A quick summary of a Q&A I recently had with one of the UK's leading economic commentators.
Question. In general, would you rather live somewhere where land values are high or low?
Answer. High. Except when they make housing unaffordable.
Question. How do you know when housing is unaffordable?
Answer. Because land values are high.
Question. But you just said high land values are a good thing ie, they represent high GDP, high amenities and therefore demand.
Answer. Yes. But housing is unaffordable, so the Government must be restricting supply.
Question. But what evidence have you got for that? The 2011 census showed we've more dwellings per capita than ever.
Answer. Er.. because land values are high?
The point being, housing is only unaffordable because the rental value of land is capitalised into the selling price of land.
We know that affordability as a ratio of discretionary income would increase four fold of an average UK household, if the rental value of land was collected by the State in exchange for freeholders right to exclude, rather than taxes on income and capital.
This rather simple point of fact seems to elude the best economic brains in the World.
We are then left with the Catch 22 of high land values being good, except when they are too high.
Bonkers.
Debate Magazine
