How could a Labour government de-financialise Britain’s housing market?

Some Labour leaders look at some houses. Image: Getty.

To end our crippling housing crisis we first need to dispel the myths about its causes. Housing costs haven’t soared simply because there “aren’t enough homes to go around”: this narrative is popular with anti-migrant campaigners and landowners/developers seeking to tear up planning red tape, but it is not supported by the data. In fact, the number of dwellings in the UK has grown faster than the number of households throughout the decades of house price inflation.  

House price booms and busts in the UK are explained far better by studying drivers of housing demand, than by looking for shortages of supply relative to housing need. Specifically, demand has been inflated by institutional changes – property tax breaks, Buy To Let mortgages, repression of tenants rights, and so on – that have encouraged the treatment of land and homes as financial assets.  

The result is that ordinary buyers have increasingly found themselves in a bidding war with landlords, speculators, second home owners, even international money launderers. Importantly, this bidding war has been fuelled by seismic deregulation of the UK mortgage market, which increased the supply of easy mortgage credit, and created a dangerous feedback loop between the finance and house prices.

One aim of our Land For The Many report, commissioned by the Labour party, and published today, is to explain how such inflationary forces can be brought under control.

We recommend major tax reforms to discourage the use of land and homes as financial assets and share out some of the eye watering unearned windfall gains from house price inflation.

We recommend measures to reduce to the exploitation and insecurity in the private rented sector – reforms that make sense on their own terms, but have the added benefit of dampening demand from Buy-To-Let landlords.

We recommend interventions by the Bank of England to reduce risky and inflationary forms of mortgage lending. We propose planning restrictions on holiday homes. And we recommend a total overhaul of the housing development model, so that builders compete on quality rather than on their ability to navigate the speculative land market. 

What stands in the way of such reforms is not just the power of vested interests, but a fear among policy makers that such reforms will trigger a house price crash. This is not an unreasonable concern: debt-and speculation-fuelled house price rises are always going to be vulnerable to reversal.

Any reform that makes housing less attractive as a financial asset could result in a sudden withdrawal of demand from investors, and potentially prompt some to try and sell. The resulting price drop could in turn make mortgage lenders more cautious about lending at high loan to value ratios, which would suck even more purchasing power out of the market, putting further downward pressure on prices. 

Although many aspiring homeowners would welcome a reduction in house prices, there are political and macroeconomic risks associated with falling prices that must be avoided. In particular, a house price crash would be punishing for households who bought for the first time at the height of the boom, and could push some into negative equity, making it impossible to move or re-mortgage.


On the other hand, a more timid approach to housing reform will leave a whole generation locked out of homeownership: it will take decades to regain a “normal” house price-to-income ratio if we merely slow the rate of house price inflation and wait for wages to catch up. 

Is there a way to reconcile the apparently conflicting interests of homeowners and non-home owners? In today’s report for Labour we float one possible way out of this conundrum. The proposal is to set up a new body – the Common Ground Trust – with three functions.

The first is to support people locked out of home ownership, who would approach the Trust when they have found a house they wanted to buy and ask the Trust to purchase the land underneath the house. The buyers would cover the upfront costs of the bricks and mortar only (which on average account for just 30 per cent of the price of a property), and then pay a land rent to the Trust. This would enable many more people with small deposits to enjoy a form of home ownership, and with it greater security and control over their living space, without taking on imprudent levels of mortgage debt. 

The second function is to facilitate the gradual transfer of land into common ownership, so that the associated unearned land rents can be pooled and distributed according to need, rather than captured by private landowners and banks at society’s expense.

The third function is to stabilise house and land values. If prices are falling too quickly, the Trust would bid slightly above market prices for the land, to slow the price decline. In other words, the Trust would be a lever for supporting stable and sustainable forms of demand in the housing market, to offset the withdrawal of volatile and socially damaging forms of demand. (Importantly, if prices were rising, the Trust would cease to bid at all, until government had brought the inflationary forces under control.)

The Common Ground Trust is an idea in early stages of development, but we believe it is a useful provocation. If we want bold measures to improve the lives of renters, tax property more fairly and avoid a violent house price crash, then we must develop a plan for deflating the housing bubble in slow motion. The Common Ground Trust is a solid starting point for that discussion.  

Beth Stratford is a PhD student, a fellow at the New Economics Foundation, a co-founder of the London Renters Union, and one of the authors of the “Land for the Many” report. You can read the whole thing here.

 
 
 
 

What are Europe’s longest train journeys?

The Orient Express was a pretty long train. Image: Getty.

For reasons that aren’t clear even to me, a question popped into my head and refused to leave: what’s longer? Britain’s longest train joruney, or Germany’s?

On the one hand, Germany is quite a bit larger – its area is 70 per cent more than Great Britain’s. On the other hand, Great Britain is long, skinny island and Germany is much rounder – the distance from John O’ Groats to Lands End is over 1,400 km, but you never have walk over 1,000 km to cross Germany in any direction.

And it turns out these factors balance almost each other out. Britain’s longest train, the CrossCountry from Aberdeen in Scotland to Penzance in Cornwall, runs 785 miles or 1,263 km. Germany’s longest train, the IC 2216 from Offenburg in the Black Forest to Greifswald on the Baltic coast, is exactly 1,300 km. Germany wins by a tiny distance.

