Pity the anxious average-income mortgage- paying ‘homeowner’!
The walls you would like to call your own close in. The mortgage, it would appear, extends beyond the grave. The small print reminding you that your home could be at risk if mortgage repayments aren’t kept up, returns to haunt, hugely magnified, in a time of flux and continuing crisis. And supposing you are forced out by circumstance – will the bloated price paid hold? Can anyone afford to buy? Or will it be the street?
Pity the even more anxious aspiring ‘homeowner’, earning an average salary but condemned to Generation Rent!
The housing ladder remains tantalizingly out of reach. Landlords know this is the case and squeeze till you squeal. What the blankety-blank happened to ‘Home Sweet Home’?
Crazy as it may sound, it got sold to the idea of housing viewed solely as an asset, with notions of shelter and home left to the little people (read ‘losers’) who dared buy into them. When this vision is endorsed by our elected rulers and their ruling deity ‘the market’ (for which read Big Money), then notions of quality of life become completely, annoyingly, irrelevant.
Sites of insecurity
This is currently the nightmare of the middle class in many a ‘developed’ country; those of more modest means circulate in an even lower orbit of housing hell (if they haven’t managed to secure a little bit of the constantly shrinking social housing provision). Yet, up until the 1980s, mortgages took 10 to 15 rather than 30-odd years to pay off; house prices were high but affordable; a living space ultimately meant security rather than debt slavery for the foreseeable future.
But in the 1980s, capitalism went turbo. Whereas previously the profit motive had been tempered by some emphasis on job creation and a notion of tithing to the common good in the belief that this was required for the wheels to turn smoothly, the 1980s ushered in an age where acquisition for its own sake ruled the roost. Neoliberalism – the name given to this ideology – was marked by state endorsement of naked power. This took the form of tilting markets even more in favour of the big corporate players (the so-called free market), privatization, deregulation and the rejection of everything communal or social. Safety nets were for sissies; the poor were just lazy, with only themselves to blame. Led by Reagan and Thatcher, and financial institutions like the IMF and the World Bank, this credo of greed has created global havoc but retains adamant devotees in high places.
Dwellings began to be viewed in a different light: rather than just places to play out our lives, they were promoted as ‘capital assets’ to the poorer people who were encouraged to buy the social housing they were living in. With the promise of homeownership, the state could start washing its hands of affordable public provision. In Britain, this trend continued under New Labour from 1997 to 2010, under the guise of creating a classless society of homeowners. Oh, were it so!
The property bubble inflated, bearing little relation to ground realities; a tsunami of big money swept in to cash in
Instead, the push to homeownership led to soaring property prices and consequent strangulation by mortgage, a net reduction in the quality of life as ordinary households were left with smaller amounts of disposable income with which to get through the month. It meant increasing social exclusion for those left out or those who fell through – the safety net was in tatters.
The bubble inflates
With property prices outstripping inflation and wage rises several-fold, housing as an investment was outperforming other forms of speculative activity. So the property bubble inflated, bearing little relation to ground realities; a tsunami of big money swept in to cash in on such returns.
But if the business of flipping properties* until they flopped (more on this in a minute) was a bit of a chore, financial institutions had invented an option of investing in the housing free-for-all at the click of a mouse.
These were the notorious mortgage-backed securities (MBSs) that powered the sub-prime débâcle in the US. With the housing market booming, banks began running out of potential mortgage clients as the century turned – those the banks considered solid had already taken out mortgages. So they took another look at those they had previously rejected, people with poor credit ratings called the sub-prime (yes, the term definitely has a whiff of the Untermensch about it), and started dangling no-questions-asked loans of a pretty questionable nature in front of them. Bearing in mind the high risk of default on such loans, the lenders promptly bundled them together and sold them on to investors hungry to get a slice of securities that had previously performed well. Once on the markets, these MBSs were swiftly turned into derivative financial instruments that were traded further, often many times over – money spinning money.
And what of the hapless ‘homeowners’? When the period of fixed interest on their mortgages ran out, they found the new interest rate was often double the old due to the economic bubble they themselves were unwittingly part of creating. Repayments zoomed up and the writing was on the wall. Meanwhile, the fiscal system was bloated with MBSs to the tune of $3 trillion. As a wave of foreclosures rippled across the US and the loans plummeted in value, these high-return darlings that were the stars of investment banks’ portfolios started performing badly. The wave crashed through the entire economy, washing out jobs and depressing investment. When the US tipped, much of the rich world followed, with the crisis eventually also affecting the Majority World countries that could not rely on their own resources to keep their economies in order.
The reaction of the authorities to the worst depression since the 1930s caused widespread outrage. Enormous sums of public money were funnelled into bailing out the same institutions that had played so fast and loose.
Status quo at all costs
Today, six years on, the approach to housing is still to view bubbles as the status quo and to try every means possible to maintain high property prices. This in a landscape where the ultra-rich have got vastly richer and the vast majority are facing austerity both personal (shrinking or static incomes and job insecurity) and public (cuts in public spending).
In the US, the Federal Reserve, the government bank, has committed to buying $45 billion worth of MBSs per month to boost the housing market. And, sure enough, demand for housing has risen, but the number of people actually buying homes to live in dropped by 175,000 in 2012. So low-end new homes, intended for single families, are being sucked up by landlords. The number of rental units went up 1.32 million.1 Big money from overseas is also buying up property either to rent, flip, or as holiday homes in desirable locations such as Florida.
