My fix for the housing crisis: ban ownership by foreign non-residents

'Politics never looks more pitiful or, frankly, animal crackers than in the housing debate – it’s almost a relief when they don’t discuss it.' Photograph: Helen Yates

 Zoe Williams in The Guardian


It is the one point on which all people and parties agree: Britain’s housing problem is one of supply and demand. The solution is to build more homes. It doesn’t matter who owns them: once we have more supply, the normal market – where perfectly equal individuals reach great deals through mutual self-interest – will resume. This orthodoxy on house-building is so ingrained that if you query it you are regarded as a person who doesn’t understand supply and demand.

Last week the economist John Kay argued that, at the current rate of building – 100,000 homes in 2014 – even to replace existing stock will take 270 years, given that there are 27m dwellings in the country. But this is not accurate – there were actually 141,000 built last year, I guess he was rounding down for ease of arithmetic. It is not enlightening – like a TV chef filling a bus with sugar and yelling “Milwaukee consumes this much sugar every quarter”, the extension is supposed to give a sense of scale, but instead bestows senseless impotence. Ultimately, it is misleading; houses aren’t people, or crops: they don’t have to be replaced every year. Indeed, if you make them really well, you might expect them to last 270 years.

But the supply argument is not a simple mistake; it is deliberated and dearly held. Once you accept it, other things follow: supply is too low because planning is too stringent, because people are selfish and they would prefer to have a large garden than to help their fellow man. It follows also that supply wouldn’t be a problem if demand were lower, so now there are people to blame: immigrants, baby boomers with their great big houses, divorcees who have perverted the supply chain with their toxic personalities, people living alone, whose atomised existences are unsustainable in our tiny jewel of an island.

Home ownership: how the property dream turned into a nightmare



Supply-and-demand turns this into a character weakness. We’re all a little bit too selfish and nimbyish; we’re inconsistent, wanting our house prices to rise but moaning when our kids can’t get on the property ladder; we want cheap labour but don’t want to accommodate the new arrivals who provide it; we’re just bad people who have created the market we deserve; those who’ve had no agency –the under-30s – should direct their ire towards those who have – their own parents and grandparents.

This depressing analysis is, fortunately, quite wrong. The problem of supply, for one thing, is not one of planning but developer incentives. Land value rises faster than the value of housing stock: expecting developers to crack on, to build and sell, is to expect them to get rid of an asset that would otherwise rise in value. This system would work fine if property development were a social enterprise. However, where the aim is maximising shareholder value, these incentives more or less guarantee that they will drag their feet: land with planning permission will remain undeveloped; when it is developed, the housing stock will be thrown up as cheaply as possible.

This is really easily solved, without having to undertake a mass reversal of the modern psyche. We could have a land value tax; the Labour proposal to compulsorily purchase land that was left idle would have worked. The Conservatives branded that “Stalinist”, while including in their own manifesto the proposal to appropriate social housing, then sell it. Politics never looks more pitiful or, frankly, animal crackers than in the housing debate – it’s almost a relief when they don’t discuss it.

But that isn’t the half of it. What we have seen over three decades is a rise in house prices far beyond what people can afford. This is thought of as a London problem, but that can apply only to things that do not infect the rest of the nation. Beards are a London problem – unaffordable housing costs have already spread to Reading, Cambridge, Oxford, Bristol, Brighton and beyond. GDP figures are mainly telling a story of housing costs in the south-east. Cities where housing is less expensive have no part in this economic growth but are expected to rejoice in it anyway. This could never have happened through simple shortage. “The housing market,” wrote Faisal Islam in the Default Line, “is driven principally by the availability of finance, mainly mortgage debt, but sometimes bonuses, inheritances, or hot money from abroad.” He is not, by the way, a Marxist; his career as a broadcaster relies on his impartiality.

To deal with those in reverse order: the money from abroad needn’t even necessarily be hot – 75% of inner London housing is never shown on the UK market, going straight to mainly Asian investors. Last week I shared a panel with a developer, Martyn Evans, and we were looking at a website’s illustration of a block of flats aimed at foreign investors. Apart from Canary Wharf showing up in the background – a scene of geographical impossibility – the funniest bits were the characters: a young man who looked like Prince William, on his phone; a kid with a bunch of balloons, running past in a blur.

