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Archive for the ‘Comment is free’ Category
Thursday, September 1st, 2011
Homelessness up. Housing benefit claims up. Housing waiting lists up. What happened to the Tory dream of home-ownership transforming the nation?
It would be funny if it were not so terrible. Britain is 30 years into the grand Conservative project that was to transform the nation into a ”property-owning democracy”. To mark this great anniversary, a government-sponsored organisation, UK Asset Resolution, is about to embark on the highly patronising and paternalistic task of telephoning 30,000 mortgage-holders and telling them to spend less on nights out, Sky television, gym membership and mobile phones, and more on servicing their mortgages. It’s safe to say that this is not what Margaret Thatcher had in mind when she promised that her privatisation policies would remove the state from people’s personal lives. It hardly chimes with David Cameron’s rhetoric either.
UK Asset Resolution. What a name. It sounds like a highly dodgy private company that buys debt, then intimidates people into paying it off at extortionate rates. But it isn’t. UK Asset Resolution is the Treasury-owned holding company that was established last October to “support around 800,000 customers with £77bn of loans”, customers who initially took out their mortgages with Northern Rock and Bradford & Bingley. Both of those companies, of course, are now “taxpayer owned”, after receiving more than £48.7bn in government loans.
Essentially, all these 800,000 people live in houses that are owned by the government, and have to pay the government every month if they wish to carry on living in them. Some of them – the riskier propositions – will also have to put up with presumptive lectures from strangers about their frivolous failure to understand their financial priorities. And they are not the only vulnerable “home owners” by any means. It is Lloyds TSB and Royal Bank of Scotland, for example, not Northern Rock and B&B, that have the greatest exposure to customers whose mortgages are already larger than the value of their homes.
You’d imagine that the implosion of the “property-owning democracy” project was obvious to all. You’d have imagined that it had become obvious back in 1997, when highly visible homelessness was one of the factors that delivered a landslide election victory to Tony Blair. But no.
Just to underline this historic failure, the National Housing Federation this week predicted that the proportion of the population who own or live with the owner of their home will fall to 63.8% by 2021, about the level it stood at in the 1980s. Of more immediate concern are the observations from homelessness charity Crisis that rough sleeping is up 8% on last year, while the number of people accepted as homeless by local councils and placed in social housing is up by 10%. Since the coalition came to power, the number of families claiming housing benefit has risen by 150,000. There are now five million names on waiting lists for social housing. Many more don’t bother to make an application, because they understand that they have absolutely no chance of becoming a council or housing association tenant.
The most astounding thing about this mess is that there is still a widespread failure to understand that a flagship ideological experiment in self-regulation by the market is in tatters. The deregulation of banks and building societies, combined with draconian restrictions on the provision of new council housing, which could have replaced stock diminished by the right to buy, was supposed to transform “sink estates” into privately owned and lovingly cared-for communities. Instead, the social demographic of people living in council flats has narrowed massively. The people with the greatest problems are herded together, sometimes seeking a dark kind of identity in their blighted postcode, to the point at which the threat of eviction from council housing is seriously touted as a way of encouraging people to think twice before they take part in riots. God help us.
Yet even though the property-owning democracy idea has achieved neither its social nor its financial goals (the housing market has manifestly not developed in an orderly fashion that seamlessly matches supply and demand), there remains a truculent insistence from the right that somehow it is still interference from the state that is the problem, rather than the lack of it. That is at the heart of Cameron’s wish to delay the enactment of recommendations whereby banks separate their retail operations from their investment arms. Not for the first time in recent decades, we see a British prime minister who is very keen on “liberal democracy” when he is “exporting” it, but much more keen on oligarchy when he is dealing with matters at home.
Capitalism is pretty simple. Those with the capital get the profits because they are the ones who have money to invest. The very fact that 30 years of financial deregulation has resulted in greater division between rich and poor is prima facie evidence that capitalism has been working extremely dynamically, unhindered by the state’s supposedly crushing interference, until the bursting of the asset bubbles that it created. Chief among these, of course, was the property bubble, which in turn fuelled the febrile consumer boom that continues to worry the 2,400 employees of UK Asset Resolution so greatly.
Yet, still there remains in place an obstinate refusal to see that, without a determinedly redistributive infrastructure, liberal democracy simply cannot exist.
Britain has now been an oligarchy, not a democracy, for quite some time. It is utterly absurd that Cameron and his chancellor George Osborne are at odds with their coalition partners over this question of reorganising the banks, and instead are minded to give greater weight to the desires of the banks themselves, who are resisting the plan.
Basically, the reform calls for the ordinary money of ordinary people, who earn it, to be looked after with more caution and respect than the extraordinary money of people looking for speculative returns that will provide unearned income. After the hammering that ordinary people have been asked to take, in consequence of the financial crash, it is perverse and repulsive that this pair can even imagine that they have a mandate to shield the banks from a restructuring prompted by their own cavalier and foolhardy negligence. It’s an appalling affront to democracy, property-owning or not.
Posted in Comment, Comment is free, Communities, House News, Housing, Money, Property, Society, The Guardian | Comments Closed
Tuesday, August 30th, 2011
Our housing problem hits the economy hard, yet politicians seem to lack the will to take any action
One thing that’s struck me frequently during the last month’s social tumult has been the abject failure of our property-owning democracy to concern itself with those who don’t own property. A twisted consequence was the staggering lack of empathy shown by looters and destroyers towards small-business owners, regarded as “rich” in the face of all evidence. Another is the fact that we seem to be the only country in Europe to have decided that your degree of enfranchisement is dependent on owning your own home.
