While housing would increase quality of life and luxury, it’s questionable whether it would fix low British productivity in non-housing constrained industries.
Consider how the Bay Area has had huge GDP growth despite housing shortages as people just cram into bedsits
Tail wagging the dog. High productivity areas cause higher housing costs – just like in London.
The Bay Area example doesn’t explain why lowering housing costs wouldn’t increase productivity—it just shows that low housing costs isn’t a necessary condition for it.
I’m not sure I agree that lower housing costs wouldn’t represent a boost to productivity.
UK average household spend on housing is ~17%:
In London rents are a much higher percentage, somewhere between 45-50%. (Will update with the exact number and a source later.)
Understood as a pot of money that could otherwise be spent on other things, I’m not sure I buy that lowering housing costs wouldn’t boost the economy.
Excessive housing costs create negative spillovers that hurt productivity in other sectors. If workers have to commute longer because they can’t afford to live near work, that reduces their available working hours. If businesses can’t attract workers because of high housing costs, that constrains their output. If consumer spending is constrained by high rents, that reduces demand (and thus production) across the economy.
It’s possible that these spillovers aren’t occurring – this comment doesn’t constitute proof – but basic economics would suggest they are.
The UK housing crisis isn’t just about productivity. Hold productivity fixed, and increase floor space, amenities, access to public transport, consumer choice in housing. Is this a UK we’d prefer to live in? Presumably yes.
We can still disagree about where to stack-rank it on our list of priorities, but that’s not really what we’re discussing.
Maybe? For the median person, healthcare seems better, disposable salaries are higher, variety and quality of food is generally stronger. The US does a lot of things better. Housing, for sure, is one of them. But I’m not sure how this is a response to my point. Could you clarify?
Housing just isn’t that high of a priority. The UK is poor because of productivity, not housing costs.
This from bernoulli_defect:
Tail wagging the dog. High productivity areas cause higher housing costs – just like in London.
The Bay Area example doesn’t explain why lowering housing costs wouldn’t increase productivity—it just shows that low housing costs isn’t a necessary condition for it.
I’m not sure I agree that lower housing costs wouldn’t represent a boost to productivity.
UK average household spend on housing is ~17%:
In London rents are a much higher percentage, somewhere between 45-50%. (Will update with the exact number and a source later.)
Understood as a pot of money that could otherwise be spent on other things, I’m not sure I buy that lowering housing costs wouldn’t boost the economy.
Excessive housing costs create negative spillovers that hurt productivity in other sectors. If workers have to commute longer because they can’t afford to live near work, that reduces their available working hours. If businesses can’t attract workers because of high housing costs, that constrains their output. If consumer spending is constrained by high rents, that reduces demand (and thus production) across the economy.
It’s possible that these spillovers aren’t occurring – this comment doesn’t constitute proof – but basic economics would suggest they are.
The UK housing crisis isn’t just about productivity. Hold productivity fixed, and increase floor space, amenities, access to public transport, consumer choice in housing. Is this a UK we’d prefer to live in? Presumably yes.
We can still disagree about where to stack-rank it on our list of priorities, but that’s not really what we’re discussing.
[This one needs work]
Isn’t the case usually that housing is the single greatest factor between a US and UK standard of life? Or do you not agree?
Maybe? For the median person, healthcare seems better, disposable salaries are higher, variety and quality of food is generally stronger. The US does a lot of things better. Housing, for sure, is one of them. But I’m not sure how this is a response to my point. Could you clarify?