It has to be said that I have never thought Chris Giles from the FT a lefty. I hope he does not mind me saying so. But he did write this in that paper today:
After almost a century of gradual social progress and narrowing of wealth and opportunity gaps, Britain is slowly recreating a rentier society, where a family's property ownership matters more than anything else.
I want the royal baby to remain an anachronism. The fact that its future is not so different from lots of other little princes and princesses who will be able to lord it over their less fortunate peers points to a profoundly dystopian vision of Britain's future.
Why does Giles take this view? Simply because society is splitting between those who have access to owning property and those who do not.
In the post ware years this once exclusive opportunity was if not democratised then at least made widespread - and tenants also enjoyed rights that ensured they could feel secure in this place. But neither is any longer true. And so, as Giles says, we are becoming a rentier society.
Three things follow. Firstly, social stress increases as inequality rises.
Second, innovation declines as rentiers always look for security, not risk.
And thirdly, and so inevitably, economic decline follows.
That's the future, in a nutshell. UNless of course we go for wealth taxation, as I would suggest not only appropriate but essential.
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Richard, I absolutely agree with the all you say on these matters.
Firstly, we are yet to see the ultimate manifestation of social stress in the form of civil unrest. Needless to say the fact that we are constantly subject to surveillance is very intimidating for people (even those who wish to engage in peaceful protest which surely must be one of the fundamentals of a democratic society).
Secondly,the ever increasing privatisation of public services enlarges the rentier sector. In the late 1960s I worked for an engineering company in the heavy capital plant industry (pressure vessels and boiler drums) and it was obvious that the company was suffering from underinvestment and so succumbed to foreign competition. I doubt if much has changed over the years. Additionally, many of our important strategic asssets/companies have been taken over by international counterparts whose allegiance is to their own country rather than ours.
Thirdly, I believe that economic decline is already with us. We failed to see that manufacturing was important and policy makers were persuaded by the prospects for the post industrial society.
Unless public policy addresses the wider abuse of the tax system in the UK and internationally, the funding of the Western model of the welfare state is doomed.
I am no fan of government intervention where it is not needed, but I believe the time has come to seriously consider price controls on housing. The average age for a person to leave home is now – I was told today, possibly unreliably but still plausible – 40. It is hard to see why rising house prices seem regarded by the press as a good thing, or why governments feel obliged to support the housing market and indeed introduce incentives to get more people on the housing ladder. This isn’t the case in the rest of Europe and if a party had a coherent policy for bringing down house prices without unduly punishing those who have been encouraged to buy at current values I am sure it would be a vote winner. After all, even if you have done well and own a nice house, the chances are you have kids and you want them to have the opportunities you had (and to move out of the house rather than wait for you to die).
The housing market perfectly encapsulates how the economies indulge in a form of ‘self harm’ as a result of short term and blinkered thinking. making money out of housing bubbles and renting at values that are massively above the purchase rental value is an utter obscenity. It contributes to cumulative inequality and is bad for free markets (but not price fixing ones that we have now) by sucking wealth out of communities and in effect devaluing currencies of any post boom buyer. No sane society should allow this. It now looks like we have another Government generated housing bubble as predicted!
http://www.thisismoney.co.uk/money/mortgageshome/article-2359365/House-prices-East-Midlands-Yorkshire-Wales-rising-faster-Londons-says-Zoopla.html?ito=feeds-newsxml
This is an utter disaster which won’t touch the portfolioed neo-libs who probably own most of it.
I could believe that the average age of first-time buyers was 40. The average age of people moving out of their parents house is surely much younger.
I hope so!!!
Mine are going well before that, come what may
I bet you’re Mrs Thatcher allowed so many people to buy council houses – we’d be in an even worse fix if she hadn’t! 😉
Not at all – if we had more social housing the problem of housing now would be much less acute
@ Pellinor – Alas, anyone who thinks Thatcher’s Right to Buy heist was part of the solution to the housing problem, rather than a serious cause of it, has, IMHO, lost the plot, as an analysis of its intentions and effects would show.
Intentions: Stated to create a “property-owning democracy”. Ulterior: to take away from Local Authorities their power to care for the vulnerable, in the interests of the already wealthy and secure, and also to depict Local Authorities as fetters on freedom, rather than enablers.
Evidence: 1) Local Authorities were NOT allowed to use any receipts so gained to build new houses, but had to deposit them to guard against increases in the Public Sector Borrowing Rate – otherwise known as an early version of the “Confidence Fairy”, so that LA’s were marvellously depicted as standing in the way of aspirational Thatcherite Council tenants AND were unable to build anything to deal with the housing shortage.
2) The houses were in any event sold off at a ludicrous below market premium of at least 50% of market value, with NO reversion, or even a requirement to offer them first to the Local Authority on re-sale. Now pause to see what this constitutes – a) an effective fraud and b) an invitation to shyster behaviours.