This week’s report from Oxford Economics, conducted by the National Housing Federation, predicts that home ownership will fall to just under two-thirds of households, from 2001′s high-point of nearly three-quarters, taking us back to levels last seen in the mid-80s, when the right-to-buy was in its early days and interest rates were in double figures.
We’ll still have a property-owning majority in 10 years, then, but the social and economic health of the nation in that time could be decided on governments’ treatment of the growing population of long-term renters. For that reason I dream of waking up one day soon to find an incumbent housing minister doing the job that the whole country is screaming out for them to do.
What does that involve? First, making sure enough suitable housing is available to meet demand, through a combination of sensitive yet decisive measures to build new homes and keep old ones in useful circulation. Second, detaching the task of housing people healthily and equitably from the task of making people feel as if they’re rich. Third, preventing this essential part of our infrastructure from being subject to endless poking by new ministerial brooms.
Housing shouldn’t just be a ministerial post; it ought to have full cabinet status: it’s a determining aspect of public health, a litmus paper for the underlying health or sickness of the economy, and therefore important enough to need a degree of protection from partisan faffing.
If the aim of a “property-owning democracy” is inherently a conservative one, it’s not one that you can automatically argue with from a social-democratic standpoint. Spain has 80% home ownership and, for now at least, a socialist-party government. Levels of home ownership in Germany, which has a centre-right government, range from around a third of households overall to under 20% in Berlin.
In some ways a renting culture encourages transience, but not in others: the very affordability of rented housing in Berlin goes some way towards explaining why it has the highest birth rate in Germany, in spite of the city’s relative dearth of decent jobs. Low rents mean low deposits and the absence of that British paranoia about “throwing money down the drain”.
British renters, on the other hand, suffer from a combination of insecurity – assured shorthold tenancies only run from between six months to three years – and inaffordability, which cements the relationship between the quality and availability of jobs and that of decent housing.
Similarly, it’s in the same areas that housing is cheapest to buy that higher numbers of homeowners are struggling with their mortgages. To buy a house for £60,000 requires a deposit of between £3,000 and £15,000 – a laughably distant figure for someone earning the minimum wage, who, for their part, is less likely to have property-owning (and therefore inheritance-leaving) parents and grandparents.
Indeed, the Oxford Economics report reveals that the average income of a first-time buyer now needs to be £44,464 in order both to raise a deposit and to raise a big-enough mortgage. In the report’s words, that’s “close to the top 10% of earners”. At which point a lightbulb goes off in my head: that’s the only segment of the population that the coalition is actually bothered about. The rest can scrabble for what’s left.
There’s no question in my mind that housing demand needs to be tackled at the level of central government: only it has the power to legislate for fairer tenancy agreements, the money to pump into stalled housebuilding schemes, and the political will at once to create jobs and fulfil demand by instigating a fully funded programme of multi-tenure building.
That would mean acknowledging that free markets need tethering if inequality and disenfranchisement aren’t to remain rigid features of British society. Only those without imaginations could possibly see this job as dull, yet its takers seem paralysed, if not by boredom, then by a conviction that there are some problems you can’t do anything about.
Posted in Business, Comment, Comment is free, Communities, House News, Housing, Housing market, Money, Property, Society, The Guardian, UK news | Comments Closed
Wednesday, August 3rd, 2011
Her fictional version of Cornwall was a dark, secretive place of passion and romance
The Cornish house that is now on the market has only a small connection with the writer, but the Du Maurier spell is potent enough to bewitch it. Few writers are so intimately linked to a place that became theirs through adoption as Daphne is, through novels like Rebecca, Jamaica Inn and Frenchman’s Creek, to Cornwall. No surprise that there is a successful annual festival in her honour each May in Fowey. Yet Du Maurier was 20 when she first saw Menabilly, the probable model for Manderley, which is as significant as the characters of Danvers or Rebecca herself, and it was another 15 years before she could afford to live there. By then she had already created her Cornwall in fiction: a dark, secretive place of passion and romance curiously at odds with Du Maurier’s own wide-eyed beauty and gung-ho attitude to outdoor exercise. Despite the jarring intensity of The Birds in 1952 and Don’t Look Now (1970), it was only much later that the dark, secretive side of Du Maurier’s own character became an accepted influence on her work. The middlebrow writer is now more highly rated as a psychological realist, a woman grappling with her own complex relationship with her brilliant father, the actor-manager Gerald du Maurier, whose languid stage presence and pressing need for cash inspired the eponymous cigarette. Hard to imagine a more agreeable companion for a lazy afternoon on a Cornish beach than the irresistible mix of surface charm and secret passion of a Du Maurier.
Posted in Books, Comment is free, Daphne Du Maurier, Editorials, House News, Money, Property, The Guardian, UK news | Comments Closed
Saturday, July 16th, 2011
Unwanted Updown Court is a symbol of everything that is wrong with today’s property market
This can’t be an easy time for homeowners struggling with a sluggish property market. So let’s spare a thought for their pain. Real people are suffering. Now we’ve done that, go find a wall – or an estate agent or a financial adviser – to punch as you take in the details of one house currently unable to find a buyer.
This £70m mansion provides the backdrop to the greatest tale of our times. It was once the UK’s most expensive house, bought by a British-born property mogul for £20m in 2001. Last week came reports that the Irish government is on the verge of seizing it. One visitor describes it as “an abandoned Dubai hotel crossed with a cruise ship”. Forget the house that Jack built. This is the house that Midas built. He was wearing the emperor’s new clothes at the time. And a big gold crown that made his brain stop working.
