Interesting Links for 04-11-2015

[andrewducker]

• Entire editorial staff of Elsevier journal Lingua resigns over high price, lack of open access
  • (tags: OpenAccess publishing academia viaJaneCarnall )
• How reducing inequality boosts economic growth
  • (tags: inequality growth economics )
• BBC Greenlights Series Based on Philip Pullman’s ‘His Dark Materials’
  • (tags: PhilipPullman tv bbc )
• Universal Basic

Comments

[steer]

I may have mentioned this before, but I found it interesting. Piketty does a lot of statistics analysing wealth distribution in his book. There's one thing he says which rings really true, that wealth distributions can be extremely misleading

[drdoug]

Totally agree with your general point - wealth is a very tricky thing to measure. And switching to consumption as a measure doesn't fix the problem either - famously, Warren Buffett might even come out slightly less rich on that measure than either of us.

But I have to disagree on one point:

Assuming you don't count your pension pot

That's almost certainly the number 2 source of wealth after house ownership, surely?

Although this is probably massively unequally distributed: most people having no pension pot; the average for those who have one at all is probably of the order of £50k; then there's high-paid public/quasi-public pensions; and then very-senior pension pots which are the ones George Osborne keeps introducing amazing perks for like that one about giving up your rights to unfair dismissal.

I have no more disposable income than I did have.

Sure, but - assuming you have a repayment mortgage and keep up the payments - you can reasonably expect to live rent-free for a considerable period of time in the future.

[steer]

That's almost certainly the number 2 source of wealth after house ownership, surely?

That's a good point. I wanted to simply things. I'm not sure what effect pensions have on wealth inequality particularly given the existence of a state pension.

- assuming you have a repayment mortgage and keep up the payments - you can reasonably expect to live rent-free for a considerable period of time in the future.Depends on your age and location. If I were back in York then I'm at an age where buying a house is actually a poor decision compared with renting as I will pay slightly more to rent than to buy and will die before I recoup the loss (actually a mortgage company would not permit me to do this with a long term loan so I could only do this if I didn't own a house by paying a punitive monthly sum). So from a selfish point of view, if I moved back to York and didn't have a house then renting would be the financially smarter alternative purely from a disposable income point of view. (I guess you can sell the house, go back to renting

[drdoug]

Interesting - I've not run those sums before (I was lucky enough to be able to buy young) to see how it works out

[naath]

Shockingly landlords would like to both pay their mortgage and make a profit. In an economy where many people have no hope of ever getting together the money to buy (houses in Cambridge are now getting more expensive *faster than I am earning money*; I will never be able to buy here baring lottery wins or surprise inheritances), and in which landlords are much more willing than mortgage lenders to believe you when you say "of course I can give you 60% of my income every month" I am not even slightly surprised that renting is so expensive.

[steer]

The mean proportion of income spent on rental has actually been "more or less" static for the UK since around about 1995

[naath]

This does seem rather unintuitive. Doesn't explain why the housing benefit bill is quite as large as it is for one thing.

[steer]

The housing benefits bill is a complex function of the number of people claiming it, the proportion of housing costs paid, the housing which those people being paid housing benefit will tolerate (typically you would have to share accommodation) and so on. The housing benefits bill is currently large because more people are claiming housing benefit. The number of claimants has literally doubled post the crash of 2008. (Actually, I didn't know it was so severe until I looked up to answer this question -- that is quite a startling statistic.)

http://www.independent.co.uk/news/uk/politics/number-of-people-in-work-claiming-housing-benefit-soars-9647752.html

Because we have wage stagnation and a slowly growing economy more and more people are finding themselves eligible to claim either because their income has shrunk, their savings have been spent or they have defaulted on their mortgage.

[naath]

If

So the actual picture is that in recent years rent has not really increased as a proportion of income and there are more houses available per head of population.

then how does wage stagnation mean that more people are unable to afford to pay their rent? Surely if "rent has not really increased as a proportion of income" then wage stagnation would imply rent stagnation too because if wages are flat and rent increasing then rent would be increasing as a proportion of income.

[steer]

Surely if "rent has not really increased as a proportion of income" then wage stagnation would imply rent stagnation too because if wages are flat and rent increasing then rent would be increasing as a proportion of income.

The mechanism to qualify for housing benefit isn't that you can't afford to pay your rent. You qualify for housing benefit if your income is below a certain level, you're renting (not paying a mortgage, though I think you can get some help if you are unemployed and paying a mortgage, I'm not sure of the details) and you don't have savings. Wage stagnation means that many people have effectively had a pay cut as inflation is low but still exists. An increasing number of people either default on their mortgage, eat into their savings until they qualify or have their income fall below a certain level. (Stagnant wages is a combination of people some of whom have wages rising, some of whom have wages falling and some of whom have wages staying the same.)

[steer]

The housing benefits bill is a complex function of the number of people claiming it, the proportion of housing costs paid, the housing which those people being paid housing benefit will tolerate (typically you would have to share accommodation) and so on. The housing benefits bill is currently large because more people are claiming housing benefit. The number of claimants has literally doubled post the crash of 2008. (Actually, I didn't know it was so severe until I looked up to answer this question -- that is quite a startling statistic.)

http://www.independent.co.uk/news/uk/politics/number-of-people-in-work-claiming-housing-benefit-soars-9647752.html

Because we have wage stagnation and a slowly growing economy more and more people are finding themselves eligible to claim either because their income has shrunk, their savings have been spent or they have defaulted on their mortgage.

[steer]

My mortgage won't be paid off by retirement age. I was asked how I intended to pay it off. I said I had a pension with a lump sum. No proof of this was required.

Those figures on property and renting versus buying aren't what I expected actually. The London figures are much closer than I expected and in general there seems to be little country-wide difference.
Weirdly the telegraph shows the opposite figure for the period:
http://www.telegraph.co.uk/finance/economics/11101904/Renting-v-buying-damned-if-you-do-damned-if-you-dont.html

I'm not sure why you'd expect renting to be cheaper than buying though. It depends on the state of the market no? I mean obviously landlords want to make as much as possible

[andrewducker]

Will you pay more to buy than rent _this year_ or over the course of the mortgage, taking into account that rent goes up with inflation while mortgages don't?

I know that interest rates can fluctuate, but my mortgage is costing me the same as it did when I moved in 8 years ago, while rents are significantly higher than then. Over the course of 25 years I'd expect that to make a massive difference.

[steer]

Accounts for fluctuations over lifetimes as I understand it -- but it's a long time since I read the analysis and, of course, things change.

[andrewducker]

Interesting. I guess I would have suspected that as I'm effectively getting a 30% discount on my housing costs from 8 years, over the length of the whole mortgage I would be doing much better. But there are other costs involved for owning, which probably balances things a lot.

(I can't find a 2-bedroom flat to rent for what I'm currently paying on my mortgage, in my area. I may be unusual, of course.)

[steer]

I looked around for views on the costs of renting versus owning and it seems it's a really hard comparison to make. I guess it greatly depends on things like initial deposit, age of purchaser, location in country and so on.