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Housing market misery

The morbid concern over the sharp fall in house prices in March not only expresses middle-class obsession with property values. It is also graphically illustrates how the market economy in housing results in gross distortions. In human misery terms, it means growing numbers of repossessions, more homelessness, overcrowding, extortionate rents and children denied the space to grow up or do their homework.

In places like London, most new households can’t afford a place to live for love or money while the number of homeless households living in temporary accommodation in England has almost doubled since 1997 to reach almost 90,000. More than 70% of these households are families with children – meaning the problem affects almost 125,000 children, says the campaign group Shelter. House prices have risen by 156% since Labour came to power in 1997; during the same period incomes have gone up by 35%. The average house price is now nearly 11 times average earnings. Not surprisingly, mortgage repossessions rose 65% last year to 17,000 homes. This is plainly the result of the laws of the jungle – sorry, laws of supply and demand in a capitalist market economy.

There has always some kind of a housing crisis in Britain, despite the fact that it is one of the richest countries in the world. Yet it has been exacerbated by the actions of successive governments, who have imposed naked market forces where once the state played a moderating role. For a long post-war period, local authorities built millions of homes for rent, enabling most new households to find somewhere to live. Rents in the private sector were controlled. The quality of housing was not always great, but the system provided access to an affordable roof over your head.

The rot set in with the Thatcher governments from 1979-1997, which pursued open monetarist policies and set out to break the power of local councils. They were compelled to sell their best housing stock and denied the chance to use the proceeds to replace the two million homes that were disposed of. Councils now build no homes whatsoever. The great “property-owning democracy” illusion began. With other routes closed off, people were driven into so-called home-ownership, whereby the bank/building society remains the actual owner. Prices crashed in the early 1990s and hundreds of thousands of people lost their homes as interest rates soared.

The Tories encouraged housing associations to build new homes for rent. The market-driven financing of these homes proved so expensive that the rents themselves became unaffordable for anyone who wasn’t receiving state benefits. So they were turned into ghettos of the unemployed and then made targets for experiments in dealing with “anti-social behaviour”. New Labour has gone further by using large parts of its housing budget to subsidise home ownership schemes instead of building for rent. These “shared ownership” homes have also become largely unaffordable, selling for as much as £300,000 in London and taking up huge proportions of average earners’ incomes.

More than 130 years ago, Frederick Engels wrote about the “so-called housing shortage, which plays such a great role in the press nowadays” and asked rhetorically: “How is the housing question to be solved then? In present-day society just as any other social question is solved: by the gradual economic adjustment of supply and demand, a solution which ever reproduces the question itself anew and therefore is no solution.”

Today’s housing crisis is testimony to the power of Engels’ analysis. The market’s “solutions” to the crisis are unacceptable. We need to devise a new plan for housing which should embrace public ownership of land, social ownership of housing finance, a halt to repossessions, conversion of mortgages into affordable rent, the requisition of empty properties (especially offices in the City of London now lying vacant) and a sustainable building programme agreed by local communities.

Paul Feldman
AWTW communications editor
9 April 2008

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