Demolition rather renovation is required in the housing market
There was a time not so long ago when the idea of housing as a political issue seemed quite old-fashioned. With consistently rising home ownership and falling demand for subsidised social housing, the need for a political party to have a ‘housing policy’ seemed a bit redundant.
Now, however, housing is not just one political issue; it’s a ream of controversies and counter-claims. The recent budget contained a raft of housing policy announcements and Labour has campaigned on ending the so-called ‘Bedroom Tax,’ and demanded a renewed campaign of house building. I could go on, but you need only open a newspaper on any given day to read about the latest development in what is rapidly being accepted by figures as diverse as Ed Balls and Prince Charles as a ‘housing crisis.’
The return of housing to the forefront of political debate can largely be traced back to the economic collapse of 2008, which still looms over all political discourse and it had its depressing genesis in housing. As banks in the US found they had given mortgages to vast numbers of people who could not afford them, with little prospect of recovering that capital, financial companies around the world which had bought debt from these institutions (under frighteningly complex arrangements) lost out. One of the many consequences of the whole debacle was that UK banks became much more cautious and less generous in their mortgage deals.
Consequently, for the first time since 1918 rates of homeownership in the UK are in decline. The proportion of people privately renting is rising and for the first time since the mid-70s the proportion living in social housing has stopped falling. Increased demand in the private rental sector has already pushed up prices significantly, particularly in urban centres, and it seems likely demand for social housing will rise again in the next few years. If homeownership is progress, we are going backwards. In fact if even affordability and security of shelter counts as progress, we are going backwards.
As these trends can largely be traced back to the financial collapse of 2008, it could be argued this will be a short-term aberration; that once the economy recovers fully, the long-term trend will re-emerge and we’ll turn into the “nation of property owners” Margaret Thatcher, amongst others, envisaged. Such a thesis is not impossible, although it seems to rely more on optimism than anything else.
Now though is at least the time to ask if private ownerships of our dwelling places really amounts to an appropriate measure of societal good, or if we need an entirely different approach to housing policy.
It has often been suggested modern British politics is fundamentally irradical. It has an abhorrence of ideas which seem extreme, impractical or difficult to comprehend sensibly. All things considered though, the status quo with regards to housing seems rather radical itself and meets these criteria for abhorrence.
It is now commonly accepted that in order to buy property someone should take out a loan that they have little realistic prospect of paying back in their natural lifespan. Mortgages meanwhile are increasingly a huge brake on individuals’ personal capital and have been found at the root of countless economic crashes. Anything but ever-rising house prices gives way to negative equity and resultant panic. Ever rising prices, however, make housing unattainable for subsequent generations. In what economic model any of this makes sense is difficult to fathom.
Yet still it is a pillar of truth for a certain strand of thinking across all UK political parties that home ownership is a fundamental good. Social mobility, some suggest, pretty much begins and ends with property. And of course inheriting a piece of property is a huge advantage in life. With life spans increasing, however, many people will not inherit any property until their seventies, and in any case much of the capital will have been expended funding the social care costs associated with old age.
There are other legitimate doubts about the benefits of home ownership. Various studies have shown that, apart from short-term crises, stock markets prove better investments than bricks and motor. Such studies admittedly neglect the fact you can not really get a good night’s sleep in a stock portfolio. The point remains though that the benefits of home ownership, in terms of individual prosperity and inter-generational social mobility, are increasing negligible.
Home ownership can also be a break on the economy by inhibiting workforce mobility. If you have spent the last fifteen years paying for a piece of property, you’re less likely to want to sell it and start all over again to take up a new job. In an increasing globalised society, this again suggests social change is diminishing the usefulness of homeownership.
The list of the countries with the highest proportion of home ownership seems to confirm there is little hard linkage between home ownership and economic prosperity. Indeed, looking at the list it may be puzzling why neo-liberal thought seems to see universal home ownership as the Nirvana of popular capitalism. It is not the free-market ideologues of the USA nor the industrial powerhouse of Germany whose citizens enjoy 90% + rates of home ownership. Rather it is a small collection of ex-communist countries, countries with declining populations and city-states with public ownership schemes, such as Singapore.
If housing as an asset is increasingly economically irrelevant, perhaps it is time to devise housing policy more on the basis of what housing primarily is to most people: a place to live.
A “nation of renters” though is not an attractive slogan. Nor is the prospect of a handful of landlords becoming obscenely wealthy of the backs of everyone else hugely appealing.
If we accept the housing market status quo as being a radical, i.e. an extreme, difficult to sensibly comprehend and impractical, market, it is likely it will then require a radical solution. In truth, I do not have such a solution. Just for the sake of it though, let us imagine a possible alternative to the chaotic, crisis-spewing, unfair market under which we currently labour.
Rather than fiddling around with ‘Right to Buy’ or ‘Right to Build,’ what about a ‘Right to Property?’ Housing could be taken out of economics altogether if at a certain age a young person was given the right to live in an area of their own nomination. As a policy it would be initially expensive no doubt, but consider the huge boost to tax revenues from people freed from the demands of rent and mortgage payments. The economic crashes property has so often been at the heart of, meanwhile, would cease to be a possibility.
House building could also finally be targeted to meet needs. One of the revelations of the ‘Bedroom Tax’ controversy has been that housing for single people simply has not been built for many years. London is experiencing an affordable housing shortage despite the huge demand from young people moving there on en masse. House builders though prefer to cater for a wealthier clientele with higher profit margins.
There are obvious flaws with a ‘Right to Property’ (how would we decide who gets the Mayfair studio and who gets the Bexleyheath bedsit? Would there be any incentive to maintain property?) and I mention it only semi-seriously. But I could ask would such a system be significantly worse than the housing model we have now in terms of equal access, affordability, market instability and social mobility?
Regardless of the answer there appears very little to recommend the way society currently allocates housing other than the fact it is the way society currently allocates housing. Government ministers have been quick to accuse anyone criticising housing policy of Marxism, but it does not take a Marxist, or even an economist, to recognise housing as a clear case of market failure. Rather than marginal tweaks to a failed system, such as realtively small scale building and equity schemes, perhaps political energies should be expended on devising a fundamentally alternative system.