Figures from the Ministry of Housing, Communities and Local Government released on Monday poured cold water on the widespread misconception that Britain’s housing crisis results from a lack of houses.
Official stats revealed that the number of long-term vacant properties in England rose by 5.3 per cent in the 12 months to October, to a total of 216,186.
In London, where housing supply is scarce, the growth of empty homes was double the national rate, increasing 11 per cent to 22,481.
This complements other evidence showing that housing stock levels have consistently risen at a higher rate than population growth, even in the past couple of decades – even in London.
Source: Positive Money (using ONS and MHCLG data).
According to the economic laws of supply and demand, this means we should be seeing an increase in housing affordability, rather than the rocketing prices that characterise millennials’ existence.
So why are homes so unaffordable?
We can’t think about the housing crisis in simple economic terms, where too many people are chasing too few homes. To understand the housing crisis, you’ve got to look at it as a broader political and economic problem – with finance and ownership both playing key roles.
Source: Positive Money (using Nationwide housing survey and Bank of England data).
In Britain’s financialised economy, homes are treated as a speculative asset, rather than simply as places to live.
In an era of low business profitability for advanced economies like the UK, housing is often the easiest and safest bet for those looking to expand their wealth, as property prices seem almost guaranteed to rise at a higher pace than interest rates, which have remained historically low throughout the past decade.
Correspondingly, banks love lending money against houses. Both in the decades leading up to and following the crash, around half of bank lending flowed into property.
Ultimately, houses are worth however much banks are willing to lend. Banks, which create new money simply by lending, are essentially unconstrained in the amount of money they can conjure to bid up property prices.
The nature (or lack) of regulation favours those who already own property, making it easier for buy-to-let landlords or wealthy speculators to snap up homes, keeping these empty as assets rather than places for people to live.
First time buyers, who are usually limited to borrowing only four or five times their annual income, are outbid by those who already own homes, who can leverage them as collateral and perhaps also use their rental income to borrow much higher amounts.
Both banks and homeowners are reliant on ever-rising house prices, otherwise they risk going into negative equity and becoming insolvent, with devastating consequences for the economy.
In the absence of productive investment, this housing bubble is driving the UK economy. To prevent it bursting, politicians create artificial scarcity. This means the state protecting the rights of existing property owners and speculators hoarding housing stock, a reality that is reflected in policies like anti-squatting laws that have made occupying empty properties more difficult.
Property developers love the dominant housing shortage story as it means councils will often let them build luxury developments, in the misguided hope that simply building more homes – any homes – will ease the crisis.
The “shortage” rhetoric also lets the property-owning class off the hook, instead allowing politicians and property owners to reiterate the toxic “Britain is full” myth, blaming immigrants instead of speculators.
So if we want to combat the housing crisis, what story should we tell? The common sense maxim that no one should own more than one home until everyone owns a home would be a good place to start.