The Housing Crisis

Many people who believe in the Free Market think this should also be applied to the country’s housing stock. This is what led to the gradual phasing out of rent-controls since the Second World War, and then the selling-off of large amounts of council housing since the 1980’s. Now initially this seemed to be a good thing, as the subsequent boom in house prices made a lot of people very rich. However the situation now is very different.

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The policy of selling-off council housing has had a massive impact on the country’s housing stock. Picture © Pafcool2

We currently live in a massively divided society, where anyone who bought property before the boom of the late 90’s is sitting on a vast store of wealth, whereas everyone else is burdened with either colossal mortgage payments or colossal rent. Added to that is the issue of homelessness, which is an inevitable consequence of housing costs being beyond the means of many people. It is often said that the solution to the housing crisis is to build more houses, but this will make no difference if those houses go into a market where their cost will put them beyond the means of most people. It is also worth noting that there is no shortage of property anyway, and though there are 112,000 homeless people in the UK, there are a staggering 635,000 empty properties, including 72,000 in London! It is also the case that many wealthy people live in homes that are far more spacious than they need, while poor people are forced to live in cramped housing or have no homes of their own at all. Unscrupulous Buy-to-Let landlords are able to exploit this situation, by providing over-crowded, over-priced, sub-standard accommodation to the most vulnerable, ironically paid for by the taxpayer via the housing benefit system (see this shocking BBC Panorama Documentary).

At the same time London in particular is also attracting a lot of extremely wealthy foreign house-buyers, attracted by a favourable tax regime, which serves to both push up prices and rents (recent figures show that rent has increased 10% in the last year alone), and also take valuable housing stock out of the market. Even worse many of these high-end investment properties are then left empty, and recent research has revealed that while London goes through the worst housing crisis in its history, wealthy property investors are sitting on hundreds of unused ‘ghost mansions’ worth an estimated £3.2bn, enough to build 10,000 affordable homes.* Currently in the UK rent is almost double the European average, and even economically-booming Germany has rents which are only 2/3 as much as they are here.*

No, the issue with housing, as with everything else in the Free Market system, isn’t one of shortage but of inequality. We need to recognise housing as a basic human need, and not simply another way for privileged people to make a profit. Part of the solution to this may be a house-building program, but the real solution is a combination of measures, firstly to bring empty properties back into the market, but primarily to re-introduce Rent Controls. This will have the double benefit of both keeping rents affordable, and also putting a lid on house price rises. Property Investors and Buy-to-Let landlords may complain, but for far too long they’ve made money on the back of others people’s pain. Oh, and if anyone thinks rent-controls are a step backwards, it should be noted that many countries have them, including Switzerland, Sweden, Holland, the U.S.A and in particular Germany*, which has a superbly managed housing policy, central to which is the idea of Controlled Rents.

* References:

London Housing Market: http://www.standard.co.uk/news/london/londons-3bn-ghost-mansions-foreign-investors-are-using-capitals-finest-homes-as-reallife-monopoly-pieces-9128782.html

UK vs EU Rents: http://www.independent.co.uk/news/uk/home-news/private-rents-in-britain-are-the-highest-in-the-eu-10340664.html

German Housing Policy: http://www.nakedcapitalism.com/2011/06/how-germany-achieved-stable-and-affordable-housing.html

 

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