A fraud, because the houses belonged to ALL of us, as taxpayers and citizens (though naturally with first call on them being owed to the local taxpayers within that Local Authority), because they constituted capital assets built up by the taxes and mutual efforts of every citizen. To take them, and sell them, without direct permission (meaning, effectively, a referendum of ALL the taxpayers in a given Council area – a mere ministerial diktat, and in my opinion, even a piece of legislation not sufficing) is, in my opinion, the action of a con man, on a par with an attempt to sell Tower Bridge. I’m glad to see that this point has been flagged up over the Post Office privatisation – they can’t sell me what I already own! Give me some legal expression of my existing mutual ownership, fine, even pay me some dividends, fine, but don’t dare to try to sell me what is mine already!
Effects + an invitation to shyster behaviours – these run together, for what ACTUALLY happened is that the initial RTB purchasers have been bought out, again at ludicrously low prices, by a few big landlords (it is estimated that most of the RTB property is now in the hands of a mere 40 landlords, many of whom were prominent politicians and even members of Thatcher’s Cabinet), with three outcomes.
First, many of the Council blocks have been tarted up and gentrified, even becoming gated communities, so being taken out of the affordable housing stock.
Secondly, not only has the affordable housing stock been reduced, so has the starting point cost of owner-occupation, since plenty of affordable housing is a way of holding down the general cost of housing – a reason for developers not being happy with the provision of the same.
Thirdly, and finally, the enrichment of the few, at the expense of the many – the opposite of post-war housing policy, up to the baleful entry of Madam T on the scene.
I repeat – Right to Buy was a heist, which New Labour, to its shame, did nothing about. If Councils could have used the receipts to build new houses, some of which could have been sold at affordable levels, especially if a “first refusal” covenant had been built into the sale, then that might have helped deal with our housing crisis.
But Madam T was NEVER going to do that, for it would have allowed Councils to be the local champions and providers they used to be in the 19th century (consider Joe Chamberlain and Birmingham), right up to the the late 20th century, and if there was one thing she hated as much as(maybe even more than) Trade Unions it was uppity Local Government – witness the wilful destruction of the GLC and the ILEA.
Andrew
Well argued
Thanks
Richard
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That’s an interesting statement Andrew. What’s your source?
@ Jonny Maddox
You ask what my source is for my “interesting statement”, without stipulating what statement, but I am presuming you mean my assertion that “(it is estimated that most of the RTB property is now in the hands of a mere 40 landlords, many of whom were prominent politicians and even members of Thatcher’s Cabinet.)”
I confess to having made that statement on the memory of an article which I read that was shared on FaceBook, which I have managed to source, and here is the reference:
http://webmail.phonecoop.coop/Redirect/www.mirror.co.uk/news/uk-news/right-to-buy-housing-shame-third-ex-council-1743338
Two points:
1 ) You might not like the Mirror newspaper, but this article is impressively researched and evidenced
2) It shows that my memory of the article was broadly correct, in terms of the effects of Right To Buy, while not bearing out my assertion that the majority of RTB properties are in the hands of only 40 landlords.
As I cannot source that assertion, I withdraw it, but feel that the deleterious effects of RTB are well set out in this article from the Mirror, and can only ask anyone interested in this topic to read that article.
Good article .
I appreciate rent-seeking goes beyond housing but with regards to housing , a lot of people got into B.T.L. because they could not see any other way of generating an income for their old age .
Ownership of a “property” which is rented out seems to go to some people’s heads and give them a false sense of superiority over people who rent .
So many of these measures would seem to either need/benefit from being implemented concurrently ; eg land value tax , improved state primary pension and earnings related secondary pension + increased pension so people could see that they are getting something in return .
I feel a bit uncomfortable with Chris Giles analogy of the royal baby when it hasn’t been born yet and could like any infant have health problems .
I am not intrinsically opposed to BLT
I am worried about the tax advantages it gets – especially when it has an interest offset and an owner does not
Private sector rented accommodation has a role in housing – and always has for students etc
Where it is problematic is when it squeezes out the young with a valid aim of buying their own property and because of tax relief shifts wealth upward in society
I am not intrinsically opposed to BLT – I assume you are not just referring to your taste in sandwiches here! Seriously though, the BTL obsession was a massive part of the housing bubble of ten years ago which has crippled communities and vacuumed wealth out of local economies – in my book it is an utterly vampiric activity. The usual argument that people use to defend it is that it offers housing to people – but it doesn’t, it contributes to house price rises and is very much part of the money for no production scenario that dominates our culture. Ten years ago, Labour should have nipped this in the bud and disincentivised it – they didn’t probably because most M.P’s have a tasty housing portfolio backing them up. Making money out of real production is fine but making money out of housing wrecks lives and creates servitude.
