Bursting the housing bubble

2014.06.17

Photo credit: www.cdn.spectator.co.uk

Photo credit: www.cdn.spectator.co.uk

To read the newspapers in the UK, you might think that the housing market is both the most important thing in the country, and something that is of innate benefit to all citizens. There is constant jubilation over rising house prices, and that seems to be about the most important thing to publications like The Daily Mail. Think about things a little more deeply, however, and it’s becoming plain to see that the UK is in the midst of a housing crisis which is desperately hurting the lives of the poorest members of society.

For many people, rising house prices are not a good thing. Poorer people who have lived in London for decades are finding themselves increasingly unable to stay in the market in that city. In many cases they are renting from the local government, or from private landlords, and the increased value of the property means that the government wants to sell their house for a profit, or the landlord wants to charge double the rent. When that happens, and these people want to move somewhere nearby – it’s impossible, due to the high prices.

Worse, many of the new owners that are fuelling this bubble in house prices are absentee landlords living in other cities or countries. Many new developments in London are specifically targeting Chinese and Singaporean owners, advertising London housing as an investment in the future – buy the house now, rent it out for a few years, sell it when the prices go up. This creates a very unstable situation for the people who rent, and further prices these new homes out of the reach of ordinary Brits.

In many cases, the potential benefits of such expensive housing are also not realized. Local governments can collect something called ‘council tax’ from each household, but the way in which this is arranged means that any apartment-style building is considered low value, and pays very little tax  compared to a normal house. This is the same even if the cost of the building is higher – one apartment owned by a Ukrainian millionaire in Hyde Park cost over £100m, but requires less council tax per year than a £200,000 home in a poor area. This means that many parts of London are not getting the tax income they need to provide services and housing for the poor.

Consequently, social housing for the poor is no longer being built in England, or is only being built very slowly. There is little money available to provide it, and even if such money was made available by increasing taxes or diverting money from other budgets, the government of the UK has essentially abandoned its responsibility to house its people over the past thirty years. It is now assumed that something as vital and as basic as shelter should be left up to the free market – this is the curse of neoliberal ideology striking again.

When combined with the outlawing of squatting – which in many cases was the last recourse of the poor and homeless who need somewhere to sleep – this is undoubtedly a crisis. The rich continue to profit from the rising prices and the desperation of the poor to have somewhere to stay; while the poor themselves suffer from uncertainty and exploitative rents, going to food banks because they can’t afford to eat after paying the rent, or simply becoming homeless when they can’t make ends meet. Once again, the policies we live with are backwards, and the poor suffer.

 

Article prepared by John Wish

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