by Jack Layton
4am is a magical time of the day. It sits precisely in that limbo between yesterday, today, and tomorrow. It’s when the best parties go on to, and when the dawn chorus finds its’ voice. It’s also when my flatmate and her boyfriend wake me up on a regular basis with their loud sex.
There’s nothing quite like being woken up in that way, at that hour, to make you realise that you are paying a lot of money, to live in poor accommodation, with people you don’t know (don’t know because there’s no communal space in the flat, and not enough room in the kitchen for more than a single person and a wok). But that is what the current housing situation forces people to do.
I am incredibly fortunate that I am earning enough money to be able to afford to live in North London, not far from where I go to university. I have a bed, a desk, and a wardrobe. On balance I’m in a good situation. That assessment doesn’t stretch to when I think beyond the next 5 to 10 years. The housing crisis, is a long term challenge, whose impact will only really be felt over the longer term. It is less a crisis, and more a chronic housing disease.
There is a shortage of affordable homes, spiralling rents, decline in social housing provision, and increased demand. All of this combines to create an at best stressful, and at worst socially divisive housing situation.
Home ownership will come to be the socio-economic signifier of the 21st Century. The reason for this is that owning a home is an investment, it is capital made solid. All the money set out to pay for a house (bought outright, or with a mortgage), can be recuperated in later life. A home can be sold to contribute towards retirement costs. Any money spent on property now, is more a savings account than expenditure.
Unfortunately, owning a home isn’t an option for many. Rather, the only feasible accommodation option is private renting. Which does have its’ benefits. It’s flexible and facilitates mobility; huge advantages in the contemporary job market. The key difference is that the money spent on rent cannot be recuperated in later life. Rather, all the money I spend on rent, is paid directly to a landlord. This will have a huge affect on inequality over the long term.
People who own a home, are able to save money and recuperate money from the value of the home in later life. Renters cannot.
This scares me when I start to think long term. Currently I pay £650 a month on rent. Let’s assume this stays flat for the next 10 years. By the time I am 33 I will have paid £78,000 in rent. Enough for a deposit on a house. Enough to pay off a sizable chunk of a mortgage. Chances are the money will have done these things, but not for me, for my landlord. Crucially, paying out this much in rent will have prevented me from saving this money. Whilst others, that own homes, will have effectively been investing that same amount.
Come 2050 there will be a stark social divide between those that have been able to invest in property over the course of their lives, and those that have been spending money on rent.
Which, as all good think pieces do, brings me to David Cameron. David Cameron and his revolutionary new idea to proceed with the demolition of social housing blocks. The housing blocks will be replaced with lower density homes, a proportion of which will be “affordable homes”, in order to increase rates of home ownership. I cannot put bigger quotation marks around that “affordable homes”. In this instance “affordable” is Orwellian doublespeak for not-very-affordable-at-all; actually-80%-of-market-rate; by-the-way-that-is-£450,0000-in-London. This isn’t going to address the problem at hand, where people cannot afford to get on the housing ladder.
Taking a view over the long term the issue is clear. Either more actually affordable homes need to be built, so that all people have access to private property as a store of wealth. Or, the focus needs to shift to support people that rent.
This could manifest itself in a number of ways. One way would be to introduce a rent cap. With lower rents people would be able to save a proportion of their income to support themselves in later life (or buy property). Another option is to invest heavily in later life welfare. I doubt that the current welfare system will be able to cope with a generation of people that have been unable to save money their entire lives. Especially with the current trend for more flexible working options making it increasingly difficult to save money in the form of a pension.
My preferred option would be for the government to invest heavily in social housing. There would be demand for it. I would much rather pay £650 a month to the government, than £650 to a random individual who managed to buy some property. Pay £650 a month to fund other public services, than pay £650 a month to pay off a random individual’s mortgage, and fund their holidays to the Caribbean.
This option would generate income for the Government that could be invested in more accommodation, or welfare later in life. There is a reason that individuals and companies invest in property, it is a relatively safe asset. The Government must be one of the few players in the property market attempting to dispose of everything they own in a short term fire sale, rather than considering property an investment over the long term. It is short term thinking of the highest order.
But, it is long term thinking that is key here. It is over the long term that the ramifications of a lifetime renting will be felt; and over the long term that the government should be thinking about how it is going to provide accommodation and welfare for its’ population. At present the housing crisis is creating a dysfunctional property market. In the future the housing crisis could have set the foundations for a dysfunctional society.