Mark My Words

In the coming weeks, I’ll be moving house. I’m not buying though, because like most people my age¹, I can’t afford to.

Housing is one of the biggest issues facing Britain today, and it was barely even touched upon during the recent election campaign. As I tweeted during the third leaders’ debate, the problem is not just, as the politicians would have you believe, a problem of supply. The market has been manipulated in order to artificially inflate prices.

Far from being happy with having somewhere to live, the modern home-owner expects to have their cake and eat it too. The generations preceding my own have got used to the idea that housing is an investment — houses are no longer homes, they are commodities. Recent history shows, however, that when basic human needs are commodified, people inevitably suffer².

This concept can be illustrated with a simple, if absurd, example. Imagine a world where everyone needs a hat. Perhaps the sky is falling in over Britain (literally, not figuratively — that’s already happening of course). There are around 60 million people, and around 60 million hats. There are just about enough to go round, so although they are not plentiful and cheap, the price remains reasonable.

Now imagine that a certain proportion of people buy an extra hat, perhaps just to be on the safe side. This means that demand outstrips supply, and the price of hats goes up³. Although there are still enough hats to go around, some people have to go without.

Now, because the price of hats has gone up, some wealthy people see a way to make some money — by buying more hats and holding onto them for a while. Because this increases demand and further reduces supply, the price continues to rise. Meanwhile, those who can’t afford to own an overpriced hat have to rent from the people who have extra hats, earning them even more money. Meanwhile their investment continues to appreciate in value.

Now, the government, who really should be putting a stop to this nonsense by stepping in to ensure that everyone has at least one hat, instead notice that because these hats are so much more expensive, and because of the additional transactions that are happening as people rent hats, their tax revenue has increased considerably. They decide that this unsustainable situation must be maintained, and they intervene to ensure that it is. They make a token effort to produce a few more hats, just to show that they are doing something to help, but these hats are just as expensive as the old ones and just as inaccessible to first-time hat buyers, so it’s really an empty gesture.

This fictional hat market seems ridiculous and irresponsible. Now, re-read that unlikely-seeming scenario again substituting the word hat for house, and realise, if you haven’t already, that this situation is real.

Knowing this, it’s difficult to come to any conclusion other than that, although profitable, it’s basically immoral to own a second home. With which other basic human need would you be allowed to take twice as much as you need and lock away what you don’t use? Imagine if it were done with food. Hungry? Hard luck. Food is now scarce, you’ll have to pay over the odds!⁴

Ok, you might point out (and several have) that these second-home owners are relying on this investment to provide for them in retirement. What can be wrong with that? They need to provide for themselves don’t they? Sure, but my generation won’t have this luxury, so what am I to do? Of course, I’ll have to set aside some of my income. Seems obvious enough, so why couldn’t our parents do that instead of spunking it all on, for example, paying back credit debts?⁵

Just as all taxpayers famously had to bail out the banks, now the younger generations must pay for the excesses of their parents⁶.⁷ While the buzzword of the Conservative portion of our new coalition government is ‘responsibility’, it’s ironic that most of the responsible (i.e. young⁸) voters didn’t vote for them⁹.¹⁰

The reluctance of the politicians to discuss this problem is understandable. A large and growing number of (generally young) “first-time buyers” are struggling to afford even a modest home and naturally want the prices to come down, while an even larger group of (generally older) home-owners are cheering for the bubble to keep on inflating, and, if they can afford it, buying up all the property they can get their hands on. As a representative of both these groups, how do you reconcile their diametrically opposed demands? No-one seems to have an answer¹¹.

As the number who are unable to buy property inevitably grows to outnumber those who can, however, the need to find a solution will become more urgent. It hasn’t happened yet, but I predict that this issue will soon become big enough to lose somebody an election¹².

1. Source: http://www.independent.co.uk/life-style/house-and-home/property/no-place-like-home-the-generation-who-cant-afford-to-buy-1921781.html ↩
2. Recent memorable examples include corn, oil, and so on ↩
3. This is a fundamental principle of markets, that the price of something is dictated by the disparity between demand and supply. Still waiting for that iPad? Don’t imagine Apple are working as hard as they could be to get it to you quicker. ↩
4. Bear with me here, let’s imagine for a second that this isn’t actually happening! ↩
5. Britons’ personal debt overtook our GDP (the value of what the country makes in a year) in 2007. Source: http://www.independent.co.uk/money/loans-credit/for-the-first-time-britons-personal-debt-exceeds-britains-gdp-462825.html ↩
6. It’s not just financially either. For example, older people are much less likely to be concerned about climate change, so while young people are changing their lifestyles to live more sustainably, we will have to go much further in this area too, because older people will not. Source: http://www.csreurope.org/news.php?type=&action=show_news&news_id=2150 ↩
7. Another example of the inequities are university tuition fees. If you’re starting university this year, you will have to pay an average of £10,000 for your basic three-year course (Source: http://www.direct.gov.uk/…/Gettingstarted/DG_171573). Your parents, if they went to university, paid nothing. Your student loan? That could add up to as much as an extra £24,000 which you will have to pay back. This debt could be a financial monkey on your back until well beyond your 40th birthday. Your parents, instead of the loan, were given a grant that they didn’t have to pay back. So you could leave university with a burden equivalent to two-years’ salary in debt that your parents never had. ↩
8. If this is a contentious statement, let me qualify it by pointing out that the young will necessarily be more responsible than their parents because of the mess we now find ourselves in. Our parents could easily be represented by Liam Byrne: “I’m afraid to tell you there’s no money left”. ↩
9. The Times concludes that the Tories haven’t outpolled Labour amongst young people for 27 years: http://www.timesonline.co.uk/tol/news/politics/article7101528.ece ↩
10. In fact, some people (mostly Conservatives, would you believe) take this argument further than I will. Tory MP David Willetts, our new Minister for Science, no less, has written a somewhat controversial book on the subject subtitled “How the baby-boomers stole their children’s future”. ↩
11. Although, the new government’s proposed increase in Capital Gains Tax, despite being attacked from all sides by the people who stand to lose out, might well have a positive effect ↩
12. This could happen in one of two ways: either the prices stay high and the growing mob of first-time buyers demand something is done, or prices fall and disgruntled property owners take out their frustrations on the incumbent party. Basically they’re damned no matter what happens. ↩