One analysis says it all: “A luxury home designed by British architects, using Italian builders, financed by overstretched Irish bankers – all in the vain hope of snaring Arab, Russian and Far East buyers.” Vain indeed. It’s been on the market for seven years. Seven years! It couldn’t even sell itself at the height of the property madness when a Russian would spend millions on a shoebox in Knightsbridge. What hope for it in these globally reduced circumstances?
The scale of folly here is as mind-blowing as the proportions of the house are unimaginable. It’s like Southfork in Dallas by way of Mr Creosote. It can barely be contained by a wide-angle aerial view. It’s a comedy vision of a comedy rich person’s home. At ground level, you will find 250 tons of Italian marble and 58 acres of landscaped gardens. In the basement, you will find a panic room with its own air-conditioning system. The panic room is at least useful. After seven years on the market, the owner must hang out in it quite a lot, if not literally then metaphorically. (He said last week: “With the benefit of hindsight, I would have run a million miles.”)
There’s an underground squash court and two indoor swimming pools. There’s a quarter of a mile of under-driveway heating. Under-driveway! There are 103 rooms, including – best of all – 27 bathrooms. I love the 27 bathrooms. They make me feel very clean. Surely no one is so dirty that they need 27 bathrooms? Of course, I can’t answer that question as I’ve never met anyone from the Chipping Norton set. But maybe there is some kind of bathroom-related mathematical differential only wealthy people know about. Like, the bigger the risk you take on your mortgage, the more “wet rooms” you have to build in order to appease your conscience.
We haven’t even got to the best thing about this house. It’s called Updown Court. Priceless. First it went up. Now the owner’s a bit down. As such, it stands for everything that went wrong in the last 20 years: a big, fat, vulgar dream of ambition and delusion, built on promises, false hope and loans from the Irish Nationwide Building Society.
Poor old Updown, a metaphor for unbridled greed. A lesson. Or is it? As Updown experiences its comeuppance, let’s look at what’s happening elsewhere. A sober stock-take of property values, an analysis of the ethics of the banking system and a debate about the redistribution of wealth, perhaps? No, that would be silly. Instead, the NHS is being dismantled, the public sector is being squeezed and in many areas house prices are still going up, up, up. Hurrah!
Updown is no longer even one of the most expensive houses in the land. Oh, no. You have to top £100m to get into that bracket now. A flat recently sold in London for £135.4m. In “Recession Britain”, there are 5,922 streets around the country where the average house costs £1m. (“House”? “Average”? I am hanging out with the wrong crowd.) The comedown of Updown is a parable for our times. But on millionaire’s row(s), they’re still singing the same old song. Altogether now for the Updown theme tune. It’s specially commissioned and comes complete with vocal cord heating system. Just cover your ears and sing along: “La la la la la la.”
The opposite of denial is going on in Eric Fischer’s geo-location maps of Twitter and Flickr activity around the world. In fact, perhaps they are the ultimate definition of “too much information”. But who cares, they’re fascinating. Fischer, a self-confessed “geek of maps”, has found a way to generate visual representations of who is tweeting and taking photographs anywhere in the world.
Tweeting shows up most in Britain, North America, the Netherlands and Japan. The places where people are most likely to take pictures and post them on Flickr? Iceland, Scotland, New Zealand and game reserves in Africa.
The maps don’t tell us anything we couldn’t have guessed. City centres are bright with frenzied social networking and photo-sharing. But Fischer’s babies are unexpectedly heart-warming. They remind you of a moment that never becomes boring: when you land late at night in a city airport, take in the lights below you and feel glad to be alive.
While the usual fleshpots are lit up with tweets and shared snapshots – New York, London, Tokyo, Beijing – 95% of the globe is shrouded in blissful, internet-free darkness. Take note, anyone planning a proper holiday.
Posted in Comment, Comment is free, House News, House prices, Property, The Observer, UK news | Comments Closed
Wednesday, July 6th, 2011
Status has come before preference for too long: those who’d prefer to live solo or communally are pushed into pairing off
Living alone costs an extra £3,500 a year. And what do you get for your money? More time to read and stare out of the window; the ability to make a reasonable inventory of what’s in your fridge, knowing that no bugger has been at your picnic eggs; the freedom to walk about naked. You could probably find a housemate who would accept all these things for much less than £3.5k. If only we could import a few honest values of the marketplace into the hearth, things would be so much more efficient.
This news story falls into a category with “Childlessness causes breast cancer” and “Children of divorce more likely to suffer mental health problems“. There’s a faux-innocent tone, “don’t yell at me, I’m only passing on the facts”, which is hard to argue: these are merely facts. But just as you would never have a child in order to avoid cancer, and just as a desire for one’s children to enjoy sound mental health would probably not be enough to avert marital breakdown, so the causal link here – between living alone and spending more – might be sound, but its proportions are off. And nobody thinks you could use a calculator to decide who to live with: a story like this isn’t for the purposes of information; its purpose is to concatenate behaviour that runs against the norm with negative consequence.
Solitary living has fluctuating status, according to how old you are and, to a lesser degree, your sex. If you’re young, it’s taken to be a sign of success, since materially it is. As we can see it’s very expensive, so if you can undertake it under 30, you must be on a fast track to somewhere. A quotation often attributed to (though never said by) Thatcher – “a man who, beyond the age of 26, finds himself on a bus, can count himself a failure” – distills this belief, which might be why it’s stuck in the national psyche. The ambitious young person wants a private space in which to determine his or her direction of travel – collectivisation is for losers.
But communal living among the young is acceptable as well. So many people do it, after all, and seem to enjoy it and remember it fondly afterwards; it would be a myopic culture that sought to portray university halls as temples of failure. Even rich people live on top of one another until they’re 25.
