I’ve been toying with the idea of writing about the economics of housing for some time but I worried it might be complicated or boring – and it might be boring. The truth is though, the economics which underpin housing policy are very simple.
The crash may have been based on gambling on increasingly nonsensical financial products but the ultimate security was the roof over our heads. The speculators may have rolled mortgages into bigger bundles, turned them into equations and then snorted them off each others suitcases but none of this would have been possible without houses. It’s been 30 years in the making but while we were gawking at a Place in the Sun, we failed to notice that the price of a basic commodity, like housing, going up and up all the time was a really bad thing, since none of us had any money.
This current crisis wasn’t some complex or unforeseen event, I don’t even think it was a side-effect of some other set of policies. When it all came crashing down, the people who caused the chaos were the best placed to deal with the “consequences.” They’ve now got all the houses and all the money and we’ve got nothing and we‘re told we have to like it. Housing has been almost completely privatised and our economy is in the dumps as a result. This wasn’t an accident – this was always their plan.
For phase one, we need to skip back to the olden days when most people stayed in council houses. This wasn’t the romanticised existence of gala days and all pulling together we often pretend, Glasgow was pretty grim well into the 80s and 90s and our housing stock was crying our for investment, even then. The Thatcher Government were in no mood for that and so they decided to sell off housing on the cheap, so they wouldn’t have to maintain it or build more. We were about to become a “property owning democracy.”
To call the Right to Buy scheme “Thatcherite” is actually to underestimate what an evil human being Maggie was, Thatcher vehemently opposed giving council tenants discounts on the market rate. In the end, she was convinced by the much broader economic and social consequences. In a “property owning democracy” very few people actually owned their homes, there were banks to own houses on their behalf. Not only that but the banks were on hand with loans which often exceeded the value of people’s homes. This left many former council tenants now paying the banks and their bills and, oh what nice scatter cushions…aren’t we dead posh? Lending people far more money than they could afford to pay back became much easier as the Tories increasingly deregulated banks and the financial markets.
It’s necessary to understand the role of the banks in all this. I mean, properly understand and contexualise it, not just shout “wankers” at them. In the sorry tale that is our economy, the banks are not the single bogeyman, acting above and outside the wider economic system. Rather, they are acting for it, driven by what it’s asking them to do. The cash that people couldn’t afford to pay back made banks lots of money, for sure (and they got the houses as well which was a bonus) but it’s no coincidence that suddenly everything else was deregulated. Now we could get our phone lines, our gas, our electricity and later of course, our internet, mobile contracts, satellite and cable from a range of companies. The average punter was no longer a tenant who received services in exchange for paying rent and tax – we became consumers living in our borrowed boxes, paying interest on our ever increasing debts.
This constant credit-driven consumption extended far beyond our front doors as we became obsessed with spending borrowed money on shit for our houses and ourselves. The bubble benefited the High Street – or more accurately the massive out of town Shopping Centres which replaced the High Street. B&Q and IKEA did a roaring trade as we continued to accumulate ever increasing volumes of stuff to cram into our houses. This made it look like the economy was doing well, no-one actually made or really did anything anymore since all the industry was gone but we all had credit so could keep each other in jobs by spending the banks’ money buying shit we didn’t need from each other and then taking out insurance on it, just in case.
Many people loved Right to Buy, some swear it was the single best thing that ever happened to working people but like all the selloffs of the 80s, it was a quick buck. That’s well and truly spent now and successive generations will wonder if not having any hope of living in houses fit for our needs, handing over some of the most fundamental parts of our economy to the private sector and paying back the massive debts we were encouraged to accumulate was really worth that lovely big rug.
While the nation pondered how staggeringly posh we suddenly all were, the people who had the money were focused on buying up all the houses. In the space of 10 years, if people had played their cards right, they could have gone from tenant to landlord. With prices going up and up, owning and developing houses became big business and we saw the rise of the Buy To Let. The lack of social housing meant property was becoming increasingly unaffordable, so the only choice for many of the poorest of the poor was to become a private tenant. The most ironic thing in all this is that many “landlords” didn’t own their houses either, they also relied on the banks and therefore charged their tenants the rates necessary to repay the banks and plenty more. This again ensured the price of housing was forced in an upwards direction.
Rather than attempt to counter ever inflating house prices by using the money made from selling houses to build more, social housing construction stopped. The existence of council houses was seen as an ideological anathema in a time of increasing private development. Those who languished too long in their ex-council houses, either as tenants or “owners”, found their houses worthless and their communities stigmatised and cut off from the “property owning democracy” going on elsewhere. This made the case for just bulldozing working class communities instead of redeveloping them ever more appealing. We didn’t regenerate areas, we either gentrified them or knocked them down, forcing those who were struggling further and further out of sight.
