London’s Intentional Housing Crisis.

by Jimmy Mulvihill

London is currently going through an unprecedented housing crisis. According to the Land Registry House Price Index, as of January 2016 the average price of a home in London stands at £506,724.  In Central London it’s £643,843.    The salary for a fully qualified nurse in the capital ranges from £21,692 rising to £28,180, with an added 15% high cost area supplement of between £3,483 and £4,439, depending on their role. A nurse based in Middlesbrough misses out on both this extra payment and the glamour of the capital, but then they have average property prices of £57,460 to console them. At best a London based nurse will have an annual salary of £32,619, which means that the lucky few that make this wage will still need to pay 1550% of their entire annual pay to buy the average home in the city that they work in. Find yourself on the lower end of the pay scale and it’s 2012%.

Twenty years of their entire pre-tax pay packet, for a nurse to buy an average home outside the city centre. Police Offers start on between £23,317 and £25,962  and a primary school teacher in inner London will earn as little as £27,819. When I was growing up I was always taught that jobs such as nurses, policemen and teachers were among the most respectable possible, creating the backbone of a strong and prosperous nation while enriching the lives of the people within it, and today these jobs do not pay enough to put a roof over your head. People in such jobs have a hard enough time meeting their bills and feeding themselves; they can barely empower themselves, let alone an entire nation. As I say, London is currently going through an unprecedented housing crisis.

Yet the materials to build a home have not risen in real terms, and the wages that builders are paid have dropped massively as immigration from Romania, Bulgaria and Poland means it should be easier and cheaper to find qualified tradesmen than ever before. The willingness of Boris Johnson to embrace the high-rise housing common in Hong Kong means it’s easier than ever before for building firms to cram more properties into limited space, and advances in technology and building methods means that building schedules can be tighter, with cranes, quick drying cement, pre-fabricated interiors and mechanised construction processes enabling progress at multiples of previous construction speed. Yet here we are, with prices spiraling out of control like never before from not being able to keep up with demand.

Credit – Patsy Lynch

On one hand curing the housing crisis should be a no-brainer for the government. When houses are being sold quickly for half a million, and when the government has substantial land at their disposal the temptation to build high density homes to sell on the open market could both bring in huge amounts of revenue and help get more people on the property ladder, a move that would likely win votes. As people become home-owners they are unable to claim housing benefit, job seekers allowance is no longer an option from so they would be more motivated to work and more likely to put down roots, all of which create long term economic growth.

So why doesn’t it happen? A popular argument is that high density housing breeds poverty-ridden sink-estates and a poor quality of life for the people who live in them. This logic goes back to the government’s policy in the 1960’s to erect tower blocks up and down the country that later had to be pulled down due to the substandard construction practices used. The tone had been set – highrise building creates inadequate standards of living.   It’s nonsense of course, and you only have to look at the list of places in the world with the highest population concentration to see this. Hong Kong, Manhattan in New York, Monaco, central Paris, and Toyko are both some of the most desirable places to live in the world, as well as having some of the highest concentration of residents of anywhere in the world. High density cities are high density for a reason – lots of people want to live there. Most of the middle east is desert, yet the area that attracts the most attention and investment – Dubai – has an intensive high-rise concentration, further breaking the association once held between lateral living and perceptions of poverty.

Credit – Alhaj Nasir Uddin

Manhattan has 27,673 people per square km and has no shortage of people wanting to live there. If 100,000 more homes came on the market today in the heart of Manhattan, they would likely be snapped up in days, rather than years. Consider also that 17.8% of Manhattan is dedicated to public parkland, with much of this being taken up by Central Park, a park that people will travel half way around the world to see. It is therefore easily possible to have huge amounts of people living close together in a highly desirable area whilst also providing world class public parks and high standards of living. If London could find a patch of land that measures 3.16kms by 3.16 kms, 10sqkm in total, you could fit 276,730 people into it at that concentration, and the high density would also cut down the cost of transport facilities, roads, street lighting, the cost of the land, sewer systems, power cables, broadband fibre-optic cables, and many other important considerations for creating a new neighbourhood.