By the time you’re in your 30s, your living arrangements are much more proscribed. Communal living in mature adulthood is incredibly eccentric, somewhere between keeping llamas and being polyamorous. Single living is suddenly frowned on, especially for women. Unfairly, pets also suffer the taint of failure here: the primetime comedy trope, endlessly recycled, of the spinster living alone with her cats is often needlessly insulting to the cat, as if a better class of feline would find a family to live with. Men can get away for longer in their bachelor pads, but again, age tarnishes the image – at 40 you’re living the dream, at 50 you’re just a lonely guy with incredibly long toenails.
If we accept that having a family is the desired norm, a lot of these preconceptions are based round the trajectory that culminates in procreation: you become financially secure, and prove it by having your own place; you attract a mate, and prove that by making them live with you; you have kids, and then live in a nuclear three- or foursome.
But there is so much that is arguable, here, which is never argued. Even leaving aside that central structure – the primacy of childbearing, which may be hardwired but surely a sophisticated mind should be able to unwire it – why is living alone considered lonely when a) a lot of people like it, and b) the loneliest way to live in the recorded history of mankind is with one other person who you don’t get on with?
And why is living communally never considered, outside education, nursing homes and sitcoms? I don’t think one’s domestic identity changes that much over time – if you are temperamentally suited to an eight-strong house when you’re 20, I bet you are at 40.
It’s because a respectable household has to do more than just propagate the species; the other footfall of cultural expectation concerns money. What would your domestic arrangement look like, at each phase of your life, if money were no object? Since living like sardines is cheaper, status attaches to small households – the fewer of you there are, the more successful you must be.
I find myself in the irksome position of agreeing with a member of government, housing minister Grant Shapps, who said this week that so-called mates mortgages could be the solution to the insurmountable costs facing first-time buyers. Why not buy a house with friends? Why haven’t we been doing this for years?
For too long, status has come before preference. Those of us who’d prefer to live in gangs have instead paired off into twos, lemming-like in our conformity, but in the outcome, in our small, traditional households, un-lemminged. People who prefer to live alone at least have the independence of spirit to do so; £3,500 is a small price to pay for a mind of your own.
Posted in Cohabitation, Comment, Comment is free, House News, Life and style, Money, Property, The Guardian, UK news | Comments Closed
Thursday, June 30th, 2011
Our bloated banking sector grew from dodgy selling and lending on overvalued properties – their profits were a tax on us all
Redundancies at Lloyds Banking Group are an inevitable consequence of Britain’s over-banked high street. This is not about the credit crunch or the recession, though they have precipitated the board’s decision to make cuts. It was obvious 10 years ago that our banking sector was bloated. A high street of 50 or 60 shops would have anywhere between four and eight banks and building societies jostling for customers’ attention.
In 2006 Barclays, for example, made profits of £1.2bn from UK retail banking, while Lloyds racked up £1.53bn. A large slug of these profits were made from selling dodgy products, like the now-discredited payment protection policies, with the rest from crazy lending on overvalued properties, their business banking units and credit cards.
Bank profits were like a tax on all of us and that was before the bailouts.
The same is true in Spain, where a decade-long lending frenzy led to an explosion of branches and a small clique of banks making extraordinary profits.
It is obviously terrible news for every family affected by the Lloyds redundances and cuts by other banks, including HSBC, which is to shed 1,000 to Lloyds’ 15,000. And unions are right to point out that banks claim all redundancies are necessary while paying inflated salaries and bonuses to traders and managers, many of whom double up as marketeers for socially useless financial products. Nevertheless, the industry always needed to shrink.
The next target should be the estate agent. Too many independent shop owners are elbowed out by estate agents prepared to pay ridiculous rents. They can only do it because they have convinced homeowners that percentage-based commissions are an acceptable, if not necessary, practice.
Property price rises of 300% or more in the last 20 years mean they earn exceptional profits, especially in the south-east, where land and property prices remain at pre-recession levels. In some parts of London they only need to sell one house a year to keep themselves in Armani suits and Gucci loafers.
Just as the financial regulator is about to outlaw commission-based sales practices by financial advisers, commission should be banned in estate agency. Failing that, a tax on land – the much-discussed land value tax – should be brought in.
A switch to LVT, essentially a tax on the wealth of the over-55s, has many and varied positive effects on the economy, including driving down the price of land, which in turn becomes less a subject of speculation and more about long-term ownership.
Our obsession with property is behind the boom in bank branches and estate agents. Both need to be put back in their place, which should be as cogs in the property selling machine, not snake-oil sales organisations for over-inflated assets.
Posted in Business, Comment, Comment is free, guardian.co.uk, House News, House prices, Job losses, Lloyds Banking Group, Money, Property | Comments Closed
Tuesday, June 7th, 2011
The goal of a property-owning democracy will wither and die if Britain doesn’t start building many more homes
Contrary to popular myth, it was not Margaret Thatcher who coined the phrase “property-owning democracy”. She made it central to her creed, she sold more than a million council houses to their tenants, and since then politicians of many stripes have agreed that owning your home is a good thing. But the copyright on the concept belongs to a much less famous Tory called Noel Skelton, an MP in the 1920s and 1930s. It was his idea – novel for the time – that extending property ownership beyond the rich would encourage a sense of independence, pride and responsibility among the masses. An implication, which influenced Harold Macmillan’s house-building programme in the 1950s as well as Mrs Thatcher in the 1980s, was that the working classes would turn away from socialism as property ownership infused them with conservative values.
