Time to hit the roof over housing?

Morning all,

Despite what this morning’s papers and Labour say, it’s not ‘news’ that there’s no May election. If you’re running the country you don’t call an early one after those kind of by-elections results, no matter how many squillions of pounds a racist might have given you for a campaign. The Kate photograph fandango is also not news as far as I’m concerned – but I’ve been massively outvoted on this one. The minutiae of that incredibly dull photograph got more attention in the office than our fine charts this week. I’m not saying that you lot or any members of the Resolution team have fallen for conspiracy theories just yet, but I’m keeping a careful eye out for any tin foil headgear just in case.

To distract you from the trivia, we’re delving into who’s the gloomiest about our economic outlook, plus the ups, and downs, of pay transparency. And COTW has real news – about us falling behind on house building.

Have a great weekend.

Torsten

Chief Executive
Resolution Foundation

Gloomy girls. Alongside a reminder that the youth are feeling the most pessimistic about the economic outlook (unsurprisingly given the last two decades have stuffed them over), there’s two puzzles in Ipsos Mori’s latest economic sentiment tracker. First, given that things have been terrible in recent years, it’s a bit surprising that only 22 per cent of us think the economy will improve in the next year vs 56 per cent who think it’ll get worse. Do you guys remember how bad last year was? And second, women are way gloomier than men. A net 57 per cent more women aged 18 to 34 think the next year will get worse rather than better, compared to 39 per cent amongst their male peers. Anyone know what’s going on?

More moderation. What are we going to do about social media? I’m all for banning smartphones for under 16s, but that’s not going to sort out the adults who lose all self-control behind the anonymity of the interweb. What can we learn from other countries? Germany, in the midst of the panic about large scale migrant arrivals from Syria a few years back, introduced a law, known as NetzDG. It fined large social media platforms up to €50 million euros if they failed to remove hate-based content promptly. New research suggests it did cut the number of hate filled Twitter posts about refugees (there were a lot…), which the authors in turn argue slightly reduced the number of hate crimes in real life (don’t get overexcited, we’re talking small reductions like 1 per cent). As Oliver Twist would have put it, please Elon, can we have some more moderation.

Peering at pay. We like pay transparency, hoping it’ll improve pay equality. A family member actually found out this week his employer was paying different wages to two groups of workers doing the same job, so new research on the topic feels particularly relevant. But it suggests there’s more to pay transparency than meets the eye. The good news is that revealing pay gaps between co-workers helps reduce them. But it also reduces average pay by up to 2 per cent. Why? Basically firms fight harder to avoid giving any one worker a pay rise once they know they’ll also have to give it to others. More positively, revealing pay available in different firms for similar jobs boosts workers’ bargaining power, helping them move to better-paying firms. What about transparency on how much your superiors get paid? It seems to motivate employees, boosting their desire to get promoted more than their resentment of the boss class.

Desirable density. We love maps. And we love charts. So a new tool to visualise the population size/density of every city you can think of, and how that varies with distance from the centre, is popular in RF HQ. I’m not sure how LA even gets to qualify as a city, looking at its ludicrous lack of density. Central Paris on the other hand is rammed – I wouldn’t have guessed its city centre was more densely populated than New York…

Tricky taxes. I had a fun Tuesday evening at UCL. Gabriel Zucman was launching the EU Tax Observatory Global Tax Evasion 2024 report. My first proper job was on tax compliance in HMT, so I enjoyed the good news that the recent step change in tax authorities sharing information across borders (e.g. about bank accounts UK citizens hold abroad) has radically reduced the number of people not paying tax on what you’ve got stashed abroad (hello Switzerland). The authors’ proposal for a 2 per cent global wealth tax on billionaires goes in the interesting but not going to happen box. For a reminder of how much the rich hate a wealth tax, read a new paper which combines the revelations from the Panama Papers with tax returns submitted in Columbia between 1993 to 2016. How did the rich respond to the arrival of a wealth tax? Declaring a lot less wealth (by misreporting hard to verify items, like overstating debt, and hiding assets abroad). The answer to how rich we are? Depends on who’s asking.

Chart of the week

The expected housing announcements didn’t make it into the Budget last week (when house prices aren’t looking buoyant offering 99 per cent mortgages is a recipe for some quickly being in negative equity). Fiscal measures open to the Chancellor (think subsidies for first time buyers or tax rises on buy to let landlords) affect who owns which houses, but not our biggest housing problem: its high cost, which is ultimately about the supply and demand of properties. A great chart on this topic comes courtesy of housing guru Jim Gleeson. It should gently remind those who set the test for our house building as “is it enough to keep pace with a rising population” that they are playing the wrong game. We need to build faster than that. Why? First, the nature of our population is changing (an older country, with more singles and fewer kids has smaller family units = requires more homes/person). Second, like most kinds of goods/services, we desire more/bigger/better homes as we/the country gets richer. Factor these in and you can see where Britain’s housing problem lies – unlike France and Germany, we’ve not been building to meet that demand (compounded by faster population growth off the back of higher migration rates this century). The result? High rents but also very cramped living spaces. New Yorkers, famously pitied by other Americans for their cramped flats, have more floor space than Brits as a whole. The 43m²/capita in NY metro area isn’t just way above London’s 33m² but exceeds the 40m² UK average. Jim’s estimate of how many more homes it would take to catch-up with Germany or France? Another 5 or 7.5 million respectively. For a start, how about we stop falling ever further behind? Time to get building.