And there are many precedents for why it could easily happen. Look at Las Vegas, a city that went from having 25 people in 1900 to 8,000 in 1940 to having over 600,000 people today, with over 2 million people in it’s metropolitan area. That was a purpose built city that is still one of America’s fastest growing today, and people wouldn’t want to move there without it having it’s charms. Sure, it’s not for everyone, but it still provides a home for many to bring up their families in. The London docklands was built in the same way: whereas the Americans built a city around gambling, in London they built the docklands around the financial sector. The city of London was overpopulated and in need of expansion yet had many building limitations due to, in part, it’s close proximity to St Pauls Cathedral, so the new area of Canary Wharf was built to solve a problem. Las Vegas grew in part from it’s close proximity to the Hoover Dam which was constructed from 1931 to 1935, when it’s 5,000 citizens were joined by up to 20,000 people looking for work on the construction process. With so many manual labourers away from their family and with money to burn, combined with Las Vegas’ lax gambling laws, a city was built to capitalise on the boredom that 5 years of intensive manual labour brings.
Credit – Christine Matthews

Visit either Las Vegas or Canary Wharf today and you’ll see thriving districts that bring in lucrative tax revenues for their respective councils and governments. Economic success stories. Within commutable distance of London alone there are over 1,250,000 people living in areas that were either purpose built planned towns or that have had huge planned extensions added later to alleviate a housing shortage, including areas such as Milton Keynes, (population 230,000) Northampton (220,000), Peterborough (190,000), Basildon (110,000), Crawley (110,000), Hemel Hempstead (95,000) Stevenage (85,000), Harlow (85,000) Bracknell (77,500), Welwyn Garden City (45,000) and Hatfield (30,000). Each of these towns is able to attract business and investment, have strong property prices and access to the city fast enough to make commuting possible, and despite many of them being built/expanded in a time when building practices were not held in such high esteem, they all help to take the strain off of the capital whilst also being thriving towns in their own right. Building a new district from scratch to solve a problem has a proven track record of financial success.

Logistically it is easier to start a district from scratch since there are fewer obstacles to circumnavigate. No historic properties to tip toe around, no residents to appease, no-one to bother with construction noise, and you can dig the underground metro tunnels out from above in trenches and cover them over like they did in the 1860s construction of the London Underground’s Metropolitan and Circle Lines. Back then Paddington, Edgware Rd, Baker Street, Great Portland Street, Euston Square, Kings Cross and Farringdon were opened in January 1863, followed in 1864 by Hammersmith, Shepherds Bush and Ladbroke Grove, a year later Barbican and Morgate opened, followed by Westbourne Grove in 1866. 10 new stations opened two years later, when Gloucester Rd, High Street Kensington, Bayswater, Latimer Rd, Westminister, St James Park, Victoria, Sloane Square, and South Kensington thrust open their doors. In a time of basic machinery where manpower and brute strength was used to overcome limitations, all 34 stations were opened in 21 years over 27 kms of track mainly due to their willingness to demolish anything in their path, with 29 opening in a single 8 year span alone. The will to succeed was victorious.

Credit – P Justyne

Yet London has many areas that are already empty and that wouldn’t need to make the same sacrifices. Upminster in East London, an area that is a 24 minute train journey from central London, is within 3,000 metres of a largely empty area of land that measures at least 64sq kms. Using just 30% of this would provide enough space to build a mini-Manhattan of 20 square kms, creating the opportunity of nearly 560,000 people being able to have a roof over their head well within 30 minutes of the heart of the city centre by train. It could be a self contained city that is able to integrate within the capital seamlessly. “New London”.

Anything that New London lacks it could borrow from London, such as history, entertainment, theatres, sports teams and airports, and anything that London lacks, such as housing, hospitals and factory jobs could be sought in New London. Immediately to the east of Rainham, 26 minutes to central London, is a patch of land between 7sqkms and 9sqkms in size, enough to house between just under 200,000 and just over 250,000 people. Within 1,000 metres of Chingford, 34 minutes away from London’s financial district, is an area of land large enough to house over 250,000 people, and within the area of Ebbsfleet, only a 20 minute train ride to Kings Cross station is an area of land large enough to easily accommodate over 700,000 people in high density, high rise accommodation.