This was actually the main point of difference between Evans and me. (It is amazing how many developers also think the system is completely broken.) He said investors look for exactly the same qualities as residents do. No (I insisted): residents want somewhere to live. Investors want somewhere where their investment will be safe. What could possibly be safer than a place where multiple balloons can be carried? Who last saw a child carrying a bunch of balloons?

It has become so normal for housing to be sold abroad that to complain about it sounds old-fashioned, almost racist. However, when anybody from anywhere can buy a flat in your city, sooner or later the people who live and work in it won’t be able to afford to. Rents will become difficult – last week the average monthly rent in London hit £1,500 for the first time. Soon after that, your population is in lifelong servitude to a landlord class, or it moves to Wales. The solution could not be easier: we could ban the ownership of housing by foreign non-residents, as they do in Norway and Australia.

Inequality has also played its part, as salaries in the financial sector have ratcheted up what sounds reasonable. Yet far more important has been the role of banks in extending credit.

This is how money is created – banks lend it to people, and it appears in the economy. Of this lending, 85% is on existing residential housing stock. Essentially, what looks like economic growth is simply the extension of credit to fuel a housing boom. Banks cannot lose: instead of being indebted to them for 20 years, it’s 30; or owing them three times our salary, it’s six; the very luckiest among us have wandered into a state of debt peonage to a high street bank, while the unlucky – who will never get on to the housing ladder – work to service the investments of the lucky. This is a bit more complicated and may involve an overhaul in the way we create money.

But when we look at how badly things are being done – the vanishingly small number of people served by the status quo, the huge numbers, entire generations, who will have to live differently because of what we’ve allowed – this can’t be allowed to stand. So sure, we can talk about supply and demand, and even create the political will to do something about supply. But the exciting bit will start when we allow ourselves to think bigger.

Where Cruelty Is Kindness

Those who promoted laissez-faire economics required an explanation when the magic of the markets failed to deliver their promised utopia. Malthus gave them the answer they needed.

GEORGE MONBIOT in Outlook India

Kindness is cruelty; cruelty is kindness: this is the core belief of compassionate conservatism. If the state makes excessive provision for the poor, it traps them in a culture of dependency, destroying their self-respect, locking them into unemployment. Cuts and coercion are a moral duty, to be pursued with the holy fervour of Inquisitors overseeing an auto da fé.

This belief persists despite reams of countervailing evidence, showing that severity does nothing to cure the structural causes of unemployment. In Britain it is used to justify a £12 billion reduction of a social security system already so harsh that it drives some recipients to suicide. The belief arises from a deep and dearly-held fallacy, that has persisted for over 200 years.

Poverty was once widely understood as a social condition: it described the fate of those who did not possess property. England's Old Poor Law, introduced in 1597 and 1601, had its own cruelties, some of which were extreme. But as the US academics Fred Block and Margaret Somers explain in their fascinating book The Power of Market Fundamentalism, those who implemented it seemed to recognise that occasional unemployment was an intrinsic feature of working life.

But in 1786, as economic crises threw rising numbers onto the mercy of their parishes, the clergyman Joseph Townsend sought to recast poverty as a moral or even biological condition. "The poor know little of the motives which stimulate the higher ranks to action — pride, honour, and ambition", he argued in his Dissertation on the Poor Laws. "In general it is only hunger which can spur and goad them onto labour; yet our laws have said, they shall never hunger."

Thomas Malthus expands on this theme in his Essay on the Principle of Population, published in 1798. Poor relief, he maintained, causes poverty. It destroys the work ethic, reducing productivity. It also creates an incentive to reproduce, as payments rise with every family member. The higher the population, the hungrier the poor became: kindness resulted in cruelty.

Poverty, he argued, should be tackled through shame ("dependent poverty ought to be held disgraceful") and the withdrawal of assistance from all able-bodied workers. Nature should be allowed to take its course: if people were left to starve to death, the balance between population and food supply would be restored. Malthus ignored the means by which people limit their reproduction or increase their food supply, characterising the poor, in effect, as unthinking beasts.