The British left was highly hostile, then regretful that it had made a strategic political mistake by opposing council house sales, and finally became an enthusiast for property ownership in the 1990s. Thoughtful progressives located an egalitarian case for doing so. They noted that the starkest dividing line through British society is whether or not you possess capital assets. For most people, that comes down to whether or not you own your home. The haves do; the have-nots don’t. Once the mortgage is paid off, the haves possess a store of wealth and an inheritance for their offspring. The have-nots have nothing to show for a lifetime of paying rent and zip to leave to their children. By the end of New Labour’s time in office, it had not only embraced the property-owning democracy, it had even set a target for it. Property was not theft – it was aspiration.
The moment when an idea achieves universal consensus is often precisely when the concept starts to eat itself. The steep rise in values made British homes very pricey relative to income. Then came the financial bust and much tighter rationing of mortgages. A slew of surveys and reports has recently confirmed just how tough it has become to get a foot through the door. The average age of a first-time buyer fell to around 25 when Mrs T was in her pomp; it has now climbed to 37; the National Housing Federation forecasts that it could soon rise to 43. The postwar trend of more owning and less renting is sharply reversing. It may be a little premature to pronounce the death of the property-owning democracy. It is fair to say that it is having extreme difficulties with breathing.
What is to be done? The cool response is to say that there is nothing to panic about and something to celebrate because property ownership is a stupid obsession, a weird British fetish which we would be well rid of. There is a side of me that hears this argument and finds within it some seductive strains. We do, as a nation, tie up too much cash and emotion in unproductive bricks and mortar. There’s too much mistaking house price inflation for economic wellbeing. There have been four price spikes in the last 40 years. A ghastly feature of each boom was the sound of middle-class home-owners smugly congratulating themselves on how much their houses were soaring in value as if this was testimony to their brilliant judgment rather than the simple good luck of surfing an asset bubble. It sounds sort of attractive when people say: “We should be more like the continentals.” For good effect, that statement should be accompanied by a shrug; for best effect, the shrug should be Gallic.
As it happens, the notion that the rest of Europe is much more contented with renting is another myth. More people do rent in France and Germany for a variety of complicated reasons, but they are not always happy about it. Home-ownership is higher in Italy and Spain than in Britain. We are actually mid-table in the European league.
In any case, it clearly does matter to millions of us. A big survey of Britons aged 20 to 45 for the Halifax and headlined “Generation Rent” suggests that three-quarters of those who don’t own a property would like to, but nearly two-thirds believe that they have no chance of being able to buy. An acute shortage of affordable housing is making a lot of people miserable. Politicians ought to take note if only for the purely self-interested reason that unhappy voters tend to express their discontent by throwing out governments.
The consequences will be far-reaching and deep-seated. The shortage of accommodation is already powering a vicious spiral – pushing up rents, making it even more difficult for the young to save for a deposit, forcing some back to live with their parents or to kip on mates’ sofas. People will have families later. Saving for a deposit is a good habit, useful to both those who acquire it and for the economy and society. That is a discipline this generation will not bother to learn – and why on earth should they? – if there is no point trying because they will never be able to save enough.
Fewer people owning their homes means fewer people with money in property when they become elderly to support their retirement and care. They will be losers when young and losers again when old. Our already highly unequal society will become even more dramatically divided by the widening wealth gap between home-owners and the rest. This will entrench the privileges of the baby-boomers, who got into property while it was still affordable, over younger generations who find that the ladder has now been pulled up beyond reach.
Politicians of all mainstream types – meritocratic Tories, egalitarian social democrats and concerned liberals – have been worrying that social mobility is freezing up, making it harder to rise out of the class into which you were born. This trend will make life chances even more contingent on your birth certificate. Those fortunate enough to have affluent and friendly parents with cash to spare can turn to them for help in raising a deposit. This will hand them a huge advantage, quite possibly a lifetime advantage, over those who do not have access to the Bank of Mum and Dad.
The easy political response is to bash the banks for lurching from one extreme to the other in their lending policies. At the demented peak of the pre-crash borrowing binge, Northern Rock offered first-time mortgages worth 125% of a property’s value and six times the salary of the borrower. Banks are now much more conservative about salary multiples and demand much bigger deposits from first-time buyers, typically 20% to 25%. This at a time when you won’t get much change out of £200,000 for a one-bedroom flat in an unspecial part of London. The number of mortgages offered in April slumped to the lowest level since records began. Easing lending criteria might salve some of this pain. The trouble is that it would also risk setting off another unsustainable boom and creating another cohort of over-stretched debtors.
There is one simple reason why so many people can no longer afford to buy. Property is incredibly expensive. A bolder policy solution would be to use the tax system to force down prices. The Treasury forgoes billions in revenues because people don’t pay capital gains tax when they sell their main residence. Are you up for abolishing that exemption, Mr Cameron? Nope, thought not. You’d be lynched by your party. What about you, Mr Miliband? Your beloved “next generation”, the younger ranks of your “squeezed middle”, would be the net beneficiaries of a fall in house prices – so how about it? The Labour leader shakes his head for, like his rivals, he doesn’t think that a declaration of war on the propertied middle classes would enhance his chances of winning an election.
The housing minister, Grant Shapps, made a speech a few months ago which included the observation that it was “in everyone’s interest to have stable house prices for a long time, because the only way we can make sure housing is more affordable for future generations is not to have these crazy housing booms”.