To the south-east of Wycombe you can create a new town of 250,000 citizens within 26 minutes of Marylebone, a new town of 220,000 people can be built just south of Hayes in Kent that would be a 36 minute train ride to Charing Cross and to the west of Epsom 150,000 people could call a new city home that is 41minutes away from Waterloo Station. No space to house more Londoners? Clearly not, as in those areas alone there is enough to house nearly 3 million. There are plenty more too: just north of Cockfosters, to the west of Slough, to the south of Dartford and to the north-west of Romford, all of them have ample space to satisfy enough homes to cure London’s ails multiple times over, with all of them being on existing train lines for quick access to the city. You’d need to turn an 8 trains per hour line into a 35 train an hour tube line, and maybe even loop over a second train line to shoulder the burden, but it could be done with hard work and political will.  Considering the efforts that London went to for the 2012 Olympics, if they can achieve the transformation of Stratford for a two and a half week sports contest, surely they can do it to change the lives of millions of taxpayers?

Credit – Google Maps

Yet this is where we get to the crux of what is causing the crisis. Firstly each of these schemes would require building on green fields, and currently that is a bridge too far for local residents and the government. Yet none of these fields grow vegetables, none have cows and horses in them. They are not actually productive, instead they act as an opportunity for a nice view and a source of silence for local residents, and building on those fields means this will forever be lost. Therefore it is no surprise that local councils will oppose any such plans for Manhattan style housing on their doorstep, and just think about what this says. It says that someone doesn’t want 200,000 or more people to have the dignity of a home simply so that the get to look out over empty land.  Their view is more important than people’s well being and financial independence.   “We had a ghastly time last night, some man was hit by a bus and proceeded to bleed all over the road, it really did put me off my fourth glass of champagne……”  Sure, it may not be ideal for them, but we’ve gone past the stage of ideals when nurses are sleeping two to a room and when there is a whole generation of people who will literally spend their whole life paying off someone else’s mortgage.  Something has to give.

Ironically the biggest argument against such plans is that land is precious and once it is built over it is lost forever, but surely this is an argument for just such a development, since the concentration that these homes are built in is up to 4000% more intensive than in urban areas. There are people living in two storey homes that are on plots that were once fields, who complain that fields are being built on for high rise apartments, the irony being that whilst they believe that there is nothing wrong with using a field to build 20 individual houses that may accommodate 80 people, they are opposed to building two high rise towers with 8 apartments on each floor at 50 stories each which would house up to 3,200 people.   Surely if we are losing fields,at the very least we should get the most out of them when doing so?  The population is only ever going to increase, so are we saying that we are never going to build houses ever, or that we are going to do them on a smaller level? By creating a new district on a huge scale from the ground up with a much higher concentration of houses you use much less land for more houses in the long term, in doing so solving both problems of providing houses and saving as much land as possible. In the long run if you want to save green fields, high density housing is the way to do it.

The housing crisis is also deceptive in that we have mitigated it’s effects by lowering our expectations and standards of living. For 2 years I lived within 3 minutes of Highbury and Islington Station in North London, on St Paul’s Rd. The homes there were period properties, built over 4 levels, with a basement level just under ground, a ground floor just over ground, a 1st and 2nd floor and an attic. The houses were terraced, one room wide with a large front room, a small middle room with no natural light, and a medium sized back room. When these properties were built they were laid out with the basement having a kitchen at the front, pantry in the middle and a dining area in the back. The ground floor had a sitting room at the front, a library or storage area in the middle room and a study or a second sitting room at the back. Both of the back rooms on these floors would have direct access to the back garden. Then on the 1st floor you would have a bedroom at both the front and back, with a bathroom in the middle, with the 2nd floor having a bedroom at the front and a kids playroom or a spare bedroom at the back, with another bathroom in the middle and the attic being used for storage. A family had a room to prepare food in, one to eat it in, a sitting room for conversation and a room to read in silence, a master bedroom for the parents, 2 further bedrooms for children and a playroom or a spare bedroom for guests, with 2 bathrooms and a storage area. Such a house allowed a family to live in comfort without the need for much compromise.

Credit – Chris 73

Fast forward 140 years and the large house is now home to 4 individual one bedroom apartments. Upon each floor the front room is a sitting room, a kitchen and a dining room in one, the middle room is a bathroom and toilet with no natural light and the back bedroom, which was originally meant to be a single bedroom, is now used as a master bedroom and for storage. There is nowhere for the children to sleep, friends cannot stay over, and if you have a fight with your spouse one of you has to take the bedroom, one has to take the sitting room. Instead of one family having a home to live, entertain and grow in we have a space for 4 different couples to sleep, with constricted space. We’ve created accommodation for more people by reducing the expectations of raising a family in the area and by compromising our quality of life. We have put off the worst of the housing crisis by accepting a degradation of how we live.

