Decaying London properties of the rich, and otherwise.
April 6, 2014 3:11 PM   Subscribe

In 2013, 85% of new houses in London were sold to non-UK buyers. Many stand empty and decaying, held as investments instead of homes. On the other end of the scale, desperate renters turn to leaking barges on the Thames.
posted by bitmage (102 comments total) 20 users marked this as a favorite
 
I've heard that a hell of a lot of these new absentee home buyers are Russia crime lords who are parking money overseas.
posted by Chocolate Pickle at 3:19 PM on April 6, 2014


Any government worth its salt would enact a shit-or-get-off-the-pot tax on vacant property.
posted by Faint of Butt at 3:21 PM on April 6, 2014 [49 favorites]


Buying up property without actually using it should be illegal.
posted by monospace at 3:30 PM on April 6, 2014 [16 favorites]


Pretty much the definition of "illth," as John Ruskin defined it.
“Wealth, therefore, is ‘The possession of the valuable by the valiant’; and in considering it as a power existing in a nation, the two elements, the value of the thing, and the valour of its possessor, must be estimated together. Whence it appears that many of the persons commonly considered wealthy, are in reality no more wealthy than the locks of their own strong boxes are, they being inherently and eternally incapable of wealth; and operating for the nation, in an economical point of view, either as pools of dead water, and eddies in a stream (which, so long as the stream flows, are useless, or serve only to drown people, but may become of importance in a state of stagnation should the stream dry); or else, as dams in a river, of which the ultimate service depends not on the dam, but the miller; or else, as mere accidental stays and impediments, acting not as wealth, but (for we ought to have a correspondent term) as ‘illth,’ causing various devastation and trouble around them in all directions; or lastly, act not at all, but are merely animated conditions of delay, (no use being possible of anything they have until they are dead,) in which last condition they are nevertheless often useful as delays, and ‘impedimenta,’ …
posted by notyou at 3:32 PM on April 6, 2014 [34 favorites]


I can't imagine what kind of failure of economics makes it not worth at least renting them out. If it's too much of a hassle to do it yourself, hire a property management service.
posted by Mitrovarr at 3:37 PM on April 6, 2014 [1 favorite]


Any government worth its salt would enact a shit-or-get-off-the-pot tax on vacant property. Adverse possesion is how parked properties come back into use as I'm sure you know.

I think that something similar to the London properties is happening in St. Louis - but it's more a hoarding thing by one old wealthy man. My half-hour search has not yielded results.

Help. Did I just dream this?
posted by vapidave at 3:44 PM on April 6, 2014 [1 favorite]


Due at least in part to the UK's "remittance basis" tax system. If a nonresident alien lives in, say, NYC for six months, blammo! They're subject to US, NY, and NYC income tax on all worldwide income (it's a little more complex for fed purposes, but no need to get into the details). Not so with UK, where tax can be avoided as long as the UK isn't one's domicile. That makes London a destination of choice for the tax averse superrich.
posted by jpe at 3:48 PM on April 6, 2014 [2 favorites]


Any government worth its salt would enact a shit-or-get-off-the-pot tax on vacant property.

I agree, in a normative sense.

But in a larger and empirical sense, what nation-state has the power anymore to tell the wealthy what to do, really? The last three decades have been all about the increasing legal autonomy of capital to do whatever the fuck it wants, wherever it wants, on its own terms. So while I agree that a decent government would do that, it's not clear to me how any first-world government, especially among those that really got on board with neoliberalism (as the US and the UK did), could or would actually enact such measures in today's world.
posted by clockzero at 3:52 PM on April 6, 2014 [23 favorites]


Vapidave, you may be thinking of Paul McKee, he is developing a large portion of north St. Louis.
posted by wikipedia brown boy detective at 4:02 PM on April 6, 2014 [3 favorites]


I think it's a problem in New York, too, although not nearly on the same scale. But there are a lot of rich people buying up New York apartments that they don't live in most of the time, and that drives up the price of real estate for people who do actually live in the city. The thing in London is different because it's the ultra-mega-super-rich, and they're buying real estate as an investment and a hedge on the possibility that the shit could hit the fan in their home countries, rather than garden-variety very-rich people who want a home base for when they come to town to shop and catch some Broadway shows. I wonder if there's some of that going on in London, too, though.
I can't imagine what kind of failure of economics makes it not worth at least renting them out. If it's too much of a hassle to do it yourself, hire a property management service.
I get the feeling that a combination of extreme shadiness and normal billionaire paranoia means that these people really, really value their privacy. They're probably more concerned about ther enemies getting access to install surveillance equipment than they are about the money.
posted by ArbitraryAndCapricious at 4:11 PM on April 6, 2014 [1 favorite]


Can't the poor break in and squat?
posted by Renoroc at 4:14 PM on April 6, 2014 [5 favorites]


Not anymore.
posted by dng at 4:16 PM on April 6, 2014 [8 favorites]


Any government worth its salt would enact a shit-or-get-off-the-pot tax on vacant property.

I live in DC, where we have the most dysfunctional of dysfunctional governments.

We tax vacant and derelict properties at 20% of their assessed value. Annually.

The law isn't even remotely controversial.

We're pretty dysfunctional... We almost just reelected a guy who's almost definitely going to end up in Federal prison for a very long time. But we're not monsters.

Unfortunately, it's possible to skirt this tax if you're a church or university. In fact, if you're a church, you basically don't need to worry about "laws" at all.

It's not a perfect system.


posted by schmod at 4:18 PM on April 6, 2014 [14 favorites]


I'm a bit shocked that the figure is 85%.

I live in London, I earn a good living, but I could only afford a tiny box on the outskirts of London. This thing will slowly kill the city, because if I (a well paid engineer) can't live here how do we have bartenders or shop staff or really anyone?

The current mayor and government are really not bothered about this.

My solution has so far been to buy my own non leaking dutch barge on the Thames, but they've since built million pound flats next to my mooring, so I don't really know how long I'll be able to afford the mooring.
posted by Just this guy, y'know at 4:18 PM on April 6, 2014 [15 favorites]


vapidave: "I think that something similar to the London properties is happening in St. Louis - but it's more a hoarding thing by one old wealthy man. My half-hour search has not yielded results.

Help. Did I just dream this?
"

Google "Northside Project".
posted by notsnot at 4:18 PM on April 6, 2014 [1 favorite]


It's not clear to me how any first-world government, especially among those that really got on board with neoliberalism (as the US and the UK did), could or would actually enact such measures in today's world.

It really isn't hard.

Enact legislation imposing punitive taxes on the owners of vacant properties, together with clauses beefing up the existing principle of adverse possession such that it became extremely difficult to own a property that remained vacant for more than a period of something like twelve months. Include measures making it easy to enforce this legislation, including some system of direct financial incentives for local authorities (in whose hands a lot of enforcement would almost certainly lie) such that they received bonuses per property repossessed and sold off to actual occupants - some flat percentage of the proceeds would be a way of doing this that would not cost anyone else anything.

I read somewhere that something very like this system exists in Denmark, and it is almost unheard of for there to be empty properties in that country. Is this true?

Of course, the current British government is wholly opposed to the spirit of this kind of thing, existing as it does solely to benefit the extremely rich at the expense of everyone else, particularly the poor, the elderly and the sick.
posted by motty at 4:18 PM on April 6, 2014 [3 favorites]


It really isn't hard...Of course, the current British government is wholly opposed to the spirit of this kind of thing, existing as it does solely to benefit the extremely rich at the expense of everyone else, particularly the poor, the elderly and the sick.

That was my point. We have the same problem in the US. Of course, in a literal sense, it wouldn't be hard to draft such legislation, but there's still the matter of getting it passed.
posted by clockzero at 4:22 PM on April 6, 2014 [5 favorites]


Apologies, clockzero. You are of course quite right.
posted by motty at 4:25 PM on April 6, 2014


We tax vacant and derelict properties at 20% of their assessed value. Annually.

