expensive.

[Tamas]

Is there any particular reason why you can't build townhouses with 6 to 8 floors in London?

They were not being built in 1890s therefore Brits don't need it :p

[The Minsky Moment]

And building high rise luxury apartments works just fine, people do that all around the world. That can help with land shortages and all that just as well.

Does it?
Question is what effect does building luxury high rise have on local housing demand?  Does it satiate it?
Arguably - it does not, it may make it worse.
Let's say you build luxury housing for 1000 rich folk in central London.  Those people demand services - dry cleaners, restaurant cooks and waiters, maids, drivers, teachers, tutors, etc. etc.  Human beings have to provide those services and they have to live reasonably near enough central London to do it.  So now what you've done by building 1000 luxury flats is create more demand for housing in the London area that working class people can afford.  Except you haven't increased the supply of that kind of housing.  Ergo rents go up and the problem gets worse.

[Valmy]

Well surely it is better than those same 1000 wealthy people having massive estates though...right?

[The Minsky Moment]

Well surely it is better than those same 1000 wealthy people having massive estates though...right?

Yes but perhaps less than taking that same space and building high density affordable housing.
That idea goes against my econ 101 instincts but I am not totally convinced that the free market operates perfectly in the context of housing market in these attractive world cities.

[grumbler]

Does it?
Question is what effect does building luxury high rise have on local housing demand?  Does it satiate it?
Arguably - it does not, it may make it worse.
Let's say you build luxury housing for 1000 rich folk in central London.  Those people demand services - dry cleaners, restaurant cooks and waiters, maids, drivers, teachers, tutors, etc. etc.  Human beings have to provide those services and they have to live reasonably near enough central London to do it.  So now what you've done by building 1000 luxury flats is create more demand for housing in the London area that working class people can afford.  Except you haven't increased the supply of that kind of housing.  Ergo rents go up and the problem gets worse.

So, rents go up, but nobody is incentivized by the higher rents to build more housing for working class people, because the law of supply is repealed in London?  Plus, those 1,000 rich folk are leaving their old housing, so putting 1,000 more places available for the working class people. 

I would say that the issue of housing in these kinds of cities is more complex than the unaided market can deal with (since there are far too many externalities to any real estate deal in such circumstances), but I would argue that London's housing shortage is more a matter of policy failure than market failure.

[The Minsky Moment]

So, rents go up, but nobody is incentivized by the higher rents to build more housing for working class people, because the law of supply is repealed in London?  Plus, those 1,000 rich folk are leaving their old housing, so putting 1,000 more places available for the working class people. 

Rents go up, which means returns to building all kinds of housing go up (revenues), as do land prices (costs).  The net impact is incentive to build even more luxury housing.  One of potential market distortions here is that unlike econ 101-land, when more affluent people that move to an area, it can actually increase the demand among affluent people to live in that area instead of satiating it, because of residential sorting effects.

I would say that the issue of housing in these kinds of cities is more complex than the unaided market can deal with (since there are far too many externalities to any real estate deal in such circumstances), but I would argue that London's housing shortage is more a matter of policy failure than market failure.

I know very little about London specifically, this may very well be right.  I'm just responding to the assumption that building an expensive high rise condo will ameliorate the perceived problem of escalating urban housing costs.  It may it certain situations, or it may not.

[Josquius]

Yep.
In a perfect glass bubble where there are 1000 rich people, 2000 medium people and 3000 poor people, building 100 houses for the rich will create a nice trickle down where 100 medium and 100 poor people get nicer houses.
In the real world though, particularly in London, the number of rich people isn't finite. The number of homes isn't limited to 1 per person. The world's wealthy are all looking for property in London. Not necessarily even for living in. Many just keep them for the 2 weeks of the year they go on holiday to London, or even just hold them as investment, then there's the buy to let people.
The potential demand for luxury housing in London far far outstrips rationally possible supply.

[Valmy]

True but London is not the only city in the UK with housing issues right?

[Josquius]

True but London is not the only city in the UK with housing issues right?

London definitely has the worst issues but yes, other cities also have problems. Some of the issues are the same as London (buy to let being exceptionally fashionable, lack of government investment where it is needed). There are issues different to those faced in London though, you don't get many Arab shiekhs buying up flats in Leeds but you do have crappy public transport limiting the effective size of the city.

[Gups]

The average house price in London is £470K, compared to £210K for the UK as a whole.

[Tamas]

I refuse to believe there is anyting more at play then too restrictive building permit regulations.

There can hardly be any more lucrative places for investments in building housing than London and SE England, in Europe for sure. Yet it's just not happening even close to meeting demand. This has to be an artificial barrier raised between potential investors and the market

[Sheilbh]

True but London is not the only city in the UK with housing issues right?

No. It's a nationwide problem of not building enough houses to keep pace with population growth since the late 90s. London's particularly intense because it's a global city and has more people in it than it ever has before.