In order to raise the quality of living within the city – not too drastic a request – we would need such homes to be turned back from 4 inadequate apartments into 2 larger apartments instead, with each one offering a second bedroom, a dedicated storage cupboard and a separate kitchen and sitting room that allows one partner to chat around a kitchen table while their spouse catches the latest film or sporting event on the TV, i.e the opportunity of a choice of rooms and some privacy. I don’t think I am being too demanding, surely?

There are also professionals who rent bedrooms and have flatmates well into their 40s through economic necessity. 4 flatmates who currently share but want their own home will need 3 new apartments, with 3 new kitchens, 3 spare bedrooms, 3 outside spaces, 3 parking spaces and 3 more front doors to fulfill their ambition of independent living in comfort. New homes on the market could provide this, but at present there is a lack of evidence for this demand as many accept their communal fate and make-do. The government calculates housing demand by how many people try to buy a home, yet that’s ridiculous. Most people aren’t in a position to even attempt buying a home as it is too unrealistic, so they never show up on the official statistics. If we want to give them the opportunity for independent living, (and why shouldn’t we?) we need to build properties for them too.

There are also properties in central London, specifically in Marylebone and Victoria, that were never intended as permanent homes, but instead they were built as Monday – Thursday sleeping lodges for city workers, somewhere for them to kip in while they worked in the city. Their occupants would eat out at restaurants and entertain in gentlemen’s clubs at night before getting the train back out to The Shires for the weekend, and these properties fulfilled their simple needs of a bed with four walls and a roof. Today these properties are homes to people who live and work there permanently in high stress jobs. Couples, often with babies and pets, have to find space for all of their property, not having the luxury of a Manor house out in Oxfordshire to house the majority of their possessions.

These apartments were never built for today’s needs, storage was not a concern, a kitchen was never properly considered and as they were meant to be single person dwellings they did not have the considerations that new properties would have. They were built to a compromise, knowing that the occupant had a spacious Country Manor to look forward to from Thursday evening to Monday morning. For us to return to the standards of living that we had in the 1800s these properties should return to this use where they are second homes for the fortunate, places to rest their head while burning the candle at both ends in the city, a luxury; instead of a property that it takes 40 years of cramped living to pay off a mortgage on. They were build as a convenience and extravagance, somehow they have become a necessity.

Credit – CC By SA 2.5

Yet for this to happen we would need to lose 100,000’s of homes in the capital from converting a larger number of smaller properties into fewer larger ones, and turning current homes into dorm lodgings which is hard to justify when there is already such a shortage, and this illustrates exactly how dire a situation we are in. To fix the problem of the housing shortage and give people a secure roof over their head we need to build a huge amount of houses. In addition, more properties are needed to improve the quality of people’s lives. There are a huge amount of people who have left the capital due to the reduced quality of housing that the capital offers and if you rectify this problem many of them will come back, which is even more demand. Introduce more accommodation and rectify the imbalance between the supply and demand for housing and property prices should fall, and suddenly even more people who are living outside London and commuting in from areas such as Milton Keynes, Peterborough, Luton and Reading may move in since the housing market is suddenly within their price range.

There are also many people living overseas who would love to come to London but could never even consider it due to the cost. Someone from Los Angeles may be willing to spend £150,000 on a flat in London to live here for 4 months a year, but for £500,000 there’s less chance of it happening. Such people who are rich enough for a second home would pay UK property taxes and pay into the economy without using it’s schools, taking employment opportunities or putting other services under pressure. Build more homes and we can accommodate such people and increase two of the biggest draws that the capital has – it’s prosperity and cosmopolitan living. That would be stage 5 or 6 in a recovery plan, but we can’t even start to make inroads into Stage 1 yet, of providing nurses, police officers and teachers with a first home. We have a long way to go, much further than politicians realise.