That was my suggestion. My city raised the taxes on vacant land recently to try to encourage people to build on it since improvements won't raise the taxes that much any more. Waiting to see if that works.
posted by octothorpe at 4:26 PM on April 6, 2014


The article mentioned that only a handful of properties in One Hyde Park were registered for Council Tax, but even if they were they would pay so very little. The most Council Tax they would pay is £1,353 even though the lowest cost of an apartment is £20 million. That works out to a property tax of .007%.
posted by Thing at 4:33 PM on April 6, 2014


I don't mean to be pedantic or imperious, motty. I'm sorry if it came off that way.

I think where I'm coming from is intense frustration with the increasingly illusory character of democracy vis-a-vis effecting any meaningful distributive justice. I find it ever harder to talk about political remedies as a serious option for meaningful change, and it's terribly discouraging because I have both an acute sense of justice and a disinclination toward the idea of using bare force to effect it. We have systems of political decision-making that were designed to make political violence unnecessary; all the people participating in the obscene free-for-all that is global, neoliberal capitalism by capturing regulation or weakening voting access or privatizing public goods have no fucking sense of perspective, they have no memory of what happened to their ideological ancestors or why. It's just so dismaying, and so unnecessary, that things are so bad and getting worse, and nobody involved seems to think they will ever need to stop or moderate their behavior as a class.
posted by clockzero at 4:35 PM on April 6, 2014 [39 favorites]


I can only imagine the long term outcome of this will be jobs moving away from London. Many companies are selling their jobs to me (as a graduate) on the basis that they aren't in London and thus one can actually afford to live in something more generously proportioned than a large wardrobe.

Especially with fast rail links out of London it won't even be a problem that most international flights land there.
posted by ElliotH at 4:41 PM on April 6, 2014 [2 favorites]


I can't imagine what kind of failure of economics makes it not worth at least renting them out. If it's too much of a hassle to do it yourself, hire a property management service.

A lot of the places don't meet codes for occupancy, and would need rehabbing and upkeep to be rented out. In addition, a lot of these are fancy places where the market-rate rent would be out of the price range of anyone but people who wouldn't want to rent a place like that, and are likely living in some jetsons like space-condo or are exactly the type of absentee buyer being discussed here.

I get the feeling that a combination of extreme shadiness and normal billionaire paranoia means that these people really, really value their privacy. They're probably more concerned about ther enemies getting access to install surveillance equipment than they are about the money.

Except the main point here is that these people are never going to live in these falling apart places, or potentially even set foot in them. A big portion of this other than what i already mentioned is "got mine, fuck yours".

This thing will slowly kill the city, because if I (a well paid engineer) can't live here how do we have bartenders or shop staff or really anyone?

This is something that's happening in pretty much every large US city i have friends in, and even some of the smaller tier-2 or 3 ones. The answer is everyone who works at those sort of places moves further and further out and commutes, and any sense of community of those sorts of people(especially younger folk) gathered in one place gets eroded until everyone is just split up all over the city wherever they could chisel out a cheap space to live. And the people closer in to the expensive areas live 3, 4, or more up on tiny apartments. I've done four up on a one bedroom before, heh.
posted by emptythought at 4:43 PM on April 6, 2014 [4 favorites]


"As prices soar the creative heart of London will be ripped apart. The days when young people could come to the capital, live in a squat, or a cheap if grotty shared house in somewhere like Hackney or Brixton are already long gone. It is no surprise that beyond over-hyped internet start ups and hipster twats, London’s cultural life is decaying from the bottom up – those at the top just can’t see it yet. Artists, actors and musicians will be forced to join the exodus out of the city along with street cleaners and care workers.

Social housing is now being re-structured as a stepping stone for young middle class professionals, with laughably called affordable rents set at 80% of soaring local rental markets. Many of those who already have a council flat are being bedroom taxed out of the capital. When these tenancies end, these homes too will convert to ’affordable housing’ in many boroughs – which means they will be unaffordable for most people.

The problems do not end there. Hundreds of thousands of children are currently growing up in social housing in London who will never be able to afford to live here when they have families of their own. Meanwhile as the so-called ‘generation rent’ approaches old age, few will have pensions which cover London rents. The housing crisis in London is only just beginning.

Yet to hear the debate about London’s housing problems you would think the problem only affects ‘young professionals’ hoping to get on the housing ladder. It is as if the rest of us – millions of us – do not exist. The people who built this city, clean it, drive the buses and look after its children are being quietly abandoned with no thought at all to our lives, housing needs or futures."
-- Excerpt from johnny voids blog
posted by Lanark at 4:48 PM on April 6, 2014 [23 favorites]


Wait, so in the UK people pay *reduced* property taxes on second homes? How does that even make sense? I understand that people probably use fewer services in their second homes, but that has to be more than offset by the negative effect on housing markets.
posted by ArbitraryAndCapricious at 4:53 PM on April 6, 2014 [5 favorites]


Having lived in both the US and UK, I can confidently say that the problem in London is worse than any comparable one in the US (even NY and SF), by at least an order of magnitude. Local governments in the US at least *pretend* to be more concerned about the problem (or, at least understand that it exists).

Even though the overall safety net in the UK is far better than the one in the US, at least local governments in the US seem to be acknowledging that there's a problem, and the overall quality of the national safety net is constantly improving (even we need to drag half the country along kicking and screaming, only to have them embrace abd claim responsibility for those programs mere months after they're enacted).

In short, the UK is sooooooo fucked. The only respite is that the younger generation and the Scots are acutely aware of the problem... Hopefully they'll still have an economy left by the time that they have a majority...
posted by schmod at 4:53 PM on April 6, 2014 [1 favorite]


London sounds like a hell pit. It's the weirdest thing, since I'll be reading some novel - old Margaret Drabble, say, something set in London sometime before or at the very least during Thatcher, and it's very startling to realize that now it's all CCTV and ASBOs and slums and punishing the unemployed if they have a spare room. I remember reading V for Vendetta years ago and thinking how silly it was to set such a thing in the UK, because of course the UK was liberal compared to the US.

But really, this suggests to me the shallowness of democracy even in the so-called developed west. Because what mechanism is there for preventing the rich from doing pretty much whatever they want? There's custom, to a degree - it would look bad to beat your servants to death or chase the children of the poor with dogs, but that's about it as far as I can tell. There was a democratic moment in the mid-twentieth-century, backed up by two world wars and the threat of international communism, but that's over and it was never deeply rooted anyway. It took a few years for the rich to realize to what degree it was over, but we're heading back to the Dickensian 19th century, and we'll be lucky if we don't end up well back before the French Revolution. I think a lot of middle class people made the mistake of thinking that there was some kind of moral commitment to democracy in the democratic countries, that anyone would keep being democratic if a better deal came along.
posted by Frowner at 5:08 PM on April 6, 2014 [48 favorites]


Are there (there must be!) examples from history of cities that had this problem of the skyrocketing property values driving out middle- and lower-income citizens? (Perhaps including the purchase of investment or show properties that mostly sat empty?) I can think of a few examples where the aristocracy bought up the city center and working people were pushed a bit farther out, but most of the time there was a robust servant class living in the aristocratic palaces AND the not-rich could only be pushed so far out because commuting was impractical prior to commuter rail and cars.

When this has happened before, what happened? How did it correct or fall apart? Or has this never happened before because of the combination of gigantic size of cities, the internationality of the super-rich creating a critical mass of them, and modern transit making horrible commutes possible?
posted by Eyebrows McGee at 5:18 PM on April 6, 2014


I'm not exactly sure I see the big problem here. If the residences were not vacant, there would still be a problem with affordable housing. The Guardian article does seem to spin a bit much about the "rich foreigner" angle, though.

Squatters and eminent domain schemes are fraught with difficulties of their own. If under-taxation is the issue, what happens if a more fair amount doesn't help housing matters?

