Comment by Apes | Hacker News Reader

Comment by Apes | Hacker News Reader

Question:

Is some group is accumulating so much money that the poorest have insufficient money remaining for their basic needs?

Observations:

- Aggregate total wealth of all private households in Great Britain was £11.1 trillion (in 2014) [1]

- In the UK there were 27.2 million households in 2017, resulting in an average household size of 2.4. [2]

- This computes to an average wealth of £408,000 per household in the UK.

- According to the Office for National Statistics, as of November 2017, the average UK house price reached £226,071 [3]

Conclusion:

With perfect wealth equality, the basic needs for everyone living in the UK can theoretically be met. Therefore, it is possible that wealth accumulation may be a significant contributor to the homeless problem.

However, the gap between the cost of living in the UK and the average wealth in the nation is fairly thin. With a realistic Gini coefficient, a large portion of the population will have their basic cost of living exceed what their wealth can support. Adjusting the wealth distribution will reduce the size of the homeless problem, but not solve it.

The UK should seek to identify why its cost of living exceeds what this portion of the population can support and take appropriate action to resolve these issues.

Sources:

[1] https://www.ons.gov.uk/peoplepopulationandcommunity/personal...

[2] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsde...

[3] https://metro.co.uk/2018/02/02/what-is-the-average-house-pri...

edit: There was a large flaw in my original logic -- the math was done per person instead of per household.

If everybody in the UK moved to where houses had average cost, everybody would be able to afford a place to live. If they could get a job, which they can't, which is (a large part of) why they don't do that.

That's the problem with averages.

The high cost of housing is caused by demand outpacing supply for a very long time. It's expensive to live in London because more people want to live in London than the housing stock will accommodate, and no amount of redistribution will change that, except to the extent such a policy makes it drastically less attractive to live in London.

The exact causes of the supply shortfall is subject to some discussion, but that the shortfall is the proximate cause of the high cost isn't.

The article is about countryside homelessness, not big-city homelessness. The problem with that average is that it overestimates the cost of countryside living, which means that people who are homeless in the countryside are seriously screwed, not "living in the wrong place".

The current trend is that more and more people can't afford below-average priced housing. This is a serious problem.

> average UK house price reached £226,071

Aren't house prices an aggregate of 'owned outright' via cash, inheritance, debt repayment and 'loaned against' in the form of bank loans against real estate? There's been a dramatic inflation in housing debt, worldwide, that first precipitated the financial crisis a decade ago, and that continues to overhang economies worldwide. It was observed a long time ago that 'the debtor is servant to the lender.' You can't look only at private household wealth, you have to look at bank balance sheets as well. I bet if you include bank balance sheets, you can find a 'small group accumulating so much money.'

If banks are accumulating wealth, which may very well be our reality, then this wealth would be reflected in the equity value of the bank itself. Thus, this wealth would still be reflected in the wealth of private households who had ownership in the bank. This would apply even if the banks were international, since the owners could still be citizens of the UK.

> If banks are accumulating wealth, which may very well be our reality

It is.

> this wealth would be reflected in the equity value of the bank itself

It is.

> this wealth would still be reflected in the wealth of private households who had ownership in the bank.

It is.

What do you mean with all these "if" statements that are quantitatively true? Even stock markets are aggregators of wealth (focusing gains on a small population).

The point is that it doesn't matter who the accumulator is, only if the accumulation is to a detrimental degree. The Gini coefficient in the UK is already lower than most, and reducing it probably won't solve the homeless crisis there. I suspect the bigger contributor to the homeless problem in the UK is the cost of living increasing to an unsustainable level for a large portion of the population.

My point is that increase in the housing part of the cost of living is directly tied to the wealth created by the extremely relaxed mortgage lending environment of the last 15-20 years. If that debt were extinguished, house (and rent) prices would be lower for a relatively large population, and wealth would be destroyed for a relatively small (but powerful) number.

All true. However, UK bank share ownership doesn't necessarily correlate with UK citizenship. And, maybe more importantly, stock ownership is skewed heavily to a relative few, e.g. (US data) [0].

[0] http://www.nber.org/papers/w24085

I think median house price would be a better statistic to use than average.

Housing is a positional good. The price is not about labor and materials, but about winning against the others who want the same house. Accordingly, housing prices respond to changes in the money/wealth available to pay them, finding whatever price level is necessary to match the number of households that can afford a unit to the number of available units. Increasing wealth across the board does not make more homes unless you also permit their construction.

Housing is not really a positional good. As a counterpoint, consider the extremes. If a market is saturated, the value of a house remains non-zero. If there is only a single house in an area, the value probably remains low since there is nothing else of value around it. Housing just more or less just follows a normal supply curve. Building more housing isn't going to cause the overall price to approach zero.

As a side note, with a healthy housing market a house would probably be a depreciating asset, like a car. This would have the side-effect of making those who put a lot of money into their home unhappy, and so homeowners have put a lot of effort into ensuring artificial restrictions leave the housing market in an unhealthy state that lines their pockets.

Getting affordable housing is possible, but it requires fighting the extremely entrenched mentality that a home is a form of savings that should always go up in value.

As someone who owns a lot of houses, well the mentality that the house is the storehouse of value is not the only thing.

My family does not want to live where anyone can buy up a house. Yes, everyone likes less problems. But your ability to reduce problems depends on the resources you've available.

We want to live in the places where there are plenty of facilities, people rougly having same income level.

It's way easier to join and relate to the people who are at same level as you.

Housing cost is the best way to ensure these emotional aspects.

>It's way easier to join and relate to the people who are at same level as you.

This is a fine reason to want stable housing prices, but when the median resident bought their house for $200k 10 years ago, and the new neighbors are paying $2 million, you're also seeing a huge change in income level and all the cultural baggage that comes with it.

Poke around the Northwest Side of Milwaukee, vastly oversupplied for its current population and economic stature. I see a 5-bedroom apartment for $46k [0]. Sure it's not $0, but it's damn close as housing goes. (Note that this area is not particularly dense, just poor. But Tokyo shows us that we can also have rich areas dense enough to be affordable).

[0] https://www.zillow.com/homedetails/5748-N-36th-St-5748-Milwa...

I like the thought process here (looking at aggregates), but this analysis is simplified to the point of uselessness. For example, since you are talking about houses I think the relevant quantity is average wealth per household. The average household size in the UK was 2.3 in 2011 [1], so that's £395,600 / household, reversing your conclusions.

I'm sure other considerations could push the results in both directions. To draw any conclusions from this type of analysis, one needs to think much more carefully about this question than either of us have done. Surely there must be economists who spend their careers addressing these types of questions?

[1]: https://www.ons.gov.uk/peoplepopulationandcommunity/populati...

It's not one person per house. By the premise of your calculation there is more than enough net worth.

Globalization and free trade benefit corporations, not workers, hence the increasing income inequality.

Corporations are pocketing the difference in labor pricing from off shoring labor rather than passing the savings onto consumers as was promised by politicians and economists when trade deals were signed.

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