The conundrum is that every time you introduce more properties you also increase the quality of living within the capital, which in turn attracts more people and demands even more housing. The main thing driving people out of London is the reduced quality of life and higher living costs, rectify that and in the short term the demand for housing increases. Not only this, but all of those people will need the basic infrastructure of public transportation, roads, hospitals, schools, police stations and more besides built. We’re currently finding it hard to keep up with current demand as it is, when what we need is to meet current demand, and then meet the back demand that has built up over the last 40 years, and then meet the demand that has not even shown it’s head yet from people accepting a lower standard of living, and then meet a expected increase in demand when more people are attracted to the city with better standards of living and lower house prices, and to then build an extra 8% – 10% more homes than needed to make sure that the property market is no longer skewed in favour of the rich landlord.  That will take at least a million properties to do this, maybe many more.  Build any less and it won’t have much of an effect. Is it any wonder that the government has accepted defeat?

Ultimately, to fix the housing crisis you need more properties than people wanting them.  By having more supply than demand we can introduce the need for competition within the market whereby offering a home for rent is no longer enough. Instead, landlords would need to offer something more than other landlords are currently offering to find good tenants, which would likely raise housing standards, create more stability for current tenants since landlords will be less likely to evict people without good reason in a buyers/renters housing market, and also give peace of mind to renters who will know that if they are evicted from their home, there are plenty more options for them to choose from.   As long as there is a shortage of properties landlord’s have no need to compete, no need to maintain high standards, and no worries of evicting people since replacements will be easy to find.  Oversupply the market and you fix many of the problems, and it needs to be done, but it’s easier said than done.

Credit – Deliff

But this does fully not explain why the housing crises is difficult to fix. Instead of it being a difficult challenge to overcome, it’s a problem that the government will actually be punished for rectifying and is thus actively trying to perpetuate. The economic “success” created over the last 40 years has come as a direct result of the housing crisis. Economic growth relies on it, and with the way that the UK economy is structured they both go hand in hand and can only be separated at the cost of intense short-to-mid term pain.

A basic principle of any economy is based around investment and a return on that investment, in the form of debt and assets. If you spend ‘x’ then the return on that spending needs to be greater, otherwise you’ve made a poor investment, and there are different factors that affect the likely return on investment. While factors such as the quality, the design or the prestige of a product can all raise it’s value, by far the greatest effect on a product’s price will come from how desperate people are to buy a product, and in a housing crisis desperation overrides everything else. People are willing to take on 50 year or interest only mortgages and will be willing to live in a home that is a quarter of the size that would accommodate families 150 years ago not because they want to, but because they are scared that house prices will continue rising and that their rights will not be protected while renting.

Today’s housing market is not run on ideals, it is run on compromises. With respect to these areas, few people say “oh, I’d love to live in Edmonton or Barking, it would be my absolute dream” but instead they realise that they cannot afford their ideal areas and decide that ‘they’ll do.’ People are no longer choosing their homes on their wants but on their needs, and it’s because of the fear of rent rises, missing out on property price rises, spending your life paying off someone else’s mortgage and the fear of not leaving anything to their children. Increase demand and limit supply and people get desperate; how desperate? Enough to queue for 3 days to secure a 1 bedroom flat in Hounslow on the Heathrow Flight path for £355,000. There is no other way to explain such an illogical investment other than irrational fear.

On one hand the government could start to build all of that Manhattan style housing in the areas identified, but with every single home that is built you reduce the gap between demand and supply and thus start eroding the factor that is raising prices like no other – the housing shortage. In doing so you could be investing money and actually creating a loss for the UK economy that is greater than the actual investment. Not only do you lose what you invest, you also lose what you don’t invest.

We’ll pick a simple example to illustrate the point where we will only focus on the effect that supply and demand has on housing, since this is the tool that the government is using to purposefully inflate house prices. Lets say that there are 1,000,000 houses worth £100,000 each, (which is unrealistically low for London but a simple number for this example.) If demand goes up by 10% then one of two things can happen. Either you increase the supply of the houses by about 10% and the price will stay roughly the same, (excluding other factors which affect house prices, as we are only investigating the effect of supply and demand on prices) or if you keep the amount of properties the same then the prices will increase.   So let’s say demand goes up by 10%, and the government then spends a lot of money on building 10% more houses.   They decide to spend, for example, anywhere between £40,000 to £60,000 per house, and then they sell it for £100,000 since this is the market’s value for houses. So they spend the money, sell the house to a member of the public, the government makes the profits, the buyer has a place to live, the housing crisis is reduced slightly, everyone is happy.