If all these vacant properties could be developed into multi resident housing, perhaps some of those suffering under high housing costs can have relief. But this would only be temporary as long as London is a place people want to live. And of course, developing these properties isn't as easy as all that, anyhow.

We tax vacant and derelict properties at 20% of their assessed value. Annually.

The law isn't even remotely controversial.


That kind of scheme sounds unfair, ensuring that real estate dealing is a business not for regular folks based on market restraints, but for corporations and the rich who can afford the governmental overhead.
posted by 2N2222 at 5:24 PM on April 6, 2014


The most Council Tax they would pay is £1,353 even though the lowest cost of an apartment is £20 million. That works out to a property tax of .007%.

Bloody hell. I've paid about half that for every tiny box I've lived in.

regular folks

Just your regular folks with unused second houses lying empty in the middle of a housing crisis?
posted by forgetful snow at 5:26 PM on April 6, 2014 [7 favorites]


Well then, if you can't live in it, burn it and enjoy the warmth.
posted by Renoroc at 5:38 PM on April 6, 2014 [6 favorites]


If all these vacant properties could be developed into multi resident housing, perhaps some of those suffering under high housing costs can have relief. But this would only be temporary as long as London is a place people want to live. And of course, developing these properties isn't as easy as all that, anyhow.

Well yes, that's the heart of the problem though: the value of these properties is not based on "wanting to live" but rather some abstracted storage of wealth. The vast amount of global wealth that could be poured into London for storage far far outweighs what most wanting to actually live there can pay. Cutting out the impact of wealth storage would have a huge relief on citizens and it is a disgrace that no government has yet tackled the problem in earnest. We are often told that making changes to the law--such as ending the scandalous non-domicile laws--would scare the wealthy and their money away, but this is exactly what we need to happen. It's sounds crazy to say, but England has attracted too much of the wrong money.

But given the overall dysfunction at all levels of English government (I'm deliberately exempting outside England) this is unlikely to happen soon. When tax havens can purchase members of the legislature (hello David Maclean!) is it any surprise that governance is so shoddy?
posted by Thing at 5:43 PM on April 6, 2014 [6 favorites]


This thing will slowly kill the city, because if I (a well paid engineer) can't live here how do we have bartenders or shop staff or really anyone?

Major cities like London and Manhattan have become theme parks for the rich. The barbers and shop staff are cast members who commute to work to entertain and provide for them.
posted by JackFlash at 5:45 PM on April 6, 2014 [35 favorites]


That kind of scheme sounds unfair, ensuring that real estate dealing is a business not for regular folks based on market restraints, but for corporations and the rich who can afford the governmental overhead.
How would it do that? The DC tax law has exemptions for property that is being advertised for rent or sale or that is being renovated or awaiting permits for renovation. People who are legitimately in the real estate business shouldn't be affected by it at all.
posted by ArbitraryAndCapricious at 5:47 PM on April 6, 2014 [1 favorite]


A Tale in the Desert is a large, persistent MMO where the players can build structures and vote on laws for the game, which the developers will then implement. The first law that always gets passed, very early in each iteration of the game, is a law that property belonging to inactive players can be claimed by anyone. Houses always cluster around the transit hubs, so this law is necessary to be able to maintain functional urban cores, and everyone realizes this.

A video game has a more functional government than the UK.
posted by heathkit at 5:58 PM on April 6, 2014 [24 favorites]


Related.
posted by cooker girl at 6:17 PM on April 6, 2014


Any government worth its salt would enact a shit-or-get-off-the-pot tax on vacant property.

Payments in salt were what the original Roman oligarchs did.
posted by srboisvert at 6:33 PM on April 6, 2014 [2 favorites]


This is happening in Los Angeles as well. Not as drastically, and mostly on the upper end of the market. In places like Santa Monica and Pasadena, home buyers usually have to contend with multiple over-asking-price cash offers coming in from outside investors. This is being attributed mostly to Chinese investors, but I don't know if that's accurate or not.
posted by Bookhouse at 6:39 PM on April 6, 2014 [1 favorite]


I can't imagine what kind of failure of economics makes it not worth at least renting them out. If it's too much of a hassle to do it yourself, hire a property management service.

I can completely believe in places and circumstances that would make this not worth it.

I own a home in Australia, and am moving to a new state later this year. I have just been looking into whether I should rent out my current place, or sell it. Leaving aside the idea of selling it, for now, these are the rental figures:

Rental income (annual, assuming only two weeks' vacancy): $27,000
Property management fees: $4,000
Land tax (only gets charged on rental properties): $8,000
Rates: $2,000
Tax on rental income: $4,000
Landlord's insurance: $2,000
Assumed annual maintenance & repairs: $2,000
Tax DEductions (as Australia allows you to treat expenses relating to rental property as tax write-offs. But since my husband will be unemployed, and expenses are assumed to be split 50/50 we only get half the deductions we would otherwise.): $1,000

So income from renting out = $29,000. Costs of renting out = $21,000. $8,000 profit is not nothing, but I imagine to a super-rich person, it's hardly worth the effort. If the land value were proportionately ridiculously high as it is in London, I imagine the profit from renting out is such a tiny proportion of the overall investment (and nothing compared to the annual land value increase) that these really rich people wouldn't bother. And this is assuming the system is the same as Australia's, which is actually designed to encourage investment property rentals. You wouldn't have to change very many of the above variables to make it not worth renting out the place at all.


(Note that for most investors, rental property is more attractive than it is for us, because Australia allows negative gearing, so you can write the mortgage interest, depreciation, plus any other costs off against your income. However in our case we have basically paid off the mortgage, and again we would have to split the write-offs 50/50, so there's basically nothing gained from negative gearing for us.)
posted by lollusc at 6:40 PM on April 6, 2014 [3 favorites]


The reason why they're not rented out is because many such properties are assets for their appreciative value not their productive value. By renting them--or even living in them--for any length of time you're taking away their "pristine" state which lowers their relative worth, and so must rent them until the income begins to outweigh the cost of any needed refurbishment. Add into this the presence of tenants (although tenants in England and Wales have few rights) and the time taken to carry out a refurbishment, and it also makes the asset less liquid.
posted by Thing at 7:03 PM on April 6, 2014


Are the costs of maintenance not tax deductible in London?
posted by padraigin at 7:23 PM on April 6, 2014


I'm not exactly sure I see the big problem here.

Properties with absentee owners pay less council tax, and sometimes (apparently) none at all. This reduces local government income, which goes towards social services for actual residents. You might ask why absentee owners should pay for those services: it's because they own a house there. Buying a house in an area means you benefit from local government services: the fact that the streets are clean, that rubbish is picked up, that it isn't a thuggish hellhole with the wind whistling down deserted streets. Property owners are benefiting from those services even if they don't live there: how much would their property be worth if those services went away?

What makes it worse is that these are large uninhabited properties and their design means that they couldn't accommodate many people even if they weren't vacant. London needs higher density; pushing people away from the core means more strain on the (incredibly expensive) transport that brings them in and out of the center. And people have to come in and out of the center, because that's where the jobs are - jobs that serve these areas, and which make it desirable. So the fact that the properties are uninhabited is bad, but the fact that they are large and uninhabited makes it so much worse.
posted by Joe in Australia at 7:28 PM on April 6, 2014 [9 favorites]




I would like a Dutch barge, is all I have to say.
posted by sandettie light vessel automatic at 8:16 PM on April 6, 2014


I don't think "right to buy" council houses could have had much to do with expatriates' desire to live in expensive London suburbs.
posted by Joe in Australia at 8:18 PM on April 6, 2014 [1 favorite]


When this has happened before, what happened? How did it correct or fall apart? Or has this never happened before because of the combination of gigantic size of cities, the internationality of the super-rich creating a critical mass of them, and modern transit making horrible commutes possible?

I can't provide any past examples, but i can provide an example of something that already seems to happen.

The formerly middle class and above suburbs are being refilled with the working class from the cities. Some were formerly minority areas, some were a decade ago full of aspirational middle class folks.