His argument was highly controversial, but support grew rapidly among the propertied classes. In 1832, the franchise was extended to include more property owners: in other words, those who paid the poor rate. The poor, of course, were not entitled to vote. In the same year, the government launched a Royal Commission into the Operation of the Poor Laws.

Like Malthus, the commissioners blamed the problems of the rural poor not on structural factors but on immorality, improvidence and low productivity, all caused by the system of poor relief, which had "educated a new generation in idleness, ignorance and dishonesty". It called for the abolition of "outdoor relief" for able-bodied people. Help should be offered only in circumstances so shameful, degrading and punitive that anyone would seek to avoid them: namely the workhouse. The government responded with the 1834 Poor Law Amendment Act, which instituted, for the sake of the poor, a regime of the utmost cruelty. Destitute families were broken up and, in effect, imprisoned.

The commission was a fraud. It began with fixed conclusions and sought evidence to support them. Its interviews were conducted with like-minded members of the propertied classes, who were helped towards the right replies with leading questions. Anecdote took the place of data.

In reality, poverty in the countryside had risen as a result of structural forces over which the poor had no control. After the Napoleonic wars, the price of wheat slumped, triggering the collapse of rural banks and a severe credit crunch. Swayed by the arguments of David Ricardo, the government re-established the gold standard, that locked in austerity and aggravated hardship, much as George Osborne's legal enforcement of a permanent budget surplus will do. Threshing machines reduced the need for labour in the autumn and winter, when employment was most precarious. Cottage industries were undercut by urban factories, while enclosure prevented the poor from producing their own food.

Far from undermining employment, poor relief sustained rural workers during the winter months, ensuring that they remained available for hire when they were needed by farms in the spring and summer. By contrast to the loss of agricultural productivity that Malthus predicted and the commission reported, between 1790 and 1834 wheat production more than doubled.

As Block and Somers point out, the rise in unemployment and extreme poverty in the 1820s and 1830s represented the first great failure of Ricardian, laissez-faire economics. But Malthus's doctrines allowed this failure to be imputed to something quite different: the turpitude of the poor. Macroeconomic policy mistakes were blamed on the victims. Does that sound familiar?

This helps to explain the persistence of the fallacy. Those who promoted laissez-faire economics required an explanation when the magic of the markets failed to deliver their promised utopia. Malthus gave them the answer they needed.

And still does. People are poor and unemployed, George Osborne and Iain Duncan Smith claimed in this week's Sunday Times, because of "the damaging culture of welfare dependency". Earlier this month, Duncan Smith, in a burst of Malthusiasm, sought to restrict child benefit to two children per family, to discourage the poor from reproducing. A new analysis by the Wellcome Trust suggests that the government, which is about to place 350 psychologists in job centres, now treats unemployment as a mental health disorder.

The media's campaign of vilification associates social security with disgrace, and proposes even more humiliation, exhortation, intrusion, bullying and sanctions. This Thursday, the new household income figures are likely to show a sharp rise in child poverty, after sustained reductions under the Labour government. Doubtless the poor will be blamed for improvidence and feckless procreation, and urged to overcome their moral failings through aspiration.

For 230 years, this convenient myth has resisted all falsification. Expect that to persist.

There’s method in Greece’s madness – it could pay off

Iain Martin in The Telegraph

In the upper reaches of the Euro elite, where leaders are forever driving up to summit meetings in shiny German cars and looking grave and self-important for the cameras, where smooth diplomats know that the way to get business done is to do it discreetly with fellow officials, there is no surer sign that a colleague has gone stark raving mad than him announcing that he is going to hold a referendum on matters European.

It is bad enough that David Cameron has decided to put Britain’s future in the EU to the voters. But at least the UK Prime Minister has given warning several years in advance and has enlisted the support of the British business establishment to win his vote in 2017. By contrast, the Greek leader, Alexis Tsipras, announced on Friday that he wants to hold a referendum in Greece on the eurozone crisis on July 5.

