How cheaper housing can boost productivity

http://bankunderground.co.uk/2015/06/30/banks-are-not-interm...

> the key function of banks is the provision of financing, meaning the creation of new monetary purchasing power through loans, for a single agent that is both borrower and depositor. Specifically, whenever a bank makes a new loan to a non-bank customer X, it creates a new loan entry in the name of customer X on the asset side of its balance sheet, and it simultaneously creates a new and equal-sized deposit entry, also in the name of customer X, on the liability side of its balance sheet. The bank therefore creates its own funding, deposits, through lending. It does so through a pure bookkeeping transaction that involves no real resources, and that acquires its economic significance through the fact that bank deposits are any modern economy’s generally accepted medium of exchange.

Banks create money and lend it against land. This is how western "economies" create money which we then label "growth".

The more productive we become the more the landlord takes.

http://www.henrygeorge.org/pchp0.htm

http://www.henrygeorge.org/pcontents.htm

Allowing occasional working from home has the same effects, and require no investment in infrastructure.

> But it is not just housing markets that hold back productivity. According to one study, employment in the Bay Area around San Francisco would be about five times larger than it is but for tight regulation on construction of all types.

I'm not familiar with Bay Area, but in Poland people constantly complain about overregulation of construction, and we have much less restrictive construction law than in western Europe (and it shows - public space in Poland is awful compared to Czech Republic or Germany).

You can have too loose construction law, and the result is a city centre were nobody lives - people just commute to work and back. This results in suburbia, and longer commute times - the direct opposite of the effect they wanted to achieve with the first point in that article.

Some amount of municipal planning is a good thing. It provides needed services for residents and increases the quality of what is built. But there is probably a limit to how much growth a government can handle in a responsible way. That suggests that building restrictions might even be a good thing. If the government is overloaded, the restrictions push the growth to other areas where the governments are more eager to plan for the growth.

One of the primary problems in London, and probably many countries with similar issues is that the politicians are far more likely to be landlords than the general public.

I read that in the UK 1 in 4 members of parliament are landlords, compared to 1 in 30 for the general public.

The side effect of this is that ever increasing demand for property, and then passing laws that make demand even stronger (right to buy for example), whilst limiting building programmes increases the politician's wealth for zero effort. They don't have the money to profit from lots of new builds, so its easier to constrain supply, and the general public who own houses will think they've never had it so good because their house is worth more.

Same thing in the US but for the arms industry.

Also mix in the fact that huge numbers of new build London apartments are being kept empty by Chinese owners (and others) and you've got a crisis waiting to happen.

There's going to be a tipping point for London - when young white collar workers such as software developers, accountants, graphic designers, marketing professionals and the other skills that make London competitive won't be arsed to travel to London for 1-2 hours, or live in a shoebox to get a salary that's 15% higher than in Leeds, Birmingham or Manchester where they could have a large house.

The way out isn't just building more property, but passing laws that force owners to rent out properties when they own more than say 3 or 4. Although that would of course crash rental income, so politicians won't do that either.

Sadly, general public don't read Economist or at least look at the facts. Govt "subsidies" public housing instead of land supply and ppl seems to complain but not analyze the issue.

We could always put progressive tax on capital and property. It will be very efficient redistribution.

If investment was made to comparable levels in any of the 10 or more other large cities in the UK so companies don't feel the need to work in London, perhaps we would solve productivity without producing a Mega-city.

It sounds easy and I know there are loads of bureaucratic hurdles and it doesn't help that local councils don't always want the change that is needed in their nice cities to create the influx of jobs...