Note that he was merely suggesting that it would be sensible if prices stayed flattish in the hope that, as earnings rose, this would gradually help new buyers across the threshold of ownership. This suggestion was regarded as so heretical that he came under attack from many sides, especially his own. So we arrive at the last solution and it is the blindingly obvious one. Britain needs to build more houses. In just one year, 1953, Harold Macmillan presided over the construction of 300,000 new homes. He understood that a property-owning democracy could not be realised unless there were enough properties. This basic requirement eluded his successors, whether they were Conservative or Labour. The social housing sold off by Mrs Thatcher was never replaced. House building in the last year of Gordon Brown fell to a postwar low. We are currently building around 100,000 homes a year when new household formation is running at about 250,000. So long as demand continues to be so much greater than supply, the prospects for the young – and a lot of the not so young – will become ever bleaker.
Politicians still talk about a property-owning democracy, but it is just piffle and wind unless they do the necessary to make it a property-building one.
Posted in Comment, Comment is free, House News, House prices, Mortgage rates, Property, The Observer, UK news | Comments Closed
Tuesday, May 31st, 2011
High levels of debt and stress encourage acceptance of low wages and long hours. There’s a lot to be said for renting
“No man who owns his own home and lot can be a communist.” So claimed William Levitt, the American property developer who created the American suburban landscape in the 1950s. Levitt built thousands of mass-produced, detached, identikit yet individualistic houses, made so cheaply as to be economically sold to lower middle- and even working-class buyers. Take away the second clause – The Good Life notwithstanding, suburban gardens have seldom been put to any useful purpose – and you have the rationale for the huge changes in housing in Britain over the last 30 years. Under Margaret Thatcher, John Major, Tony Blair and Gordon Brown, an attempt was made to create a “property-owning democracy“, banishing the spectre of socialism in the process. But has David Cameron inadvertently started to break the pact?
This week’s report by the Halifax on home ownership corroborates a fact obvious for some years now – that, as property becomes more and more expensive, especially in the south-east of England, a generation is growing up unable to buy a home. One of the UK’s largest mortgage lenders reports that two thirds of “potential first-time buyers” have no prospect of taking out a mortgage, and partly because they lack the appropriate thriftiness. Aside from this blaming of the victim – given that real wages are either stagnant or falling, and have been for decades, it’s in poor taste to moralise about credit – it clearly believes that home ownership is a good and desirable thing. Is it?
In the 1970s, many saw the property-owning democracy on the horizon, and considered it a dangerous, albeit refined, piece of bribery. In his classic Working for Ford, sociologist Huw Beynon found that many trade union activists at the Ford plant in Halewood, Merseyside, refused to take out mortgages or buy houses. He quotes one shop steward as saying: “[The workers] get made up, earn a lot more money and then the company starts encouraging them to buy a house, to get a car on the company’s scheme. I know this for a fact. Then when they’re up to their neck in debt they put the screws on them, and they’ve got no chance. A shop steward should never be in that position, where he can’t afford to go on strike pay. I’d never buy a house when I was a shop steward. I don’t think any steward should.”
Then, the Ford Motor Company’s own mortgage schemes were a front in a class war; since 1979, it has been official policy, with the introduction of the Right to Buy council housing combining with a refusal to build any new council housing stock. Together, they decimated secure, comfortable rented accommodation. If this was a trick, as the Halewood stewards suspected, then most of us fell for it. Today, crippling levels of household debt, repossession and housing-related stress coincide with low wages, long hours, and extraordinarily few strikes. It’s hardly a coincidence. A housing crisis, with millions in insecure or overpriced housing, doesn’t necessarily lead to anger, to a demand for something better – it leads to fear, anxiety that even the Barratt Homes rabbit hutch you’ve acquired could be easily lost.
The UK’s preponderance of home ownership is matched only by the poverty of its homes. The most expensive in Europe, they are also the most dilapidated when old, the smallest when new. And yet, from the London county council’s arts and crafts estates of the 1890s to the Trellick Tower in the 1970s, we once had some of the world’s finest low-cost rented housing. It was not owned by us as individuals, struggling to meet the instalments – it was owned by us collectively, as a public good. Rather than wishing cheap mortgages back, we need to be thinking outside of our own homes and lots.
Posted in Business, Comment, Comment is free, Communities, guardian.co.uk, Homes, House News, Housing, Housing market, Life and style, Money, Property, Real estate, Society, UK news | Comments Closed
Saturday, April 16th, 2011
Geographically, never mind socially, we are not all in this together. Life in London feels different to anywhere outside
In Bradford on a winter’s night 25 years ago, I stood in front of an estate agent’s window and made a calculation. For the price of our terrace house in north London – two up and two down and a bit of garden at the back – I could buy 10 similar houses in Bradford. This month I read that Burnley has the lowest property prices in England, and made another calculation. For the price of our London house I could buy 40 houses in Burnley that were averagely cheap and 80 of the very cheapest. This doesn’t mean that the differential in house prices between London and northern England has grown by more than 400% since 1986. I live in a bigger house now, and Burnley isn’t Bradford. But the gap is certainly widening: according to Halifax figures, houses in Newcastle-on-Tyne cost on average 28.8% less than they did in 2007, while in Islington they’ve risen 9.7% in the past year after changing very little – up or down – in the previous two.
I look at pictures of the cheap houses in Burnley. They’re Victorian terraces. Their doors open straight on to the street, but they look solidly built from Pennine stone, no frills, but handsome. I imagine workers came home to them from cotton mills. Our house is certainly more imposing, three floors rather than two, with bow windows and ornamental red brick. But it has shallow foundations in London clay, so whether it’s sturdier is doubtful. I imagine someone who earned money in a suit, a senior clerk or a shopkeeper, first moved in when the terrace was completed in 1890. Without substantial inherited wealth, not even two-income families in the modern equivalent of those jobs could move in now. Newspapers sometimes write that the coalition cabinet contains “18 millionaires” as though it were a peculiar outrage, but everybody who’s paid off their mortgage in my street is a millionaire, if property is counted among their assets. And I stress that this is an ordinary street; until 30 or 40 years ago, a schoolteacher or a Fleet Street sub-editor could have afforded a house here.