Credit – Andrevruas

As they built 10% more houses they now have 1,100,000 houses worth £100,000 – as demand and supply both rose at the same rate the house prices have stayed consistent – and this gives a total value of £110 billion worth of property.  Yet if they didn’t build the houses then the price of the 1 million houses would have gone up since demand rose and supply didn’t. If they were to go up by, let’s say, 10%, in that example you have 1 million homes worth £110,000, which is also £110 Billion, the difference being that they didn’t need to build any properties. Instead of spending £40,000 – £60,000 to get a 10% rise in total house values, they got it anyway by doing nothing with no cost and no effort.  In a situation where people are attracted to London, whether you build the houses or not the overall value of the property market rises either way, with the increase in total value coming either in the increased volume of all houses, or the increased value of those houses.

That’s just an example, but the principle remains. If you want the total value of all of London properties to grow exponentially, you need to either raise the value of these houses or the amount of these houses, and it’s much easier and cheaper to just rely on the rising market as it requires no effort and no costs.  If the government were to set a target to increase the amount of housing in the capital by 10% each year it would be a ludicrous level to attempt to reach since it would mean providing homes for 850,000 people in one year, and this is incredibly difficult to do.  Yet time and time again London house prices keep rising by up to 10% with ease. The greater the value of the overall housing market, the greater the inequality in the country but the better it is for the government, as when house prices rise people are more likely to re-mortgage their homes and spend that money, and that helps the UK to forget it’s debt. If a home owner has £10,000 worth of credit card, a slight bump in the market and that debt is gone, in theory at least.   Britain has about £1 trillion of debt, the only thing balancing that out is assets.  Build more houses and you diminish those assets.

As more people make profits on the housing market other people are attracted to the market too, which helps to raise the amount of money swishing around the economy. The higher the price of property the higher stamp duty will be, the more profits the banks will make on mortgages and the more the government can then borrow from the banks. You’re going to be less concerned about a pension if your home value keeps rising, and the more that homes rise in value the more financially stable current property owners become, and home-owners are more likely to vote on the whole. The government can then turn around and proclaim how rich the country is becoming from all of this equity in the housing market.

House prices in London are high, and lots of people have large debt secured against these homes. The only reason that the value of homes is so high is due to their scarcity, so if the government were to rectify the imbalance between how many houses there are and how many they need by flooding the market with properties, then the price of the properties on the market would drop. Suddenly loads of people would then be in negative equity as the value of their property has dropped while the value of the debt has remained the same -mainly as few people have equity on their home –  and in such a case many people would forgo their properties and allow them to be repossessed since many people in London only use property as an investment, as is the case with the buy to let sector. Why continue paying the debt on a property that has fallen in value when you can hand the keys back to the bank and write off the debt in the bankruptcy court?  It makes no sense to pay off debt when it is so easy to avoid it. If they are home owners they could easily go back to renting, a move which will be even cheaper now that the market has fallen, especially as there are plenty more properties to choose from.  Building new properties is opening a can of worms. 

Credit – A P Monblat

It gets worse: many people invested in the property market on the basis that they would get a high rate of growth on their investment as standard. To them a rise in the market is not a bonus, it is a prerequisite. Let’s say that they expect the market to rise between 7% and 10%, if they were to then get a 5% yearly rise in the value of their property, well above what you would get from a bank, it could still cause a lack of confidence and damage the housing market since it was lower than expected. The problem with high expectations is that you need to keep on hitting that standard, and with the cyclical nature of the economy a small dip in confidence could cause a knock on effect of property prices dropping, people panicking and selling their properties, and many people defaulting on their mortgages. With every person that does this the government would have to pick up the tab, either directly or indirectly, so they have no choice but to underpin the market.   While many people want prices to fall, the UK has to make them grow and grow and grow.

If homeowners declared bankruptcy the bank would need to pick up the tab and cover the debt, but if that happens too much the banks could go bust. Inevitably the government would have to step in and pick up the tab since that’s what governments do – they protect the economy, and banks today are the economy since there is such a reliance on the finance sector in the UK.   If the government ever tried to close the gap between supply and demand they would need to spend between £120,000 and £150,000 per home, multiplied by about 1.5 million homes, plus the infrastructure around it. They’d do well to have change from £350,000,000,000 and the result?   A drastic fall in the housing market and a new run on the banks.  As a result of the government trying to fix the housing crisis they now have another super-recession on their hands from destabilising the one market that is actually bringing in revenue for the government.

