The UK Housing ‘Crisis’: Are You Profiting From It?

Jul 14, 2015 9:45 AM

A blog from guest writer Zeph Auerbach asks - how much personal responsibility do we have for the housing crisis?

Now that the election is over, and Eurovision is a distant memory, London turns back to its favourite moan: the housing crisis.  I frequently share this moan with my mixed group of friends: some renters, some homeowners, some letting out the odd room or flat.  This conversation always seems to have an 'in it together' atmosphere, as we berate the property speculators, the oligarchs with vacant mansions, and most of all our government, which clearly sees its role as sustaining the rise in house prices (Help to Buy, pension reforms, reductions in stamp duty and so on). 

But we ignore the elephant in the over-valued and under-sized room.  This is an elephant which you'd see, if you looked hard enough, lurking in the corner of almost every Independent or Guardian article decrying the housing crisis. The elephant in the room is simply this: we find ourselves on opposing sides of this ‘crisis’ and for some of us this ‘crisis’ is something we profit from and sustain.

We may be sitting around the same tables, or reading the same papers, but we do not pay the same for shelter, and our futures do not look the same. There is a growing and gaping lacuna between those who have gotten a foot on the ladder, and those who are simply being used as the rungs. And let's not forget the real losers of all of this, who are typically not around to speak up: the increasing number of homeless people or those living a month away from being such. 

In his otherwise compelling book, ‘All That is Solid’, Danny Dorling takes the position that the housing crisis is bad for all, except a very small minority of landlord barons at the top, since homeowners are exposed to a possible crash and a plunge into negative equity.   But is this convincing?  Picture somebody who is half way through paying off their mortgage, who faces a vague and uncertain threat of a negative equity situation (but also the more likely prospect of reaping a huge profit from their ‘investment’).  Are they really suffering in anything like the same way as those confronted by a future of paying extortionate rents or relying on benefits?  Instead, let’s put it plain: some of us are winners; some of us are losers. And if you are winning by selling or letting at a ludicrously high price, yes you are contributing to the dire situation for your friends and strangers alike.

It may feel more comfortable for us to come together, the winners and the losers, to jointly take aim at the government. And, don't get me wrong, the big problems with their big solutions, so sorely lacking, are certainly theirs.  But individual people's decisions also contribute to the problem, and different decisions by these people could help it.  People who own houses seem oblivious to their power – which typically amounts to an over-valued houseworth of power – to do anything to alleviate the crisis.  Shoulders are shrugged, laments are given, and all the while the value of theirs assets grows. 

So here are some things which individuals profiting from the housing crisis could do:

1) If you rent out a flat, don't charge the market price.  Charge less.

2) If you sell a house, don't sell it for the market price.  Sell it for less.

3) Consider donating money to charities such as DePaul or Shelter that try to help people suffering the consequences of the crisis.

4) Apply as much political pressure as you can to effect change.

I know that some people already do some of these things, and should be commended for it. But they are not in the majority.  When it comes to property, most people just assume that 'business is business' and they are powerless but to maximise their profit.  “I'd be losing out if I didn't charge the maximum rent,” they say.  This sort of line might come from somebody who in all other domains is emphatically not a profit-maximiser, who sees themselves as left-wing and socially conscious.  But when it comes to housing they are suddenly transformed into little caricature capitalists, 'just following the rules', acting as if they have been given a green light to do anything they wish.  Morality is irrelevant.  The housing crisis is somebody else's problem.

This defence is seen all the time in other contexts: it is the defence of the tax-avoiding company that is ‘technically not breaking the law’, or the economy-crippling banker who was ‘just doing their job’.  Lots of people are happy with this defence.  They are also entitled to be happy when this defence is given by someone who has inherited a home and earns more from the house price rise alone than a nurse or a teacher earns in their salary.  But others may have their doubts.

There are lots of complications to the simplistic suggestions I give above.  If you sell a house for less than the market price, who exactly are you directly helping?  Probably somebody much like you, and certainly not somebody on the brink of homelessness.  Or what if you are moving house and are just part of a chain?  Well you will probably have no choice but to buy at the market rate.  These are very important considerations but do they do not undermine the principle that people who have more power have both more choice in how they act, and more of an impact on the fortunes of others.  If you are worried about who you are selling or renting to, have you looked into using more ethical estate agents or instructing your estate agent with your priorities?  It is perfectly legal for you to sell only to first-time buyers, for example, or rent only to single parents who are struggling to get by.  Yes, the housing industry is currently geared solely to maximising sales, but how would it feel to be part of a movement that tried to change this?

I have a friend who is a Lecturer in Economics at Edinburgh University who thinks I have simply ignored the lessons of Adam Smith, and that I am deluded in thinking that social problems can somehow have individual solutions.  A collective-action problem such as the housing crisis requires collective-action solutions, and these are best mediated through the political system, by changing the rules which govern economic activity. Danny Dorling would certainly agree with him.  In his book, he argues for a land tax, rent controls, taxes to discourage speculators sitting on empty land, and the like.

I agree with my friend and with Danny Dorling.  But we must reject the false dichotomy behind the common view: 'It is someone else’s fault, so I am not in the wrong'. Yes, the rules of the game are sustained by the politicians, but we still have freedom for how we play the game.  We are not mere automatons of the market, powerlessly spectating as we accrue wealth at the expense of others.  If we recognise that invisible hands are pushing us in the wrong direction, we can resist. 

Besides, Danny Dorling’s book reads even more depressingly, now that the election is over and the Edstone is crumbling away in a garage somewhere, along with any hope that the government will properly address the crisis.

So let me just put the divisive icing on the provocative cake: if you are profiting obscenely from the rising housing market, you are contributing to it.  If you think that morality is somehow divorced from the individual decisions of ordinary people, you are mistaken.