Suburban sprawling apartment complexes with hundreds of units(the kind that all look the same, and have a pool in the center of the sprawl of 2-3 story rows of apartments) have emptied of tech workers and young families using them as a stepping stone for their first house, and are filling with the game store workers, call center jockeys, and bartenders. Their rent hasn't really gone down much, it's just that the rents in the city quickly outstripped them. And hey, a place that was formerly a 3 bedroom with parents and two kids that was a single or double income household is now covered by 3 or 4 incomes.

That, as far as i can tell is the future. The formerly higher income suburbs becoming just grottos of lower income workers because everyone who lived in them now wants to live in the city. All the commuter infrastructure is already there in most places.
posted by emptythought at 8:21 PM on April 6, 2014 [3 favorites]


Buying up property without actually using it should be illegal.

Why?
posted by esprit de l'escalier at 8:39 PM on April 6, 2014


Why shouldn't it be illegal, or at least strongly discouraged via regulation? Land should be used for the benefit of the greater good, and in urban areas, that means it should be lived on or used for commerce that benefits the area.

Even if you're not a weirdo socialist like I am, that just seems to make sense, why would capitalists want huge amounts of urban property to lie fallow? It does nothing for anyone.
posted by padraigin at 8:56 PM on April 6, 2014 [4 favorites]


Why shouldn't it be illegal, or at least strongly discouraged via regulation? Land should be used for the benefit of the greater good, and in urban areas, that means it should be lived on or used for commerce that benefits the area.

Even if you're not a weirdo socialist like I am, that just seems to make sense, why would capitalists want huge amounts of urban property to lie fallow? It does nothing for anyone.


Of course someone is benefitting: the owner of the property has more buyers if the buyers do not have to promise to live X days in the property or else face stiff penalties, etc. Reducing the number of buyers means reducing sale prices, which most owners would vote against. Who would enforce such a system anyway? You would have to pay to have properties monitored for use.

I think the arguments that we are wasting resources is the same argument that we are wasting food when the food industry allows food to go bad rather than put it on sale at lower prices. It is applying the economy of the home to the market without considering the full effects of this logic. If the market is perpetually flooded with surplus food, no one buys the other food and farmers can't make a living.

If the prices are too high, then people will simply move somewhere else. That's the easy solution.
posted by esprit de l'escalier at 9:21 PM on April 6, 2014


I don't think "right to buy" council houses could have had much to do with expatriates' desire to live in expensive London suburbs.

No, but it did have a massive effect on house prices in the UK, which is one of the things that makes London property attractive as wealth storage or investment.
posted by Dysk at 9:23 PM on April 6, 2014 [1 favorite]


I don't think "right to buy" council houses could have had much to do with expatriates' desire to live in expensive London suburbs.

Sure it did. Look at this chart of the average price of London property. Property prices begin increasing drastically in the 80s, dip with the early-90s recession, and then go crazy starting around 1996. Right-to-buy was the beginning of very deliberate large-scale social engineering that convinced suckers the middle classes to pour money into the "property ladder" instead of actual productive assets.

Like the (very good) blog someone linked upthread said:
London’s housing market is being turned into a billionaire’s casino, and as more money pours in those returns will keep getting bigger. Or at least they will until someone blinks. And then the whole sorry scam will come crashing down, leaving the not quite so obscenely rich – who thought they were the players – discovering that they have been well and truly fucking played.
And as the article(s) point out, many of them aren't actually living there. These are "investments".
posted by junco at 9:24 PM on April 6, 2014 [1 favorite]


If there is truly a worry that speculation is causing volatility in the housing market then I'm totally for some mechanism to prevent such speculation, such as a property tax tied to assessed resale value coupled with a stipend for people who work in the city (or have recently lost such a job). Ideally this would make renting or owning cheaper for people who live in the city, while increasing the cost associated with speculating on and not using properties.
posted by esprit de l'escalier at 9:33 PM on April 6, 2014


Let me guess, esprit de l'escalier - this problem does not affect you personally and you cannot imagine it affecting you personally.

Because your comments on the subject - especially the bit about if the prices are too high, people will simply move somewhere else - strongly imply that you are coming at this problem as one of the people who really doesn't give a flying toss about the widespread destruction of communities and lives that the inability to find somewhere decent to live in your own city means to millions of people.

After all, the little, insignificant people - like me and others in this thread - will 'simply move somewhere else'.

It's the easy solution.

There are various words for people who take that view but I will not type them here.
posted by motty at 9:41 PM on April 6, 2014 [20 favorites]


Bookhouse, Orange County too. My cousins in Irvine live in a pleasant middle-class neighborhood and we went to visit and said, "I bet this is a great street for elementary-age kids, right?" and they said actually more than half the houses are vacant and owned by Chinese nationals who may use them one or two weeks out of the year visiting family, tops. I got pretty sad thinking about it...my poor niece and nephew out playing by themselves because even in their somewhat dense suburban neighborhood, no other kids live on the street because NOBODY lives there.
posted by town of cats at 10:01 PM on April 6, 2014 [3 favorites]


I think the arguments that we are wasting resources is the same argument that we are wasting food when the food industry allows food to go bad rather than put it on sale at lower prices.

There actually is more food (locally) than people can eat, so putting food on sale simply reduces the money that suppliers get for the rest of the food they wish to sell. In contrast, there is an under-supply of housing, and cheaper housing would mean more people living in a particular area. This would mean more and stronger local businesses, more taxes that could be used for local services, and fewer resources used for transport.

If the prices are too high, then people will simply move somewhere else. That's the easy solution.

That creates negative externalities. These areas are desirable specifically because they're close to the heart of London, which means the restaurants, theatres, shops and galleries that people work in. If they're forced to move further out then they'll spend more time getting to their jobs; more roads and rail must be built to move them; and local tax revenue will fall further, which will lead to poorer and less efficient local services.

The most obvious problem, to me, is that council rates are perversely designed to promote large house blocks and absentee living: the amount is capped (which promotes expensive houses at the cost of cheaper ones) and apparently reduced for people that don't live there. I can't see any reason to cap the cost of council rates; if we're worried about aged grannies being forced to move then impose a cap of based on the value of the property. Don't give any reductions or exemptions for expatriate owners. Treat more local government imposts as charges, rather than taxes, to catch people abusing their diplomatic status. After all this is done and billionaires are still leaving their houses empty then, oh well, at least they're paying their fair share.
posted by Joe in Australia at 10:12 PM on April 6, 2014


Because your comments on the subject - especially the bit about if the prices are too high, people will simply move somewhere else - strongly imply that you are coming at this problem as one of the people who really doesn't give a flying toss about the widespread destruction of communities and lives that the inability to find somewhere decent to live in your own city means to millions of people.

After all, the little, insignificant people - like me and others in this thread - will 'simply move somewhere else'.

It's the easy solution.

There are various words for people who take that view but I will not type them here.


Is your worry that speculation is causing high prices or volatility? Because if it's high prices, then I think it's almost impossible to come up with a fair solution. Anything you do to lower prices is necessarily taking money out of the property owner's pockets. Did you consider those people are also significant?

Volatility affects people's lives unfairly, and there is plenty of economic precedent to reducing volatility.

When I said that people will move somewhere else, I was imagining that the businesses will too. What's wrong with that? What's wrong with living and working in Newcastle or Leeds?

Finally, did you consider my tax and stipend solution? That's a de facto transfer of wealth from foreign speculators to residents. Seems like it might prevent the problem in the article.
posted by esprit de l'escalier at 11:06 PM on April 6, 2014


Is your worry that speculation is causing high prices or volatility? Because if it's high prices, then I think it's almost impossible to come up with a fair solution. Anything you do to lower prices is necessarily taking money out of the property owner's pockets. Did you consider those people are also significant?