I’m agreeing with you
BTL has massively overgrown due to tax advantages and failure of pension thinking
So we have a distorted market
Without that distortion though I am saying there is a private rental market that meets a need
I go along with what you said .
Their needs to be an availability of rented accommodation for sure .
Their is no point in buying unless you are absolutely sure you want to stay there . Perhaps some accommodation within inner city’s needs to be reserved for rental .
If property was subject to reasonable rents , like in Europe , why would anyone be in a hurry to buy ?
The big issue here is housing, housing and housing – it’s is not just in the province of the left, Richard, Karl Denninger, one of the founders of the Tea Party wants to see speculation removed from housing. Convincing the British that the mortgage (death-pledge culture) is inimical to a healthy society is like challenging the beliefs of a religious fundamentalist. Banks create debt peonage with mortgages yet people will push themselves to be on this ladder even if it means the banks putting a huge ball and chain on them. people still talk of the housing ladder despite the absence of rungs and two missing side. people in britain will go after mortgages even if they have to crawl on their bellies in the dust – which is pretty much what they have to do – when will this change, when will they notice the millstone around their necks?
Simon’s last point hits the nail on the head, whereas in the past for many over 65 today it may have been possible to enter retirement without debt the future looks bleak .I have three offspring all engineers who are involved in social enterprise jobs that are undervalued. They are not complaining, but will inevitably take a greater financial burden into the future , a poor reward for their skills and one which is unlikely to lead to a secure retirement. This is wake up time , a minority have captured the indecent rewards of a rentier system which keeps the majority in a servile position. We need some form of social unrest which threatens the prevailing supremacy of capital . Basically people are more important than money,they are the social capital on which we depend ,not the mendacious whims of capital that now has a non existent moral context
“The “McDonald’s Budget”: Laughably Unrealistic But Also Deeply Tragic”
http://www.activistpost.com/2013/07/the-mcdonalds-budget-laughably.html
Carole Cadwalladr’s column in Wednesday’s Guardian shows us why nothing is being done to address the problems and unfair advantages given to people who ‘buy to let’. As she says in her column ‘How can members of this parliament represent working people when so many of them make a profit from the property market? Spend even a short time contemplating the financial interests of our elected MPs and you’ll be forced to reckon with an even greater force of nature: the “property portfolio”.
I have long thought that there must be some reason why our crazy housing system wasn’t being tackled by parliament and I know understand when I read that over 200 MPs own one, two, or — in the case of James Clappison, the Conservative member for Hertsmere — 26 other properties (and that doesn’t include all the MPs who own a constituency home and a London home)
Sandra Ellen – very true! You have amplified the point I made above. The housing scandal is so obviously wrecking communities and syphoning off wealth into the hands of a rentier minority that it beggars belief that it can be allowed. My own M.P. is a rentier par excellence owning properties and London and land in East Anglia, largely inherited.
“These measures go well beyond the savage austerity cuts imposed on workers in Greece and other heavily indebted European countries.”
http://www.wsws.org/en/articles/2013/07/18/pers-j18.html
Recent remarks on the rentier economy by Michael Hudson:
“Classical economists defined rent as unearned income, a property claim that did not reflect a corresponding expenditure of labor, which was the sole source of value. But as our postindustrial society has evolved into a “service economy,” the national income and product accounts count interest and rent as a product — an output of services. Landlords thus are depicted as providing a useful service, not merely charging access fees for sites created by nature and given value by the community’s overall prosperity. The classical value judgment that deemed some business activities unproductive — or even “sterile,” as France’s Physiocrats put it — has been rejected by today’s value-free economics.”
Houses are expensive for 2 reasons and 2 reasons alone: insufficient supply (could be solved by a drastic relaxation of planning controls) and excess demand (population growth/immigration and insufficient houses being built).
There is a third much more significant reason: lack of tax. Commercial property is taxed at a much higher rate and that is why it is relatively cheap compared to residential. If we removed the land element, houses would be cheap as chips (well, not quite). Land for development of social housing could be bought up cheaply from those anxious to move a worse-than-worthless asset off their portfolio.
The supply demand issue is a partial myth used by those who want to promote the mortgage ‘religion’.
watch this positive money video:
http://www.positivemoney.org/issues/house-prices/
Banks have been pumping up house prices for the last thirty years at the expense of lending for small businesses. In this environment land value tax is desperately needed to put an end to this arrant nonsense. Using housing as an investment vehicle is bad for society and hurts real (not ‘rentier’) economic activity
Well worth a watch…
http://www.youtube.com/watch?v=2nq2odIQR2k&feature=relmfu
“How to Create Mass Homelessness the George Osborne Way”
http://johnnyvoid.wordpress.com/2012/12/07/how-to-create-mass-homelessness-the-george-osborne-way/