The price of housing continued to rise throughout the nineties and well into the next decade. In case anyone thought this was a bad thing, there were no end of happy smiling faces to tell us how wonderful it all was. An ever increasing number of programmes encouraged us to care about the what a nice holiday home some people could buy and how much money you could make buying a dank shithole, painting it a wee bit and then pawning it off to the povs. The slightest slowing of the market was greeted with howls of panic from the Daily Mail and Phil & Kirsty encourage millions of us to believe we could get out of our place in the slum, if only we can save that 15 grand deposit. No-one asked what would happen when no-one could afford housing and no-one could afford to pay the banks back.
Inevitably, that‘s exactly what happened. People could no longer pay back their mortgages, houses began to be repossessed meaning prices dropped, many were left trapped in houses which weren’t worth what they’d borrowed and “negative equity” left many people who thought of themselves as “home owners” realising they were just debt owners who lived in a big house.
The property owning democracy was in full swing and the Government stepped in; bailing out the banks who owned all the property at the expense of the rest of us. The central premise of capitalism is that when it all goes tits up, it’s a good thing, the market is “correcting” itself. Prices going down would have allowed more people to buy houses which in turn would lead to increased economic growth (in the short term). But when property is at stake, the laissez-faire ideology of those in charge was suddenly replaced by interventionism on a Soviet scale. The state just couldn’t do enough to help the rich.
The Tories arrived making various “never again” type proclamations about how we’d been taken to the brink of destruction and proceeded to do…exactly the same things all over again. Social housing tenants continue to bear the brunt of vicious attacks – now being told that the houses they were assigned were far too generous and if they happened to need a spare room because they’re disabled or happened to have a spare room because…well…the state had given them one, they now owed us loads of money. Of course, the government managed to find hunners of cash to help those it judged to be in need. The latest scheme, “Help to Buy” effectively see the government buying some of your house for you, subsidising both the borrower and the bank. This ensures the single most important thing happens – house prices go up and up and up again and who could possibly think that was a bad thing?!? So the government is happy to buy up to 20% of a £600,000 house to ensure prices rises continue – that’s an investment of £120,000 (in today’s over-inflated world). Spending half that building a decent house to help keep prices down would be an unthinkable act of state meddling – they are only ever prepared to intervene to increase inequality.
Thatcher’s dream has come true, now the democracy in our society is only working for those who own vast amounts of property. Getting out of this mess is not impossible because we go here as a result of a series of choices made over the last 30 or so years. This may need a short term investment but the long term gains are immense. We’ve got plenty of cash to allow rich weans to buy houses worth half a million quid for a mere 25 grand under “help to buy” but we don’t seem to be able to fund bricks, mortar or employment in our flagging construction industry.
Power is increasingly concentrated in areas with high property prices, so Scotland finds itself at a democratic deficit. Economic decisions are taken to ensure the boom in the South-East of England continues but we’ll all be picking up the tab when the bubble bursts, this time as before. Taking full economic powers back to Scotland and expanding the limited house building programmes we have could regenerate the economy both in the short and the long term. Ensuring the right to an affordable houses which are fit for purpose could and should be the priority of any future Scottish government.
Before we get all “what about Bank of SCOTLAND and Royal Bank of SCOTLAND” – there’s an excellent demolition of this from the less rabidly leftist folks over at Business for Scotland. They point out that “English” bank Barclays was bailed out to a much greater extent than HBOS or RBS. Except it was the US and Qatari governments who helped Barclays and not the taxpayer. As I’ve already pointed out, banks don’t operate above and beyond the economy – they work for it.
You also don’t need to share my dream of communist utopia to see that what’s going on in the housing market isn’t good news. In this piece on the Beeb, known subversives such as the Adam Smith institute, the National Landlords Association and mortgage brokers John Charcol say the Help to Buy scheme “risks inflating a new housing bubble”, is “trying to cure the symptoms rather than tackling the underlying cause” and is “redundant.” It’s pretty clear that the only plan the Con-Dems have is to recreate the last false boom in the hope we’ve already forgotten that it was us who picked up the tab when it all collapsed.
Remember that bit about “full economic powers?“ An independent Scotland would have to disentangle itself from the horrors of London finance – there would be a tough choice between whether to then entangle ourselves into the Brussels bubble or go it alone. An approach based solely on bricks and mortar won’t solve a crisis that’s perpetuated by those in the city who turn every commodity into gambling chips to chuck around for their own amusement.
Every society up until this point has given its citizens or subjects a home, if only so that they can continue to be healthy enough to work for their masters. The removal of meaningful work means many of us are now expendable, as are the homes we live in. We can invest in building and maintaining social housing stock, prioritise helping those trapped by their mortgages instead of subsidising others taking them out and reverse vicious policies like the Bedroom Tax, if we choose to do so. We can intervene in the market to encourage greater equality by forcing prices down instead of up.
We are where we are because successive governments have put us here; a needs based democracy, a house building democracy, an environment maintaining democracy – are all just as possible as the “property owning democracy” we’ve become. We need to build a real alternative, brick by brick.
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