Well, the speculators are also significant, and your plan would take money out of their pockets. I think the specific case we're talking about in London is the effect of heavy speculation, but even without that, letting cities be segregated by income is a bad idea.

I tend to think about most issues like this in terms of the tragedy of the commons. In this case, the commons is a vibrant, functioning city. If you want to be in a neighborhood with big, expensive homes and only people in your income bracket, go live in a wealthy suburb. But if you want to live in a city, where you can find someone to walk your dog, deliver your food, do your dry cleaning, or work at your startup, then you're going to want a city with a diversity of income levels. But it's in no one's individual interest to maintain this diversity - they just want to live in the cool part of town and if they can afford the rent, they'll do it.

Yes, rents rise because people want to live in an area, and they rise even more when rich people want to live there. But they don't want to live in a city because of the ground. They want to live in a city with artists and housekeepers and potential employees. Continuously rising rents destroy that. And then yes, the market response is to move away and rents will fall. When all the artists are gone and the restaurants suck because the waiters had to commute two hours to get to work that morning, then the rich people leave and the city collapses. Eventually, maybe the cycle repeats itself.

So even without speculation, there is a real problem here. How do we let cities grow and expand without destroying the things that made them valuable in the first place? One solution, which hopefully will be adopted in Seattle, is to set the minimum wage high enough that people can afford to live there. And if coffee gets really expensive because the barista is paying $1000 a month for a studio apartment then, well, less people will move there and rents will stabilize. Another option is regulating the rental market with price controls to ensure some stability. I know this is the case in New York, but I don't know how effective its been or how it's changed over the years.

But the point is, simply moving somewhere else is not the easy solution. The real consequence of that is the less well off, who were already living there, will now pay a kind of tax in order to participate in the city's economy - a tax in the form of time spent in transit. This tax is highly regressive - if they can afford a car and parking, it's less than if they have to take the bus. And if the tax is so burdensome, because the new residents of the city don't want to fund public transit since they all have limos or jetpacks or whatever, then people will leave, the city will go into decline, and once again you've taken money out of the property owner's pockets.
posted by heathkit at 11:48 PM on April 6, 2014 [8 favorites]


Well, the speculators are also significant, and your plan would take money out of their pockets

—Not if they rent out their property, since the renters can be receiving the stipend and therefore can afford to pay more, which allows the owners to charge more. It only punishes owners who choose not to rent, which was the point of the article.

. And then yes, the market response is to move away and rents will fall. When all the artists are gone and the restaurants suck because the waiters had to commute two hours to get to work that morning, then the rich people leave and the city collapses. Eventually, maybe the cycle repeats itself.

This is volatility — not high prices. In that case, we are on the same page. I also think this is a problem.

I disagree with minimum wage increases as a solution because it really only helps people making minimum wage and can hurt the middle class. Increasing minimum wage can force businesses to increase prices, which reduces the real spending power of the middle class.

(Also, baristas are not a good example because they make most of their money through tips, which increase with gentrification.)

The real consequence of that is the less well off, who were already living there, will now pay a kind of tax in order to participate in the city's economy - a tax in the form of time spent in transit. This tax is highly regressive - if they can afford a car and parking, it's less than if they have to take the bus.

I think a better solution that increasing minimum wage is to mitigate this tax directly by aggressively funding public transit, education, and healthcare. These investments make the city more affordable for everyone.
posted by esprit de l'escalier at 12:31 AM on April 7, 2014


Baristas in London won't get tipped a lot - culturally it's just not something we tend to do for coffee.
posted by edd at 1:04 AM on April 7, 2014 [4 favorites]


I disagree with minimum wage increases as a solution because it really only helps people making minimum wage and can hurt the middle class. Increasing minimum wage can force businesses to increase prices, which reduces the real spending power of the middle class.rh

Erhh... increasing the minimum wage increases the spending power of those on minimum wage.
posted by Mister Bijou at 1:16 AM on April 7, 2014 [1 favorite]


I disagree with minimum wage increases as a solution because it really only helps people making minimum wage and can hurt the middle class. Increasing minimum wage can force businesses to increase prices, which reduces the real spending power of the middle class.rh

Erhh... increasing the minimum wage increases the spending power of those on minimum wage.


…and decreases the spending power of those that make even slightly more.
posted by esprit de l'escalier at 1:25 AM on April 7, 2014


esprit de l'escalier: I think a better solution that increasing minimum wage is to mitigate this tax directly by aggressively funding public transit, education, and healthcare. These investments make the city more affordable for everyone.

And you fund that spending how, exactly? A big chunk of the problem, as outlined in the FPP, is that expatriates are immune to many forms of taxation. Your solution would end up hitting the workers, and leave the Russian oligarchs alone.
posted by Joe in Australia at 1:27 AM on April 7, 2014 [1 favorite]


esprit de l'escalier: I think a better solution that increasing minimum wage is to mitigate this tax directly by aggressively funding public transit, education, and healthcare. These investments make the city more affordable for everyone.

And you fund that spending how, exactly? A big chunk of the problem, as outlined in the FPP, is that expatriates are immune to many forms of taxation. Your solution would end up hitting the workers, and leave the Russian oligarchs alone.


Given the context of the article, presumably with property taxes?
posted by esprit de l'escalier at 1:49 AM on April 7, 2014


Given the context of the article, presumably with property taxes?
Someone who knows more than me will correct me if I'm wrong, but I think that property taxes in the UK are a one-time thing that you pay upon buying the property. So if someone buys a UK property as an investment and then it sits vacant for forty years, as has been the case with some of the houses the author of the article looked at, then they're not paying any property taxes for those forty years. They're also not contributing to the local economy by buying goods and services, because they don't live there. And many of these people aren't paying council tax, which is the tax that's supposed to fund local services.

Out of curiosity, did you actually read the article?
Of course someone is benefitting: the owner of the property has more buyers if the buyers do not have to promise to live X days in the property or else face stiff penalties, etc. Reducing the number of buyers means reducing sale prices, which most owners would vote against.
Many of the current owners aren't able to vote in the UK. At any rate, the number of people who are benefiting from the current situation is massively dwarfed by the number of people who are being hurt. I guess that's the heart of this debate, though: should UK society be organized for the benefit of a tiny number of Russian oligarchs, Middle-Eastern oil barons, and the property developers who serve them, or should it be organized for the great mass of people who live in the UK?
Who would enforce such a system anyway? You would have to pay to have properties monitored for use.
We're talking about a country that manages to enforce TV license laws. If they can figure out if you're watching broadcast television, I'm pretty sure they can figure out if someone lives in your house.
posted by ArbitraryAndCapricious at 2:44 AM on April 7, 2014 [3 favorites]


Erhh... increasing the minimum wage increases the spending power of those on minimum wage.

Not when it results in the job being outsourced (or simply not performed). Butchers at a "Danish Pig Production" slaughterhouse demanded higher wages which were not competitive with wages in a nearby country and the Danish slaughterhouse closed down and outsourced the production.
posted by flif at 3:19 AM on April 7, 2014


Not when it results in the job being outsourced

Perhaps less of an issue when we are talking about service staff who work in central London.

Can you give us any more detail on the Danish bacon producer who outsourced the production to another country?
posted by asok at 3:35 AM on April 7, 2014


as someone in seattle watching the minimum wage thing play out, there's several other big problems with that plan including

* Entitled butthead business owners treating employees like crap, and/or expecting people with PHDs or 10 years of experience or whatever because "dammit i'm paying them good money!"

* Reducing the number of employees, and the number of people on shift to the bare minimum

* The entire supply chain getting fucked. Lattes aren't just $10 because the shop has to pay the baristas more, everything that goes into them costs more because the guys who drive the green beans to the roastery, the chocolate chips, the empty cups, everything have to be paid the new high minimum wage.