Not only that, they also have a very real chance of a civil war breaking out in the country since the rich people who previously had properties would be being made bankrupt, while the people who could never have realistically afforded a property before the crash are now happy since they can suddenly own their own home from the property crash. With half of the population angry and upset over a government policy that brought such joy to the other half of the country, you have now created an incredibly divided society, and it would likely lead to a civil war in the same way that the Spanish Republic’s efforts to readdress financial inequity in the 1930s did.

At present we have a certain section of society that is angry at the current housing shortage, and they are overworked, demoralised and fractured. They have little lobbying power and few connections, and many are actually swallowing the golden carrot of government rhetoric, believing their intentions to fix the crisis which is stopping their anger reaching boiling point. When this sector of society is angry it creates a mild inconvenience for the government. By contrast by fixing the housing crisis you now have the most financially powerful people in the world angry at you since their assets will be worst affected, and they have both the contacts, the arrogance and the ruthlessness to stop at nothing to get their way. The people who have risen to the top of the banking sector have done so through tenacity, intelligence and a willingness to bend the rules and stop at nothing that borders on the psychotic. These are not the kind of people you want to upset.

You think the government is worried about a single mother of 3 that is unable to get on the property ladder who creates a Facebook group to vent their anger, who also works 3 jobs to support their family and so has no time or energy to make progress? No, they care about organisations that can pull hundreds of billions of pounds of investment from the UK in minutes, who can close down the power stations that we rely on, that are friends with the current ruling class and who know their weaknesses and secrets, and who have a track record of getting what they want. Revoke the insurance on a few airlines and you close UK airspace. Take their money out of the UK economy and Britain loses it’s AAA rating and will find it hard to borrow money.  They can do this if they wanted to.

Property owners, many of whom are politicians, investors and banks are making money hand over fist with the property market, and they are not doing it on scale, they are doing it based on scarcity. Rectify that scarcity and you’ve now pissed off the most financially powerful people in the country. Do you think that they are going to put their tail between their legs and lick their wounds? Not a chance.

Despite how much they need to, the government cannot fix the housing crisis as it would be a declaration of class war on the richest people in the UK, and most politicians today have only got to where they are today on the backs of these very people. As a general rule people who can afford to send their kids to Eton don’t do it by getting up at 4am and baking bread, laying bricks, delivering letters or doing data entry. Instead they make their money by working with the elite, by manipulating market forces and by playing the financial game, which includes artificially inflating house prices. The only people who can fix the crisis are the people who benefit from it the most.

By attempting to fix the property market not only do you create a divided society and an economic catastrophic but you may also reduce the efficiency of the workforce. While property prices are high people have to work hard and cannot take chances that could see them losing their jobs, and this creates a strong, disciplined economy. They’re working so hard that they don’t have time to think about anything else, so by keeping housing costs high you get a more focused and hard working workforce. If people could get £100,000 mortgages they could easily get onto the property market earlier with only £10,0000 being needed for a deposit, and they could pay off their mortgage within their 40’s. Once the mortgage is paid off they may work less, take a job that pays less that is more rewarding in other ways or start on a new business, of which 50% of them fail in the first 5 years. Release people from the financial shackles that confine them and you give people an increased quality of life that is not so focused on work, and that’s just plain bad for the economy. Hence, there is a conflict of interests between giving people a good quality of life and building a strong economy. You either have one or the other, it’s difficult to have both. By reducing the housing crisis you improve people’s quality of life, and that doesn’t pay for the government.  It’s also hard for the government to claim the credit for it.

The UK has been under the illusion that it has been building economic growth in recent years, the difference is that by creating this “growth” based on a scarcity of homes, they cannot build more homes without undoing the one factor that created that growth.  They’ve driven down a one way road, and can’t turn around without huge amounts of backtracking.  One of the biggest challenges any government could have would be to rectify the financial imbalance in society, yet by doing this the government would cause a short term recession, which would be worth it in the long term.  If that happened, on the face of it under the previous government there was “economic growth” (there wasn’t really) yet suddenly the government that has taken the steps that were needed to solve the housing crises will now have to suffer the indignity of the criticism for doing something that was desperately needed when the crash happens, and it is unlikely that this will be seen in any other way other than bad management of the economy. When in fact all that they have done is fix the problems caused by their predecessors. Whoever fixes the problem will get the blame for causing it since they will have to expose the problem first.  Try to fix the problem and you’ll almost certainly lose the next election.  There’s no two ways about it – if the problem was exposed on their watch, it will be seen as their problem.

