Housing in Britain: of roofs and riches
04-20-2014
If the aim were exacerbating society's class divides, it is hard to think of a surer means of accomplishment than a property boom
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Imagine "if people hoarded food on the basis that its value was sure to go up when others began to starve and would pay anything". Thus begins a defining study of the defining social problem of our age. Danny Dorling's thought experiment in his book All That is Solid is designed to wake us up to what we have allowed to happen in British housing.
The imaginative leap from food to shelter got wider on Tuesday with the publication of two divergent price indices. Overall inflation sank to 1.6%, well below the Bank of England's target; house prices, meanwhile, climbed by more than this annualised rise in the cost of everything else in the single month of February. Over the whole year, official figures showed, property inflation is running at 9%, and at double that – 18% – within London. Even if there is finally better news on average wages on Wednesday morning, after four straight years of pain, the cost of keeping a roof over your head will continue to eat deeply into pay packets.
We are indeed allowing people to hoard homes on the assumption that their price must keep rising, since others will ultimately pay whatever it takes to avoid destitution. In the bubbling metropolis, the presumed certainty that rising rent can in the end be collected leads to carelessness about whether it actually is. Footloose funds fleeing the eurozone's shaky banks and the continent's anxious east have poured into London investments, deemed as safe as houses. Prized within foreign portfolios for the prospect of capital gains, many of the most desirable addresses in London no longer serve as homes at all: the population of the most sought-after borough, Kensington and Chelsea, has been declining.
Kensington is a world away from those great tracts of the country where prices have still to recoup credit-crunch losses, and yet there are 30m-40m actual or potential bedrooms nationwide not slept in every night, according to Dorling. The tiny fraction of these found in council housing are being aggressively pursued through the bedroom tax; public policy takes no responsibility – and shows no interest – in what happens with the rest.
For a brief time, the coalition seemed concerned about making the stock of property affordable to those who needed to be housed: while the housing minister, Grant Shapps, talked about stabilising prices. By last year, however, George Osborne was reported as quipping to cabinet that he'd make everyone happy with "a little property boom". If this was a joke, it was one to fall flat with anyone priced out of the market. But joking aside, the real worry is that this is exactly the way that policy has been pushing. Rules requiring new developments to include affordable homes have been swept aside, to encourage buy-to-let investment. There will soon be new freedom for the minority with big pension pots to pour them into snapping up existing bricks and mortar, further pumping prices. Help to Buy involves the taxpayer stumping up the funds for exactly that tranche of a property's price that the bankers fear is froth.
If the aim were exacerbating the age divides and class cleavages that are seared across society, it is hard to think of any surer means of accomplishment than a fresh property boom. Last year, Sir John Hills's exhaustive survey of the evidence on British wealth established both that one in 10 British households now had assets exceeding £1m, while a quarter had zero or negative financial assets, many of them no doubt driven into debt by excessive rents.
Wealth has always been grotesquely skewed towards the rich, of course. The big change since 1980 is that its totality has ballooned, rising from 300% to 500% of national income by 2005. Housing is the most important form of British wealth, so a new bubble reinforces this trend, dashing not merely expectations of affordable accommodation but also the dreams of those without property who believe that they can earn it through hard graft. In other words, the new property boom thus punishes the very "hardworking people" the Conservatives claim to speak for.