One of the biggest ones though is that it will have the "punching down" effect of really fucking anyone who's been unemployed for any period of time and is currently, and amplify all the effects seen since the recession. Mainly credentialism and demand for lots of previous experience in "entry level" jobs, discarding the resumes/applications of anyone who isn't currently employed somewhere else, and other garbage along those lines. Everyone i know who has actually been in the service industry trenches since the recession hit is excited to see their paycheck expand since they're generally at 10-12 right now, but are nearly universally convinced that it will result in all the open jobs drying up, and basically only being fed to friends-of-friends already employed at other shops and people directly recommended. This is already a huge thing, but its pretty much seen as "Oh, sorry we were looking for someone with dishwashing experience" becoming the norm.

I mean ignoring the "destroys middle class spending power" argument, you can try and slay that. But everyone i know who has recently or is currently working in the service industry or retail in a city with rapidly rising rents thinks the high minimum wage idea is conceptually cool, but would create a pretty big "fuck you, got mine" while also causing a lot of people to be pink-slipped.

Or i guess in this case, P45'd.
posted by emptythought at 4:22 AM on April 7, 2014 [1 favorite]


Just FYI the Swiss rarely use restraunts, cafes, etc., way too expensive. It's better with fewer service jobs imho, make your own damp late and drink beer outside
posted by jeffburdges at 4:52 AM on April 7, 2014 [1 favorite]


motty: I read somewhere that something very like this system exists in Denmark, and it is almost unheard of for there to be empty properties in that country. Is this true?
Denmark has a law that a residential property, be it a farm, a house or an apartment, has to be a primary residence for somebody - i.e. they must stay there for at least 183 nights per year.

In rural districts, the duty to reside is waived after 10 years residence.

In cities, the rule is waived only for newly built property but comes into force the first time someone registers their permanent residence at the address. This means that in Copenhagen, wealthy expats (mostly) can buy apartments in newly developed areas, but the nice city center properties are (technically) immune to this.

In practice, enforcement is hard. Current Danish Prime Minister Helle Thorning-Schmidt ignored the law for 7 years while working in Brussels, for instance. That said, there isn't a big problem with empty housing in Copenhagen - it has been very much a buyer's market the last five years.
posted by brokkr at 4:52 AM on April 7, 2014 [1 favorite]


We need to shorten the work week for everyone, the minimum wage is just a distracting circus.
posted by jeffburdges at 4:54 AM on April 7, 2014 [3 favorites]


Can you give us any more detail on the Danish bacon producer who outsourced the production to another country?
Dismay at Danish Crown Faaborg plant closure
Danish Crown to close two facilities
Danish Crown acquires total shares of Sokolów
posted by brokkr at 5:00 AM on April 7, 2014


emptythought, I'm not sure I agree with those arguments:

* Entitled butthead business owners treating employees like crap, and/or expecting people with PHDs or 10 years of experience or whatever because "dammit i'm paying them good money!"

Yeah, fair enough, but this is already happening (dicks gonna dick) but at least it would guarantee the employees were being compensated a reasonable amount to put up with the crap raining down on them.

* Reducing the number of employees, and the number of people on shift to the bare minimum

I'm never convinced by this one, what kind of business has that kind of surplus of labour? A business that is running shifts with more than the minimum number of employees is badly run. I expect there would be a few instances of redundancies, as the cost/benefit of having some employees shifts slightly but I don't think the 'OMG we'll all lose our jobs' scenario that the right seems to believe in would happen.

* The entire supply chain getting fucked. Lattes aren't just $10 because the shop has to pay the baristas more, everything that goes into them costs more because the guys who drive the green beans to the roastery, the chocolate chips, the empty cups, everything have to be paid the new high minimum wage.

Well yeah, raising the minimum wage will almost certainly put up prices. It will also raise the spending power of those on the minimum wage so they will have a higher purchasing power than before (this is simply as they are receiving all of the benefit of the increased prices, whilst the cost is being bourne equally by everyone). This means that those earning more than the minimum wage see a decrease in wages in actual terms, but as this process leads to more equal wealth distribution, I see it as a feature, not a bug.
posted by Ned G at 5:14 AM on April 7, 2014 [2 favorites]


Someone who knows more than me will correct me if I'm wrong, but I think that property taxes in the UK are a one-time thing that you pay upon buying the property. So if someone buys a UK property as an investment and then it sits vacant for forty years, as has been the case with some of the houses the author of the article looked at, then they're not paying any property taxes for those forty years. They're also not contributing to the local economy by buying goods and services, because they don't live there. And many of these people aren't paying council tax, which is the tax that's supposed to fund local services.

The UK has stamp duty, which you pay when you buy the property, and rates are set nationally. There's also a higher rate for some expensive properties bought through a corporation, and the threshold was recently reduced.

Then you pay council tax on the residence itself, and local councils can set their own exemptions on this - for instance in Oxford, which also has a housing shortage and high prices although not to the same extent as London, there is no second home discount, and the charges rise to 150% if the house is empty for more than two years. The problem is that the council tax bands are not that reflective of house prices as there's one big top band - I am in a low council tax band and pay about 0.7% of the price of my house per year, but if I bought this £3,500,000 house, I would pay about 0.1%. Even if empty houses were charged double council tax, it would still only be ~£6,000 a year on your million-pound house.

I don't think council tax is a property tax in the way they work in other places, because it's paid by the residents, not the owner - so the tenants pay the council tax on a rental property.
posted by penguinliz at 5:59 AM on April 7, 2014


Squatters are part of the Invisible Hand of the Market as well.

Should The Market decide, with ineffable wisdom, that a given investor is not using a property for maximum return, then that property will be naturally taken over for a few years by beggars who can offer greater economic activity, followed by a purely accidental fire which levels the property and thereby clears it away for profitable rebuilding by another investor, thereby cycling assets through the economic system to the betterment of all.

Property seizure is, when you think about it, merely yet another feedback element present in the Market. There's no point complaining about it, you know, it's just how economics works.
posted by aramaic at 6:20 AM on April 7, 2014


I know everyone's chiming in about how it's similarly happening in their city or the city they once used to live in before they were priced out and all - but this is happening to my country. There are no cheaper options when your entire country is getting too expensive to live in. Well, except for the nuclear option of actually banishing yourself outside the country where you were born and to which you pledge allegiance, and to leave the soil which you are duty-bound and legally obliged to defend with your life through mandatory military conscription. And it has gotten that way indeed, with people starting to find it cheaper actually to live outside their own country and drive across international borders to work on a daily basis.

This is a list released by the Knight Frank Wealth Report, on the amount of square metres that US$1million can buy in various cities around the world. There's mine at #4, just one step below London and two steps above New York City. I don't know how the Monaco citizens handle it (they're #1).

Oh, and I notice adverse possession mentioned in this thread as a way to fight property hoarding. Our legislature abolished the doctrine of adverse possession here about 20 years ago, so it no longer applies (justifiably too, I think, but for purposes of argument, that's one less string in our bow).
posted by hellopanda at 6:47 AM on April 7, 2014


I don't know how the Monaco citizens handle it (they're #1).
Monaco is so small as to be an outlier, but anyway - the 99% of people in Monaco who can't afford to live in actual Monaco live a couple hundred meters across the border into France. Most Monaco "residents" are rich people who move there for tax reasons.
posted by brokkr at 7:53 AM on April 7, 2014


I disagree with minimum wage increases as a solution because it really only helps people making minimum wage and can hurt the middle class. Increasing minimum wage can force businesses to increase prices, which reduces the real spending power of the middle class.