What explains my good fortune? To some extent many of my generation share it, especially if they worked in a trade or profession that blossomed in the 1980s (better, on the whole, to have been a national-newspaper journalist than a mechanical engineer). Most people I know have grander homes than their parents, no matter where they live in the United Kingdom. If they live in favoured parts of cities such as Edinburgh and Leeds, their homes are often enviable for their architecture and space. Only the very grandest of them, however, could be swapped for 40 cheap houses in Burnley. Above every other consideration – career, age – the combination of judgement and happenstance that made me a London house-owner is what explains my relative wealth.
To a certain degree, this is an old story, and common to every metropolis. Moving to London four decades ago, I discovered one-bedroom flats were double the price of those I’d left behind in Glasgow. But then the 1980s arrived and the British economy’s centre of gravity shifted sharply (and to date, permanently) south. Between 1979 and 1986, jobs in manufacturing industry declined by almost two million; 94% of jobs lost in every sector in those years were north of a line drawn between the Wash and the Bristol Channel. The traditional idea of Britain – one taught in school geography books – was a country that made its money in the midlands and the north (including Scotland, and not forgetting Wales) and spent the profits mainly in the south. But now both the generation and consumption of wealth grew concentrated in the same place, and the north-south divide suddenly marked something more fundamental than dialects and traditions.
It was during this time, soon after the miners’ strike, that I stood with a notebook in a Bradford street and worked out the house price ratio. I wondered then if it could last. It didn’t seem possible that it could get worse – and for several years around the turn of the century it didn’t. Public spending financed by European grants and taxes raised in the City of London secured for many northern towns at least the suggestion of a viable future, if viability is measured in warehouse conversions, art galleries, warm cappuccino and rising property costs. The crash has since jeopardised all these simulacra of metropolitan living. The odd thing – the unfair thing, considering where the crash originated – is that the metropolis itself is immune. Geographically, never mind socially, we are not all in this together. Life in London now feels different to anywhere outside, as though you leave through city gates at turn-offs on the M25. Never has its atmosphere as a rich city-state felt so extreme.
“Revenues have bounced back and we are again seeing strong sales growth. The outlook for the UK as a whole may be gloomy but I think the long-term prospects for London, especially with the Olympics, are very good.” These are the words of Des Gunewardena, who runs a chain of expensive restaurants (Le Pont de la Tour, Quaglino’s) and I read them last week in the Evening Standard, underneath the headline, “Surge in dining out feeds a flurry of restaurant launches”, next to a picture of Sienna Miller arriving at Sheekey’s. Each in the list of a dozen new restaurants still to open has the name of a chef attached. One of those already opened, the Pollen Street Social in Mayfair, took 5,000 calls looking for reservations in its first day.
Beyond the hope that manufacturing industry can rebalance the economy, and the faraway prospect of a high-speed rail line to Birmingham, no government strategy exists to spread this wealth further north. The political tone is southern – look at the party leaders, or many of the Labour candidates parachuted to northern seats. It has been left to the BBC to do a little social engineering by – bravely or foolishly – relocating departments to Salford, Cardiff and Glasgow, so that half of its output will be produced outside London by 2016. Will better programmes result? Very few BBC staff seem to think so; on the evidence of BBC2′s Review Show, now made in Glasgow, extra expense in travel and hotel costs looks the likeliest difference. But three formerly great industrial cities will have BBC budgets and salaries added to their troubled economies; there will be job opportunities; the middle class in each place should grow a little larger.
The staff who refuse to go are easily mocked. Haven’t they heard about the better quality of life, the Lowry, the easily accessed countryside, the “creative buzz” that’s now reported along the banks of the Clyde and the Manchester ship canal? Their reluctance to move is usually expressed in personal and professional terms: of not wanting to interrupt their children’s education, or being too far away from their show’s guests. But perhaps among their worries there’s something less easy to define; that by quitting London they’re removing themselves from its cultural, political and economic heft, which has grown so remorselessly and, whether or not BBC Breakfast gets done in Salford, will carry on regardless. The country’s centrifuge: both awful and interesting.
Posted in Comment, Comment is free, Economic growth (GDP), Features, House News, House prices, London, Property, The Guardian | Comments Closed
Monday, March 14th, 2011
Buoyant house prices are far from the only benefits of living in a town with a natural spring
A rather severe marble girl on the little temperance fountain in the centre of Bath pours eternally from a jug above the inscription “Water is Best”. She is right – or so it appears, in every sense, from the latest index of UK property prices. Spa towns have an average premium of 16% over houses in neighbouring places where springs have yet to bubble or stink. In some hotspots, such as Boston Spa and Ilkley in West Yorkshire, prices are almost twice the level for the rest of the county. Life is not always fair, but it seems specially perverse that fissures should open and allow natural water to the surface largely in areas already generously blessed. Leave aside property prices, and Bath, Ilkley and most of the others would be lovely if no chalybeate or other soothing water had ever seeped from their soil. But the dips and douches created their own virtuous circle; from Buxton to Royal Tunbridge Wells, and even at little Askern near Doncaster, fine architecture followed the hypochondriacs and now attracts wealthy buyers. And the benefits may spread. Just as the best place to live in Cheltenham is not in a Regency house but opposite one, so the canniest property buyers will go for cheaper towns near spas and so have the best of both worlds. And perhaps, live in geothermal hope. Let us not forget that “Nil sine aqua” was the motto of humble south Staffordshire’s waterworks company, while their counterparts in Grimsby had “E rupe erumpet aqua” (Let water gush from the rock).
