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The Collapse of the Home Owning Dream August 16, 2010

Posted by Garibaldy in Capitalism, Housing.
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I put most of what follows up on my own blog yesterday, but in looking at the Irish Times, saw a story discussing the failures of the Irish state in relation to the provision of social housing, and so am posting the original article here, along with addition bits based on the Irish Times article.

The Observer today reports on the end of what was in many ways the most emblematic feature of the Thatcherite programme – home ownership. We know that the Tory decision to sell off huge quantities of public housing in the UK was driven by both ideological and more nakedly party political considerations. Displaying an awareness of the truth of Marx’s theory that it is social existence that determines human consciousness, the Tories aimed to change the consciousness and political inclinations of large sections of the working class by allowing them to buy their homes cheaply. In the words of Norman Tebbitt, they aimed to make them possessors of capital, and thus, to turn them literally into capitalists. This, along with the deliberate de-industrialisation of the country, was part of a plan to destroy the social conditions that had bred the assertive labour movement of the 1970s, and to hand over the keys of the kingdom to finance capital. At a party-political level, as seen most nakedly in Westminster, it was expected that the new homeowners would vote Tory. The consequences of course were deepening inequality and division, and the devastation of the former mining and industrial areas that were left behind. The transfer of property was reliant upon cheap credit. At the same time, the orgy of speculation and spiralling property prices that resulted has now reached the stage where although the cult of home ownership has become firmly embedded in British social and political culture, it is becoming an unreachable dream for growing numbers. As could only ever happen, it has created a new contradiction in economy and society, especially now credit has dried up as a result of the current crisis. A new generation faces a lifetime of renting in a culture that valorises home ownership.

The Chartered Institute of Housing (CIH) warns today that the “golden age of home ownership” is coming to an end. In the most expensive parts of the country, lenders are demanding deposits of £40,000 for even the cheapest properties – requiring a level of savings that most renters could only dream of.

The British rental sector, the Observer reports, is in crisis, and demands are growing that the government take action to address the needs of the 3m households in the private rented sector.

Campaigners and experts point to government figures that show 44% of all privately rented homes are classified as “non-decent” – a far higher level than for owner-occupied houses (32%) and social rented homes (26). They also highlight the plight of the “in-betweens” – low-paid workers unlikely to be offered council housing but with little chance of buying a home.

There are other problems as well, with short-term leases with one or two month notice periods creating insecurity, especially for families with children. In the social housing sector, things look like getting worse under the Con-Dem coalition. Along with changes to housing benefit that put up to three quarter of a million people at risk of becoming homeless, Cameron recently announced that he planned to end social housing tenancies for life, and that council tenants would have to move on if their circumstances changed. This is what the big society means. Forcibly removing publicly-provided resources and facilities in order to allow profiteering in a private sector that is incapable of providing what is needed, as the figures for non-decent housing in the private rented sector show.

Not surprisingly, there is a generation gap here.

Estate agency Savills has identified 1976 as a key year dividing the property haves and the have-nots. For those born before that year, there have been far more chances to get on to the housing ladder and profit from it. For the younger generation, it is a different story. Many have not made it on to the ladder, and many of those who succeeded bought at the peak of the market and risk being plunged into negative equity.

So what might be the answer?

Sarah Webb, chief executive of the CIH, says the time has come to move away from the notion of “right to buy” and “wrong to rent” and to focus on how to make renting a positive choice. In essence, campaigners want to see a cultural shift on a par with the one Thatcher began in 1980, this time in favour of promoting renting

It seems sensible that there is going to have to be a change in culture, in which renting becomes more normalised. Not only because of the problem of affordability, but also because of the environmental sustainability issues surrounding ever-increasing numbers of houses being built. Those who have bought in flood plains and who are getting flooded every couple of years would probably agree, but there are also issues surrounding demands on the sewage system, transport links etc. An integrated approach to housing and urban planning is definitely needed, in which the issue of renting is part of a broader plan. Of prime importance must be the provision of social housing built by the state. The property speculators and the private sector have made more than enough out of the public sector, and out of the public. We have seen the damage that has been wrought economically and environmentally by handing over control to the market. If the government takes responsibility for providing affordable quality social housing, then we will have gone some way to solving the problems caused by the collapse of the Thatcherite dream. And at an ideological level, with the state demonstrating its power to transform the lives of citizens for the better, we may have gone some way to reversing the damage done to social consciousness as well.

ADDS: And right on cue, comes a call by Michael D. Higgins for John Gormley to abandon the state’s leasing scheme for local authority housing. In the north, Margaret Ritchie bought some privately-built houses cheaply to use for social housing. Some complained that this was bailing the builders out, but given the restrictions on the Housing Executive building houses, it seemed to me, and still does, to have been a good idea on her part. It’s certainly a lot better than what has been occurring in the south. In what Higgins rightly calls an “outrageous scam”, most local authorities have been leasing privately-built housing at a total cost of around 20 million Euro a year. This year, the plan is to lease 8 or 9,000 properties, for an average of 20 years. As Higgins points out, this means that

At the end of the arrangement ownership of the properties will be vested, not in the residents, not in the local council, not with the State, but with the developer.
The developer wins by having a guaranteed income from an asset that currently is lying dormant, and then wins again by being able to sell off or rent out the housing unit at the end of the deal.
Now it is being imposed by the Government’s cutting of housing capital allocation and their refusal of loan approval to local authorities. This madness must be stopped and I am calling on Minister Gormley to intervene.