I think the problem here is that you're not thinking big. I want a minimum wage that well and truly affects much of the middle class - by raising their incomes.


hellopanda, I totally hear you, the difference in the price of everything - not just real estate - between Singapore and JB is absolutely astounding, especially in light of how easy it is to travel between the two.
posted by Dysk at 7:57 AM on April 7, 2014


Thanks for the pig details brokkr. It sounds like Danish Crown were undergoing restructuring anyway. On top of that the workforce voted against the advice of their union and did not accept the proposed wage decrease that would have kept the plant open for a few years. They probably thought that *Danish* Crown wouldn't relocate facilities to Poland, but instead would show some loyalty to Denmark rather than the bottom line.
posted by asok at 8:27 AM on April 7, 2014


Happening in Vancouver as well.
posted by Theta States at 10:08 AM on April 7, 2014


It was unnervingly obvious when I was in Vancouver last year. Our hotel looked out onto condo apartment buildings, and the lights were mostly off and the pools empty.
posted by The corpse in the library at 12:02 PM on April 7, 2014


On top of that the workforce voted against the advice of their union and did not accept the proposed wage decrease that would have kept the plant open for a few years. They probably thought that *Danish* Crown wouldn't relocate facilities to Poland, but instead would show some loyalty to Denmark rather than the bottom line.
No, they were completely clear that their employer wouldn't back down. I think it was more a case of not wanting to set an example of being bullied into pay reductions.

Danish Crown gets more than 90% of its 7.8 bn € yearly revenue from outside Denmark, so there's little impact to them from a Danish consumer backlash. Besides, it's not like they had a great reputation before anyway. Tulip is the byword for mass produced meat crap (I was actually surprised when I had a nice pulled pork from Tulip for dinner recently) since they have traditionally exported the best meat to the UK where it commands higher prices.
posted by brokkr at 12:38 PM on April 7, 2014


This is already a huge thing, but its pretty much seen as "Oh, sorry we were looking for someone with dishwashing experience" becoming the norm.

I don't see how that's caused by a higher minimum wage, though. That's a function over the supply of labor outstripping demand, so businesses can be very picky about who they hire. The correlation between minimum wage and higher unemployment is actually pretty weak. According to the San Francisco Fed, unemployment remains high mostly because of lack of aggregate demand. Business don't want to hire much since they have fewer customers.

It's persuasive and intuitive that raising the minimum means employers will hire less, but in reality moderate increases in the minimum wage can improve net demand for labor. This is because the increase in aggregate demand adds more jobs than are lost due to the increased cost of wages.
posted by heathkit at 1:25 PM on April 7, 2014 [1 favorite]


We should automate virtually all manual labor, Dysk, including the non-routine work, like waitstaff, barstaff, etc. It's okay if that requires establishing a basic income eventually, or pay students indefinitely so long as they pass their classes, thus making the university the basic income distributor.
posted by jeffburdges at 1:46 PM on April 7, 2014


waitstaff, barstaff,

Automate waiters and bartenders and I stop eating and drinking out.

♫ One more for my baby.... ♫
posted by IndigoJones at 4:38 PM on April 7, 2014


I disagree with minimum wage increases as a solution because it really only helps people making minimum wage and can hurt the middle class. Increasing minimum wage can force businesses to increase prices, which reduces the real spending power of the middle class.

I think the problem here is that you're not thinking big. I want a minimum wage that well and truly affects much of the middle class - by raising their incomes.


Did you think this through at all? How can that work?
posted by esprit de l'escalier at 10:13 PM on April 7, 2014 [1 favorite]


as someone in seattle watching the minimum wage thing play out, there's several other big problems with that plan including
* Reducing the number of employees, and the number of people on shift to the bare minimum

This point is always getting brought up by the "job creators" and is such bullshit.

What company is employing extra people just for charity? If they could fire people and still operate, they would have already done it.
posted by Iax at 11:51 PM on April 7, 2014 [2 favorites]


I prefer outside activities like picnics or drinks in public spaces, IndigoJones, so much nicer when not being served by anyone. In particular, waiters, bartenders, cabbies, etc. creep me out because the hospitality industry exists partially to provide pretend servants to the middle class. Ain't just me either, folks commonly interact with strangers more positively in say parks as opposed to restaurants or bars. We do need to curate public spaces both inside and outside however, which requires money. Automation can help remove the subservience, ala tipping, etc.
posted by jeffburdges at 5:09 AM on April 8, 2014


Did you think this through at all? How can that work?'

I'm from Denmark. Yes I did, yes I do, and I've lived and worked somewhere where it demonstrably does.

(An effective minimum wage is set per-sector based on union negotiations, and it doesn't really fall below nearly double what minimum wage is here in the UK in any sector that I'm aware of. Yes, the level of taxation and cost of living is different - though with the housing market being what it is in many parts of the UK, the cost of living is not really that different on aggregate in my experience - but it far from erases the differences.)
posted by Dysk at 8:43 AM on April 8, 2014 [1 favorite]


This point is always getting brought up by the "job creators" and is such bullshit.

What company is employing extra people just for charity? If they could fire people and still operate, they would have already done it.


and

I'm never convinced by this one, what kind of business has that kind of surplus of labour? A business that is running shifts with more than the minimum number of employees is badly run. I expect there would be a few instances of redundancies, as the cost/benefit of having some employees shifts slightly but I don't think the 'OMG we'll all lose our jobs' scenario that the right seems to believe in would happen.

Nah, not really. I mean bring up the job creators and shit on me all you want, but i'm talking about places that have say prep, line, and a cashier so they can quickly motor through customers when it's busy. They'll cut down to two and one, instead of three and two employees depending on whether it's peak time or not.

Could they have always done this for "efficiency"? yea, but it's a false efficiency since now the time per customer is longer. Is this exactly the kind of thing that will happen, and that a lot of people have seen cheapass owners and managers do before to keep labor down even when it doesn't actually make sense anywhere but on paper? yes.

Nowhere did i say or imply anyone is employed as a "charity", my point was just that jobs will be found that make no sense to someone who hasn't spent time in the shop when it's packed and just seem like "cruft". They will be cut. Similarly, i don't see a point in associating this argument or me with the right except to discredit me and make it sound like i'm just talking farts with my asshole.

And i didn't even get in to apathetic managers who know it will fuck the shop over a bit, but only care about labor numbers. Saying that people won't either get severely less hours or be let go because of even just that point with this is delusional. I think i pretty clearly stated that i'm all for a higher minimum wage, i just don't think it's going to be all roses and sunshine like a lot of people and especially its proponents in seattle seem to paint it as.

I mean hell, watch some stuff like this. Economists writing up the hypothetical way it would work are not business owners operating in reality.

The correlation between minimum wage and higher unemployment is actually pretty weak.

"Some studies say yes, some studies say no" isn't pretty weak. That's weasel words shit. Up for debate, more study is required about, etc would be more honest. Saying it's pretty weak is depicting a slam dunk that isn't there.

Well yeah, raising the minimum wage will almost certainly put up prices. It will also raise the spending power of those on the minimum wage so they will have a higher purchasing power than before

How do you reconcile these two? If your wages essentially double, but the price of a carton of milk or a cut of chicken doubles as well... then what have you gained?

I haven't seen anything but nebulous arguments on this part. If there's a good article i should be reading that i haven't, which explains how increased wages will outstrip increased costs of everything, probably up to and including housing(because that's a function of what people are willing to pay, not some fixed cost), i'd love to read it.
posted by emptythought at 1:13 PM on April 8, 2014


Did doubling CEO pay over the last few years also double the cost of a carton of milk? Why not?
posted by aramaic at 1:45 PM on April 8, 2014 [1 favorite]


That is not the same thing, you know that, and i shouldn't have to explain why. Don't be coy.
posted by emptythought at 4:46 PM on April 8, 2014


Unless literally every single expense also doubles - unlikely, given that not all products are purchased exclusively by people on minimum wage - you're still better off with twice the wage, even if milk and eggs cost twice what they used to (which is unlikely - the kind of wage/price spiral you're alluding to, has it ever actually been observed in the wild?)
posted by Dysk at 8:49 PM on April 8, 2014


Unless literally every single expense also doubles - unlikely, given that not all products are purchased exclusively by people on minimum wage - you're still better off with twice the wage, even if milk and eggs cost twice what they used to (which is unlikely - the kind of wage/price spiral you're alluding to, has it ever actually been observed in the wild?)