Except then I was hooked. What about the longest train in France? Spain? Italy?

So I did what anyone would do. I made a map.

The map above was all drawn with the Deutsche Bahn (Germany Railways) travel planning tool, which rather incredibly has nearly every railway in Europe. The data quality is better for some countries than others (the lines in France aren’t quite that straight in real life), and the measurements may be a bit off – it’s not always easy to find the length of a train service, especially when routes can vary over the year – but it gives us a good idea of what the routes look like.

Let’s start with the UK. The Aberdeen to Penzance route isn’t really for people who want to go all the way across the country. Instead, it’s a way to link together several railway lines and connect some medium-to-large cities that otherwise don’t have many direct services. “Cross-country” trains like these have existed for a century, but because they crossed multiple different company’s lines – and later, multiple British Rail regions – they tended to get ignored.

 

That’s why, when it privatised the railways, the government created a specific CrossCountry franchise so there was a company dedicated to these underused routes. If you want to get from Edinburgh to Leeds or Derby to Bristol, you’ll probably want a CrossCountry train.

The usual route is Edinburgh to Plymouth, but once a day they run an extra long one. Just one way though – there’s no Penzance to Aberdeen train. 

The longest train in Germany is weird – at 1,400 km, it’s substantially longer than the country itself. On the map, the reason is obvious – it takes a huge C shaped route. (It also doubles back on itself at one point in order to reach Stuttgart).

This route takes it down the Rhine, the biggest river in west Germany, and through the most densely populated patch of the country around Cologne and Dusseldorf known as the Ruhr. Germany’s second and third longest trains also have quite similar routes – they start and end in remote corners of the country, but all three have the Rhine-Ruhr metropolitan area in the middle.

You’re not meant to take the IC 2216 all the way from north east to south west – there are much more direct options available. Instead, it’s for people who want to travel to these major cities. They could run two separate trains – say, Offenburg-Dusseldorf and Griefswald-Cologne – but making it a single route means passengers benefit from a bit more flexibility and helps DB use its rolling stock more effectively.

France’s longest train exists for a very good reason. Most of France’s high-speed lines radiate out from Paris, and it’s very hard to get around the country without going to the capital. Usually to get from Marseille on the Mediterranean to Nantes near the Atlantic, you’d need to take a TGV to Paris Gare de Lyon station, then get the Métro across the city to Gare Montparnasse.

Once a day though, this TGV avoids this faff by stopping in the suburb of Juvisy and turning around without going into the centre. This lets passengers travel direct between the coasts and reduces the traffic through Paris’s terminals in the rush hour. The exact length of this route isn’t clear, but Wikipedia says it’s about 1,130 km.

Spain’s longest train is very different. This is the Trenhotel sleeper service from Barcelona to Vigo, and it’s pretty fancy. This is a train for tourists and business travellers, with some quite luxurious sleeping cabins. But it is a regularly scheduled train run by the state operator Renfe, not a luxury charter, and it does appear in the timetables.

Being dry, hot and quite mountainous in its middle, most of Spain’s cities are on its coast (Madrid is the one major exception) and as a result the train passes through relatively few urban areas. (Zaragoza, Spain’s 5th largest city, is on the route, but after that the next biggest city is Burgos, its 35th largest,) This is partly why overnight trains work so well on the route – without many stops in the middle, most passengers can just sleep right through the journey, although there are occasional day time trains on that route too if you want to savour the view on that 1,314 km journey.

Finally, there’s Italy. This is another sleeper train, from Milan in the north to Syracuse on the island of Sicily. It goes via Rome and travels along the west coast of... wait, it’s a train to the island of Sicily? How, when there’s no bridge?

Well, this train takes a boat. I don’t really have anything else to add here. It’s just a train that they literally drive onto a ferry, sail across the water, and then drive off again at the other side. That’s pretty cool.

(As I was writing this, someone on Twitter got in touch to tell me the route will get even longer in September when the line to Palermo reopens. That should be exciting.)

So those are the longest trains in each country. But they aren’t the longest in Europe.

For one thing, there are some countries we haven’t looked at yet with very long trains. Sweden has some spectacular routes from its southern tip up into the Arctic north, and although the Donbass War appears to have cut Ukraine’s Uzhorod to Luhansk service short, even Uzhorod to Kharkiv is over 1,400 km. And then there are the international routes.

To encourage the Russian rich to take the train for their holiday, Russian Railways now run a luxury sleeper from Moscow to Nice, passing through France, Monaco, Italy, Austria, Czechia, Poland, Belarus and Russia. This monster line is 3,315 km long and stretches across most of the continent. That’s got to be the longest in Europe, right?

Nope. Incredibly, the longest train in Europe doesn’t actually cross a single border. Unsurprisingly, it’s in Russia, but it’s not the Trans-Siberian – the vast majority of that’s route is in Asia, not Europe. No, if you really want a long European train journey, head to Adler, just south of the Olympic host city Sochi. From there, you can catch a train up to Vorkuta on the edge of the Arctic Circle. The route zigzags a bit over its 89 hour, 4,200 km journey, but it always stays on the European side of the Ural mountains.

Bring a good book.

Stephen Jorgenson-Murray often tweets about this kind of nonsense at @stejormur.


All maps courtesy of Deutsche Bahn.