In Britain, the government is also likely creating a new housing bubble in its attempts to help first-time homebuyers. The Bank of England is shovelling funding to banks to promote renewed lending. But this release of funds is not being matched by increased homebuilding. Current rates of housing construction fall 120,000 short of the housing need2 – so those inflated house prices seem to be in no danger of coming down any time soon. Meanwhile, social housing continues its downward spiral and the intergenerational homeowning gap has widened, with the elderly having a far greater likelihood of owning than young people. Rent, meanwhile, has increased over the last eight years by an average of 50 per cent.3
In Australia, where housing prices have increased by 130 per cent since 1996, shooting way ahead of wage increases, the government has given tax breaks worth billions each year to big investors without making the slightest dent in affordability or indeed bringing new rental accommodation on the market.4 Whereas the Australian economy has been in an enviable position during these crisis years, the number of households suffering housing stress is higher than ever.
The various housing crises in some of the wealthiest nations of the world paint the neoliberal project in its starkest colours: concentration of wealth, accumulation for its own sake rather than for any productive purpose, and the total relinquishing of conscience. The trillions of dollars of non-productive capital inflating property bubbles constitute a social time bomb. Researchers from Citigroup, the US transnational financial services corporation, are quite clear about who rules the roost: ‘The earth is being held by the muscular arms of its entrepreneur-plutocrats, like it or not.’ And mass pauperization would appear to be the plutocrats’ goal: it provides a dirt-cheap labour force.
This is what the city of the future will look like: enclaves of obscene wealth, linked by sprawling slums. Many cities have this appearance already.
In Mumbai, with its 20.5 million population and its shortage of physical space (the city is an island), well-to-do families cram into a one-room flat, the vast working class retreats to tiny rented cubicles in enormous slums, the less fortunate lay down their limbs on the pavements under the open sky, and the wealthy hire armed guards to protect their front doors. Here, on a street where land prices are $25,000 a square metre, towers Antilla, the 27-storey home of Mukesh Ambani, India’s richest man. It is the world’s most expensive home, having cost over $1 billion, some say up to $2 billion. Were its ceilings not so high, it could have had 60 storeys. It has three helipads, six floors of parking, nine lifts and an army of 600 servants. All the trappings are there of wealth beyond measure: gymnasiums, ballrooms, a cinema.
Housing is either a site of insatiable appetite and consumption or one of endless insecurity. The inequality that is the defining feature of our age has truly struck home
A short flight away in Dubai, wealth of all dubious shades from all corners of the world seeks appropriate shelter in the fantastic properties that have become legion, like the constructed islands in the shape of a palm tree. Swimming pools here are refrigerated in the height of summer; there is an indoor ski slope. Dubai’s palaces have been built by South Asian labourers working 12-hour shifts in the baking sun, living in crowded, uncooled shacks out in the desert. Any sign of assertiveness on their part can result in instant deportation. They are banned from the marbled malls and fancy restaurants they build. They also die in their hundreds each year due to slapdash safety provision.5
Hop across to the Central African Republic, where UN-HABITAT reports an incredible 95.9 per cent of the urban population lives in slums. How is this possible? The answer lies in the kind of abject poverty that makes basic building materials unattainable. Elsewhere in Africa, capitals like Nairobi and Lagos have enclaves with skylines that proclaim wealth.
Another vision of home
Housing, wherever you look, is either a site of insatiable appetite and consumption or one of endless insecurity. Increasingly, there is nothing simple about a roof over one’s head. The inequality that is the defining feature of our age has truly struck home.
If one views goods as a means of sustenance, then the drive by the very rich to acquire and consume beyond all reason or ability is a doomed attempt at immortality that deprives everyone else. The big-picture solution to various housing crises must be to change our view of property as absolute, perpetual and exclusive, and to see it for what it is: a place to live in. That will only happen when we can loosen the grip of the twin pincers of acquisition and speculation, and restore some notion of fair shares.
As far back as Aristotle there was a notion that property should be seen as providing for basic needs – otherwise it could become an acquisitive battleground where the majority were losers. Many traditional African societies have a vision of land which is based on sharing it for community benefit. In rural African societies, land resources and tenure are or were often governed through a system of collective rights and responsibilities rather than one of absolute ownership. Benjamin Franklin, one of the founding fathers of the US, would probably not recognize the housing market of his country today. He argued for all property to be public, administered for the public good, except for a modest portion that would support an individual’s subsistence.
Just imagine a world where the price of housing reflected in some way its real cost rather than the inflations of the marketplace – what a great impulse of energy and resourcefulness that could free up for social wellbeing and, possibly, the economy.
Could it happen? Yes, if we prevented bubbles, which means stopping the hoarding of housing resources by élites. If governments saw social housing as a good which would allow citizens to participate more fully in society. If private rents were controlled to an acceptable level. If people were allowed to build their own modest homes to save on costs where land was available. In other words, if homes could be removed as far as possible from the manipulations of the marketplace. Then we could get on with living in them and be less consumed by the struggle to possess them.
Mike Whitney, ‘The mysterious new housing bubble’, Counterpunch 18 December 2012.
The Independent, ‘Are we heading for a new housing bubble?’, 22 January 2013.
Samir Jeraj, ‘An Englishman’s home is his castle – So long to our dream of ownership?’, 4 July 2012, opendemocracy.net
Phillip Soos, ‘It’s time to abolish negative gearing’, 1 October 2012, the conversation.edu.au
See Mike Davis’s excellent essay ‘Sand, fear and money in Dubai’ in Evil Paradises: Dreamworlds of neoliberalism, edited by Mike Davis and Daniel Bertand Monk, The New Press 2007.