On the treadmill

The harm to people’s ability to access decent, affordable and secure housing is already well-documented. Many commentators have drawn attention to the growing divergence between incomes and prices. Yet the causes and potential solutions to the problem of rocketing house prices are frequently misunderstood.

‘Experts’ cite supply and demand due to population growth, household changes and so on as ‘fundamental’ causes of rising house prices. Buy-to-let and the role of lenders and legislators in funding and promoting housing as an investment are hardly ever blamed.

But it seems obvious that changes to population, household composition and incomes cannot account for an almost tripling of house prices during 10 years. Secondly, hyperinflation in housing markets is a global trend – regardless of demographics. Thirdly, it requires a huge stretch of credibility to imagine that almost a million investors, many competing directly for first-time buyer property, has not had a profound impact on prices.

In fact, it seems reasonable to argue that the global property boom is the result of unusually accessible and cheap credit – coupled with an element of greed and fear. Housing has been viewed by many amateur investors as a route to riches, particularly since faith in stock markets fell, while many financial institutions, in an increasingly competitive and lightly regulated mortgage market, have been falling over themselves to find more borrowers to lend to. The consequence is a classic investment ‘bubble’, where inflation fuels anticipation of big profits and further prices rises become a self-fulfilling prophecy.

Furthermore, contrary to claims of ‘responsible’ lending by finance industry spokespeople, the major banks and other lenders have responded by chasing these inflated prices with increasingly ‘generous’ and lax lending, further fuelling the bubble. By far the most likely outcome is that boom will be followed by bust, just like in the US and Spanish housing markets. But, regardless of whether the current boom ends in a sudden crash or, as appears less likely, prolonged stagnation, the consequences could be dramatic and socially damaging.

The young and not so young who find themselves on the wrong side of the current housing divide are doomed to extended student-style sharing or living with parents, and having to postpone independence, new relationships and parenting. In some cases, the consequence is homelessness.

All of this has rendered government rhetoric about the importance of education and work as the route to success somewhat hollow, as the gulf between earnings and house prices yawns and success, security and status appear to be dependent upon property ownership rather than income from work.

We are reaching a point where the opportunity for achieving a normal family life is being denied a large proportion of the population.

Many young families are forced into renting from buy-to-let landlords and, as some of our respondents indicate, are regularly moved on by investors liquidating their assets. One young family say they have been moved five times in four years. This trend has been facilitated by the provisions of the assured shorthold tenancy, which appears particularly conducive to property speculation.

For many, accessing the ‘housing ladder’ has only been achieved by taking on a level of risk which would have seemed inconceivable to previous generations. Many couples and families are assuming levels of debt that will render them little more than bonded labourers (particularly in a rising interest rate environment) to the financial institutions that once ‘helped them out’ with huge advances in terms of their incomes.

The fact that many are likely to be trapped in negative equity within the foreseeable future makes the situation worse. The burden of mortgage debt will add to their stress as both debt-harassed parents are forced to work long hours to meet mortgage payments, and have little time left for family life and little disposable income with which to enjoy it. This is ironic while politicians of all hues bemoan the demise of family stability and good parenting practices as the source of social ills.

Another scenario could be that buy-to-let landlords buy more of the homes that come up for sale, moving us closer to a form of rentier society where, through property and inheritance, one sector of society lives from unearned income derived from the earned income of the other.

From the above, it is clear that we view buy-to-let, cheap money and irresponsible lending as being the main causes of the housing boom.

It is no coincidence that UK house prices began rocketing in 1996, the year that buy-to let mortgages were introduced. If we are right, legislation to restrict buy-to-let is the solution.

However, the impact of these causal factors has been absent from political debate. Why? Maybe because the real causes and consequences of this developing crisis conflicts with the current neo-liberal consensus (where all intervention and regulation in markets is deemed inherently unwise), with the narrow interests of a much-courted middle Britain, and increasingly powerful financial sector.

Also, from a more pragmatic perspective, continuing house price inflation, despite being unsustainable, is now viewed as an essential driver of our consumer society, with no politician wishing to see the almost inevitable bust on their watch. So, the only concessions currently being tabled are in terms of shared ownership and key employee housing schemes, which are likely to have minimal impact and do nothing to address its real causes and consequences.

This trend, if left unchecked, holds the potential to return us to a form of grossly divided, unequal and unjust rentier society, echoing the socio-economic divisions of the 19th and early 20th century, and is but one feature of a general shift towards social and economic regression, as opposed to a much vaunted ‘modernisation’ that has characterised the past few decades.

These developments are now generating a great deal of anger, cynicism and emotional distress with respect to many of the young people in this position we have encountered thus far, to such an extent that it seems likely that the housing crisis will have wider social and even political implications further down the line.

Dr John Bone is a lecturer at the school of social science, Aberdeen University