Posted in Comment is free, Editorials, House News, House prices, Property, The Guardian | Comments Closed
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The notion of Britain as a property-owning democracy is in tatters | Deborah Orr
Thursday, September 1st, 2011Homelessness up. Housing benefit claims up. Housing waiting lists up. What happened to the Tory dream of home-ownership transforming the nation?
It would be funny if it were not so terrible. Britain is 30 years into the grand Conservative project that was to transform the nation into a ”property-owning democracy”. To mark this great anniversary, a government-sponsored organisation, UK Asset Resolution, is about to embark on the highly patronising and paternalistic task of telephoning 30,000 mortgage-holders and telling them to spend less on nights out, Sky television, gym membership and mobile phones, and more on servicing their mortgages. It’s safe to say that this is not what Margaret Thatcher had in mind when she promised that her privatisation policies would remove the state from people’s personal lives. It hardly chimes with David Cameron’s rhetoric either.
UK Asset Resolution. What a name. It sounds like a highly dodgy private company that buys debt, then intimidates people into paying it off at extortionate rates. But it isn’t. UK Asset Resolution is the Treasury-owned holding company that was established last October to “support around 800,000 customers with £77bn of loans”, customers who initially took out their mortgages with Northern Rock and Bradford & Bingley. Both of those companies, of course, are now “taxpayer owned”, after receiving more than £48.7bn in government loans.
Essentially, all these 800,000 people live in houses that are owned by the government, and have to pay the government every month if they wish to carry on living in them. Some of them – the riskier propositions – will also have to put up with presumptive lectures from strangers about their frivolous failure to understand their financial priorities. And they are not the only vulnerable “home owners” by any means. It is Lloyds TSB and Royal Bank of Scotland, for example, not Northern Rock and B&B, that have the greatest exposure to customers whose mortgages are already larger than the value of their homes.
You’d imagine that the implosion of the “property-owning democracy” project was obvious to all. You’d have imagined that it had become obvious back in 1997, when highly visible homelessness was one of the factors that delivered a landslide election victory to Tony Blair. But no.
Just to underline this historic failure, the National Housing Federation this week predicted that the proportion of the population who own or live with the owner of their home will fall to 63.8% by 2021, about the level it stood at in the 1980s. Of more immediate concern are the observations from homelessness charity Crisis that rough sleeping is up 8% on last year, while the number of people accepted as homeless by local councils and placed in social housing is up by 10%. Since the coalition came to power, the number of families claiming housing benefit has risen by 150,000. There are now five million names on waiting lists for social housing. Many more don’t bother to make an application, because they understand that they have absolutely no chance of becoming a council or housing association tenant.
The most astounding thing about this mess is that there is still a widespread failure to understand that a flagship ideological experiment in self-regulation by the market is in tatters. The deregulation of banks and building societies, combined with draconian restrictions on the provision of new council housing, which could have replaced stock diminished by the right to buy, was supposed to transform “sink estates” into privately owned and lovingly cared-for communities. Instead, the social demographic of people living in council flats has narrowed massively. The people with the greatest problems are herded together, sometimes seeking a dark kind of identity in their blighted postcode, to the point at which the threat of eviction from council housing is seriously touted as a way of encouraging people to think twice before they take part in riots. God help us.
Yet even though the property-owning democracy idea has achieved neither its social nor its financial goals (the housing market has manifestly not developed in an orderly fashion that seamlessly matches supply and demand), there remains a truculent insistence from the right that somehow it is still interference from the state that is the problem, rather than the lack of it. That is at the heart of Cameron’s wish to delay the enactment of recommendations whereby banks separate their retail operations from their investment arms. Not for the first time in recent decades, we see a British prime minister who is very keen on “liberal democracy” when he is “exporting” it, but much more keen on oligarchy when he is dealing with matters at home.
Capitalism is pretty simple. Those with the capital get the profits because they are the ones who have money to invest. The very fact that 30 years of financial deregulation has resulted in greater division between rich and poor is prima facie evidence that capitalism has been working extremely dynamically, unhindered by the state’s supposedly crushing interference, until the bursting of the asset bubbles that it created. Chief among these, of course, was the property bubble, which in turn fuelled the febrile consumer boom that continues to worry the 2,400 employees of UK Asset Resolution so greatly.
Yet, still there remains in place an obstinate refusal to see that, without a determinedly redistributive infrastructure, liberal democracy simply cannot exist.
Britain has now been an oligarchy, not a democracy, for quite some time. It is utterly absurd that Cameron and his chancellor George Osborne are at odds with their coalition partners over this question of reorganising the banks, and instead are minded to give greater weight to the desires of the banks themselves, who are resisting the plan.
Basically, the reform calls for the ordinary money of ordinary people, who earn it, to be looked after with more caution and respect than the extraordinary money of people looking for speculative returns that will provide unearned income. After the hammering that ordinary people have been asked to take, in consequence of the financial crash, it is perverse and repulsive that this pair can even imagine that they have a mandate to shield the banks from a restructuring prompted by their own cavalier and foolhardy negligence. It’s an appalling affront to democracy, property-owning or not.
Posted in Comment, Comment is free, Communities, House News, Housing, Money, Property, Society, The Guardian | Comments Closed