Housing Entitlement Day

Shelter's annual affordability index, published earlier this month, shows how disastrous the house price increases have been for most people in the UK. It indicates that the price of a first home has risen from £52,674 to £159,494 over the past ten years, with house price to income ratios rising from 1.72 to 3.4. Mortgage repayments now represent 21 per cent of household income compared with 12 per cent a decade ago. This cash is returned as interest payments to wealthier home-owners and bank shareholders - another redistribution of wealth from poor to rich.


Many years ago, Spencer Fitzgibbon, a former external communications supremo for the Green Party who has now retired to write novels, came up with a brilliant policy which he called 'housing entitlement'. The idea was they we chose a day and made it law that, wherever people were living on that day became theirs.

This was a brilliant stroke - a thought experiment that requires you to question what home ownership means, and whether something as fundamental as the need for a roof over your head should ever be subject to the vagaries of the market.

So what would it mean for different groups in society? Those with mortgages would lose them instantly - no need for the stress of working to pay for housing. Those who were renting would suddenly gain home security and an asset to allow them onto an equal footing with the more prosperous members of society. These would be the winners.

And what about the losers? Mutual building societies would no longer own assets and would have to begin again by taking deposits from savers before they could lend. Private banks would also lose their assets - which would impact severely on the indirect absentee landlords who make up their shareholders. Landlords and landladies would also lose assets - the more they owned the more they would lose.

The great thing about this thought experiment is that your reaction depends entirely on where you find yourself in the present housing hierarchy, but the reality is that the majority of this people would, on average, find their well-being improved by such a policy. The overall losers would be quite a small number of very rich people.

Every now and then the government could name a new housing entitlement day. It could be about every 40 years or so - like biblical jubilees - about the amount of time it takes the greedy and unscrupulous to distort the ownership system enough for goodly citizens to really be suffering. Tweet

House price boom: who benefits?

As with the public debt, private debts also enable those who lend money for interest to extract money from those who are forced to borrow it because they control an unfairly small amount of material wealth. The mania with ever-increasing house prices conceals the fact that, since most of this value will end up being paid for out of mortgage-based debt, it will increase costs for those buying homes in the future. Unto those who have shall be given, and from those who have not shall be taken even that little that they do have. This is the real message of the boom in house prices that is drowned out by the voices raised in celebration of the nominally inflated value of housing stock. If you have already bought your home then what you own is still a home, and unless you are prepared to trade down its financial value is of little interest to you. However, if you are either intending to buy or seeking to meet your need for housing through renting, the house price boom is a disaster.

It is the lenders who benefit from the increasing value of houses, since the increased level of loans allow them to create ever greater amounts of money and then to charge interest when they lend that money to struggling home-‘owners’. The banks incur no cost on creating this money but receive its full value as well as vast sums in interest, hence record bank profits. HSBC reported a 37% rise in pre-tax profit in 2004 to £9.6bn ($17.6bn) for 2004, the biggest ever profit for a UK bank. This followed on from Barclays profit of £4.6bn. (up 20%) for the same year, and that of the Royal Bank of Scotland, which was £7bn. (up 14%).

The focus on the house-price boom has also deflected attention from the most vulnerable in the housing ‘market’, those who rent their homes. For economists ‘rent’ is always a dirty word, since it means gaining value for nothing and in the case of housing the landlord always appears to be using his excess of assets to exploit another’s need for a home. But the rush by those on middle incomes to move their money from the unreliable stock-market and into property has made their situation much worse. The concept of a buy-to-let mortgage automatically implies that the mortgagee of an extra property will set the rent at a level high enough to cover his or her mortgage and other expenses, which means charging a higher rent than a genuine owner would need to. This, combined with the annihilation via government fiat of the public housing sector and the abolition of rent controls, has caused a massive increase in the cost of rented accommodation. Again the most vulnerable are paying for the increasing wealth of the rich.

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