That’s right. The developer will be rescued from having a house he can’t sell, get 20 years’ of rent from public funds, and then have the house handed back to him to sell at whatever the market value is then. The government claims there is the possibility of a buy-out clause, although it’s unclear who will have the right to buy – the tenant or the state. And that is only a possibility. Just when you thought the government couldn’t sink any lower in its desire to rescue its financial backers and masters, you are reminded that there are no depths that will not be plumbed to bail out the economic elite at the expense of the working class. Given that there are 300,000 empty homes in the state, and that many of the bad debts taken by NAMA have granted effective ownership of many of these to the state via the banks, the naked class reality of government behaviour at the local and central level couldn’t be any clearer. Only a government of the left can offer a real alternative to the corruption and inequality offered by Fianna Fáil and Fine Gael.

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1. Tweets that mention The Collapse of the Home Owning Dream « The Cedar Lounge Revolution -- Topsy.com - August 16, 2010

[…] This post was mentioned on Twitter by Bosca, Garibaldy. Garibaldy said: Home ownership post updated with discussion of Irish state's gifting more money to property speculators at CLR http://tiny.cc/7hpzr […]

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2. Bartley - August 16, 2010

In the Irish case, its not just the Mammy telling ya rent is dead money or the state pro-property propaganda that drives people with absolute determination to buy.

Not everyone can go into the social sector, and those who rent privately end up having to deal with one of the most unsavoury of Irish chancers, the part-time landlord. Often a Garda or bank official or solicitor in real life, these specimens are among meanest and pettiest to ever stand in shoe-leather. Once you\’ve had your deposit pocketed by a tax-dodging red-neck Peeler, and experienced the dawning realization that all the power is on his side, suddenly buying into the property pyramid doesnt seem like such a bad idea.

If on the other hand, there was secure tenancy and real oversight plus taxation applied to these part-time landlords, then renting for life might become a more realistic option.

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3. Garibaldy - August 16, 2010

I think the point about the proper regulation of the private sector is spot on.

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4. Justin - August 16, 2010

The FT has a perhaps complimentary article on the collapse of the American Dream among the US so-called “middle class” (ie working class) : http://www.ft.com/cms/s/2/1a8a5cb2-9ab2-11df-87e6-00144feab49a.html

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5. Garibaldy - August 16, 2010

Thanks for that Justin. Great article. Amazing though that it persistently mis-identifies the working class.

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6. FergusD - August 16, 2010

I’m not a peeler or a banker – but I am a landlord (gasp!) in the UK. The rent for my my mum’s house helps pay for her care home fees. Same applied for my mother-in-law. Both will pay tax on that.

Actually I would desparately like to help some people onto the property ladder with the sale of one of these houses (some of the family really, really need that money). Alas there seems little hope at the moment.

The private rented sector in the UK seems to be expanding, due to the difficulty in getting a mortgage, but many new landlords are reluctant additions to that “class”. I hope you are all sorry for me!

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7. Jim Monaghan - August 16, 2010

It is forgotten that we have always sold off state housing in Ireland, long before Thatcher. I think it is built into our DNA. When I asked my father for help buying a house, he told my mother how happy he was. He regarded it as more important than marriage, a settling down by his wayward son. I suppose it is a residual fear of the landlord.
On a parallel theme I suppose it is what people with a few extra bob think of when investing. Bricks and motar are tangible.
One of our problems is encouraging investment in what will hopefully become the new industries of the future and persuading those with capital ( not necessarily very rich people but those who want to have a little extra than the state pension when they retire) to invest in say green energy. Right I wish the state would provide all capital requirments an invest directly but none of the contenders for Gov.is thinking that way.
The state can have a positive role. Alas, in fueling the housing boom it can also have negative effect.

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FergusD - August 16, 2010

Jim,
Agreed. Same applies in the UK. Plenty want to invest in property as it seemed a sure bet, but isn’t now. Plenty bought shares in privatised industries (not me, I do have SOME principles left) as they were sold cheap and were pretty much a safe bet (everyone needs gas and leccy).

Investment in other stuff seems far too risky for many. How many really want to get into stocks and shares. Maybe some sort of govt bond, with some guarantee, and tied to a particular development e.g. gree energy? Could be a way to win over the middle classes?

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8. LeftAtTheCross - August 16, 2010

Residential rental accomodation in Ireland (and UK?) tends to be the domain of the individual landlord. I haven’t lived “on the continent” myself but I’ve hear from people that have that many rental properties are owned by institutions rather than individuals, whose primary interest is in a fair long-term return on their investment. Hence a more professional and stable relationship between landlord and tenant. Makes one wonder could the trade union movement (for example) use whatever financial influence they might have (e.g. via investment in pension funds) to move things in that direction here? Or could credit unions become a vehicle for collective investment of this type? Has anyone here any direct experience of renting in Europe that provides and hopeful pointers to how the situation could be improved here?

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