Housing in the UK is no longer seen by government as a place to rest your head at night, to bring up a family, to entertain or to store your possessions.  Instead it is seen as a tool to leverage debts against, and the only way that we can rectify the housing crisis in the long term is to break this association. Doing this would mean the government admitting that most of the “economic growth” in the last 40 years was made not through hard work, but by rigging the market at the cost of the poor renters who were tasked with paying those debts off. The first step to solving a problem is to admit that it’s there, and that’s impossible for political parties to do. It would be the honorable, the sensible and the practical thing to do, but it would involve falling on their sword and holding their hands up to the hardship that has been intentionally caused for so many years.  It would be akin to the Wizard in the Wizard of Oz stepping out from behind the curtain.  Sadly, while we have the current focus on winning elections instead of on serving the voters as best we can, this is unlikely to happen.    

The heart of what causes the housing crisis is that people usually only care about what affects them personally. The home-owners want homes to increase in value since it’s money in their pocket, the people desperate to get onto the property ladder want the market to crash since it will be the only way that they can afford to buy a property, the government wants to prop up the market since it’s the only way to continue the illusion of economic growth and to win the next election, and the banks want to prop up the market since they know that if the market collapses their assets are wiped out. The people living in the countryside next to the prime sites where new cities could be built don’t want homes built since it would spoil their peace and quiet, the people who work in London don’t want to move to the north since they want to live in London – and why shouldn’t they – and the companies that are based in London that provide the well paid jobs that drive the prices higher refuse to move out as London earns them more money. Everyone is looking out for themselves, and is it any wonder – when you’re paying more than 50% of your wage on wages, don’t be surprised when a siege mentality sets in.

When people think in ideals no progress can be made.  What we need is a system where people are ‘mostly’ happy.  Where a property tycoon that has made £300 million loses £200 million of it, yet it still happy to have £100 million left over. Sadly if that happened you can bet that they would complain about the market losing them that money, with them forgetting that it was the same market that earned them that money in the first place and that they still have £100 million in the bank. People aren’t happy with “enough”, they want it all.

We need people on the outskirts of London to understand the need for new properties to be built, and to understand the loss of their view, the temporary building noise and the  sudden influx of new people, and they need to understand that other people went through the same process when their homes were built.  We need banks to understand that they will have a big hit to their profits for 10 -20 years, but that as a result the housing market will get more stable.  We need a political party that is willing to take a big drop in the polls with the understanding that in 50 years time, people will look back and say “what a good job that party did.”  Lest we forget, Winston Churchill was a pivotal figure in winning the war, and got voted out of power the very same year.  Labour got elected in 1945 with a majority of 146, founded the NHS and then only got reelected in 1950 by a majority of 5, losing altogether in 1955, yet both Churchill and Atlee, leader of the Labour party at the time, are looked back on as some of the UK’s greatest ever leaders. We need leaders that will take the short term loss for the long term gain, and for them to think in longer than 5 year cycles. We need to put “progress” over ideals, to put the needs of others over their needs and to make the decisions that are desperately needed, not the ones that are easy.

By reducing house prices we could have 40 year old parents who have paid off their mortgages taking on mortgages for their children, and we could have teenagers having the luxury of knowing that they have their economic destiny in their hands. The more outright home owners we have with mortgages paid off the less debt the country has, the more financially comfortable we are the less we will need to compete with each other and the less stressed we will be. By reducing the proportion of people’s income that they spend on housing you reduce their stress, saving the Health Service immense amounts of money in stress related healthcare problems. There are strong links between stress, and both antisocial behaviour and excessive drinking; cut the stress and you reduce both. With less of a need to earn lucrative wages, instead of children being taught how to be productive workers and consummate consumers they can be taught about a wider range of topics that enrich their lives and the lives of others that are less focused on money.

Instead of property being seen as the best investments, investors could invest in companies that provide a product or a service that actually creates value instead of wealth. With a housing market so safe it makes little sense to invest in the medical research that could save lives, technology that could educate millions, the alternative energy sources that stop global warming, or another means to make a real difference in people’s lives. Make no mistake, rectifying the housing shortage would be nothing short of a revolution, and that’s why everything will be done to make sure that it never happens – the last thing that any government wants is a revolution.


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