The prices increase not because people on minimum wage are purchasing them. They increase because people on minimum wage are producing them (and shipping them and shelving them and refueling the trucks that ship them, etc.) Increases in minimum wage can affect a single product many times over.

The increase in prices is compounded because as price increases, the number of customers willing to pay the amount decreases, which can make the price even higher in order to ensure a profit.

…you're still better off with twice the wage, even if milk and eggs cost twice what they used to…

If you make minimum wage, then you are better off, and if you make more than minimum wage, you're worse off. But I think there are better and fairer ways to redistribute wealth than increasing minimum wage.

Did you think this through at all? How can that work?'

I'm from Denmark. Yes I did, yes I do, and I've lived and worked somewhere where it demonstrably does.

(An effective minimum wage is set per-sector based on union negotiations,


That's not a minimum wage. Denmark technically has no minimum wage. Union negotiation is much more flexible than a hard minimum wage.
posted by esprit de l'escalier at 9:18 PM on April 8, 2014


Union negotiations in Denmark aren't necessarily frightfully flexible, with the way the legal framework around them is set up. In all but name, it is a minimum wage with some slight variance by sector.
posted by Dysk at 7:41 AM on April 9, 2014


Besides, any redistributive justice will necessarily leave some people worse off. Set the minimum wage at a decent level, and it's the people living above that decent level who are worse off - I don't see this as any more problematic than a system of progressive taxation, for example, which has a similar effect.
posted by Dysk at 7:43 AM on April 9, 2014


Dysk, have you got any studies showing that? Because my gut feeling is that redistributive measures disproportionately help the poorest sections of the community, including the ones just outside the section receiving aid. They're more likely to be geographically or socially associated with the people receiving the aid, and they're more likely to be the second-order recipients of benefits associated with the aid. That is, if some people in a poor community have more money, they tend to spend it locally and everybody is better off. If homeless people are housed, there's less stress on social infrastructure and their neighbours are better off. And so forth.
posted by Joe in Australia at 2:20 PM on April 9, 2014


Joe in Australia, how are you housing the homeless? Perhaps with taxes on the super-rich? Is it really that much of a question if Bob Millionaire would be better off in Monaco or Denmark, for example? He'd have more money in Monaco, because he wouldn't ever be paying a marginal rate of income tax in excess of 60%.

Sure, you help most everyone by helping the poor, I agree. But most everyone is not literally everyone, and I just don't have a problem with that. 'Redistributive' necessarily implies taking from some party and giving to another.
posted by Dysk at 5:06 AM on April 10, 2014


Sure, you help most everyone by helping the poor, I agree. But most everyone is not literally everyone, and I just don't have a problem with that. 'Redistributive' necessarily implies taking from some party and giving to another.

Are you considering indirect effects of raising minimum wage? Raising minimum wage is not the same as "helping the [most everyone]".

It can improve the bottom line for people making minimum wage — unless it costs them their jobs when the industries are offshored to more competitive countries. Not every country is Denmark. As the wage increases, there is an increasing economic incentive towards offshoring and automation. Maybe that's not true for a few percent increase, but the 100% increase you're suggesting can eliminate entire domestic industries — eliminating supply of wage jobs.

Not all poor people are wage workers. A contractor who gets occasional work to fix houses for example, might be poor as far as his annual income, but not his hourly wage. A woman who owns her own business, say a dry cleaner, is paying herself. Raising the minimum wage does nothing to help the contractor find more work or the owner find more customers (despite increasing the spending power of some people at the cost of others.) Therefore, raising minimum wage biases the economy towards certain kinds of jobs and away from others — increasing demand for wage jobs.

Raising minimum wage is inflationary, which devalues people's savings — including the savings of poor seniors. This is unfair. Inflation also makes investment less attractive, which constrains development and therefore employment, harming poor people indirectly.

Constraint of industry means that while raising minimum wage superficially helps minimum wage workers take more of the pie, it can make the total pie smaller, so that everyone makes less.

Finally, raising minimum wage necessarily puts domestic companies at a disadvantage to foreign ones. If you're going to bite an economic bullet, why not bite one that puts domestic companies at an advantage? Why not invest in public healthcare, education, and transit? Make it so that companies have a healthier, better-educated, and larger (because of transit) labor pool — so that poor, bright or hard-working children succeed more.
posted by esprit de l'escalier at 10:46 PM on April 10, 2014


Finally, raising minimum wage necessarily puts domestic companies at a disadvantage to foreign ones. If you're going to bite an economic bullet, why not bite one that puts domestic companies at an advantage? Why not invest in public healthcare, education, and transit? Make it so that companies have a healthier, better-educated, and larger (because of transit) labor pool — so that poor, bright or hard-working children succeed more.

Why one or the other? Why not both?

You're overlooking the economically stimulating effect of having more money flowing round the economy - money likely to be spent - in every regard, except inflation. That seems a little one-sided.
posted by Dysk at 2:04 AM on April 11, 2014


You're overlooking the economically stimulating effect of having more money flowing round the economy - money likely to be spent…

Three points: (1) All money is spent, whether it's paid to a poor person or a rich one; (2) It's the central bank's — not the government's — job to affect the money supply; and, (3) if you want to increase the money supply, it's better for the central bank to buy back bonds to mitigate the interest that everyone is paying on those bonds.

Why not both?

I gave plenty of arguments against raising minimum wage: it increases demand while reducing supply of wage jobs, the inflation unfairly affects people, and it reduces the total pie of economic activity.

I'm not saying there shouldn't be a minimum wage, but there are many reasons to use other levers to improve social justice.
posted by esprit de l'escalier at 5:32 AM on April 11, 2014


All money is spent? Maybe over a long enough time frame, but there sure are a lot of wealthy people who still have a lot of their wealth when they die, and it's not because they're earning it in their twilight years. Beyond that, money paid to the poor is far more likely to be spent locally. It's not a matter of increasing the money supply, but increasing the degree to which it actually moves round the economy. If increasing minimum wage were so straightforwardly responsible for 'decreasing the size of the pie' then we'd expect to see a strong correlation between minimum wage increases and GDP decreases, or at least falls in the rate of economic growth - something that the corpus of evidence from minimum wage increases historically does not show.
posted by Dysk at 10:56 AM on April 12, 2014 [2 favorites]


All money is spent? Maybe over a long enough time frame, but there sure are a lot of wealthy people who still have a lot of their wealth when they die, and it's not because they're earning it in their twilight years.

What does keeping your wealth have to do with money being spent? How do do you think people keep their wealth? — in cash under their mattress? If it's in a bank account, the bank spends it; if it's invested in equities or property, the seller has it and spends it.

Beyond that, money paid to the poor is far more likely to be spent locally.

What do you mean by "locally"? All money is spent domestically since it is only legal tender domestically. Do you mean in the same city? Why should people in one city be favored over people of another? I think part of living in a free society is the freedom to spend money wherever you want.

It's not a matter of increasing the money supply, but increasing the degree to which it actually moves round the economy.

The "degree to which is moves around the economy" is called the "velocity of money". It's not necessarily a good thing. Too high a velocity is inflationary, too little is recessionary. The balance is achieved by controlling the money supply by the central bank. The whole reason that the central bank is not under direct control by the elected government is to prevent the public from choosing selfish short term economic policies at the price of inflation, which is what you're suggesting.

If increasing minimum wage were so straightforwardly responsible for 'decreasing the size of the pie' then we'd expect to see a strong correlation between minimum wage increases and GDP decreases, or at least falls in the rate of economic growth

Establishing causal relationships between economic policy and economic activity is hard. Small changes in the minimum wage might not do anything. I think it's clear that doubling minimum wage will promote offshoring and automation.

something that the corpus of evidence from minimum wage increases historically does not show

That may be true with small changes to the minimum wage, but it's not clear to me that doubling the minimum wage wouldn't destroy industries that depend on minimum wage workers.
posted by esprit de l'escalier at 4:53 PM on April 12, 2014


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