In the eyes of the Euro elite, this momentous decision made Mr Tsipras the instant winner of the European madman of the year competition. Several years ago, when his now forgotten predecessor in Athens attempted a similar manoeuvre, demanding a public vote, the Germans ordered Georges Papandreou not to be silly. Indeed, the then French president, Nicolas Sarkozy, told President Obama that the Greek leader was a “madman”. Truly, that was the pot calling the kettle noire.

Now, Mr Tsipras wants his own vote. What does he think he is doing? Does he realise that this is not how the eurozone and the European Union work? Who knows what will happen if Greek voters are asked whether they approve of the final offer of new terms from stricken Greece’s creditors. Goodness, the voters might say no. So exasperted were the other Eurogroup leaders that on Saturday they decided that the referendum move means their latest offer is void and Greece is on its own. It looks as though the referendum will go ahead regardless.

That fear of referendums on the part of EU leaders and officials is rooted in bitter experience, of course. The messy attempt to smuggle the integrationist Maastricht Treaty past European electorates in the early Nineties was followed by the long-running wrangle over the abandoned EU constitution and the Lisbon Treaty. Voters are awkward. Sometimes they do not do as they are told by the leaders and officials who do the deals. Why take the risk?

But Mr Tsipras is certainly not mad, or not in the sense that he has lost his marbles. Despite his Marxist beliefs and trainee demagogue antics, there is something rather compelling about the cunning way in which he has handled this crisis and declined to be railroaded by the corporatist EU powers-that-be, even though he has been slapped in the face (literally, last week) by the atrocious Jean Claude Juncker, the president of the EU commission. This is to say nothing of the ineffective behaviour of the over-rated German chancellor, Angela Merkel, cooed over by diplomats and the foreign policy community despite no one ever being able to name a single great achievement or convincing act of leadership in her career other than the knifing of her mentor Helmut Kohl.

But surely the real madmen here are not the Greek Marxists at all. The real madmen are those who created the euro, this cock-eyed construct, who thought political dreams and vanity could trump economic sense and cultural and national differences, by creating a currency union on a vast continent without the necessary safeguards.

Yet instead of facing these realities, and accepting that the EU model as currently constituted has had it, the Europhile leaders intone pompously about European Union values being agelessly sacrosanct. It is as though these men and women believe themselves to be functionaries of the Holy Roman Empire, rather than representatives of a modern botched-together political experiment that was only created in its latest form when German and French politicians misdiagnosed the consequences of the end of the Cold War as recently as 1989 and prescribed the euro.

This weekend, as those in the markets brace for the likelihood of Grexit, and a mammoth default on debts of more than 300 billion euros, it seems likely that Mr Tsipras has wanted Greece out of the eurozone all along, pretending throughout the negotiations that he is trying for an accommodation and debt relief when really he wanted to leave. That is what observers of Syriza, his party, believe.

But Mr Tsipras had a problem when he came to power. Although many Greek voters like his style, they also liked the euro because it meant membership of a supposedly democratic club that confers respectability. That is why he had to be seen to try for a deal, to create the illusion of good faith, so that he can say to the Greek electorate that while he did his best, the wicked architects of austerity – the central bankers and International Monetary Fund technocrats who want to make poor Greek pensioners (age: 57) homeless – would not see sense.

Now, Mr Tsipras may win either way. Either the creditors retreat in the next few days, because European financial institutions are exposed and the IMF is looking at a giant hole in its books, thus enabling Syriza to proclaim victory. Or, much more likely, Greece defaults on its debts and reintroduces the drachma as its currency against a backdrop of grievance and anti-German feeling that will serve the Greek Left well for generations to come.

The Greek people certainly won’t be winners, or at least not in the short term. On Saturday they were jogging to their banks in preparation for a full-blown bank run, in the expectation that the government will have to introduce capital controls, restricting the flow of money out of the country. If it does not do this, then the banks will have to close their doors. On Tuesday, Greece will start defaulting on the first chunk of 9.7 billion euros it owes the IMF this year. And that is all before the expected referendum on Sunday, which is a vote on a deal that eurozone finance ministers are declaring void already. What a mess.

Leaving will not be easy, contrary to the predications of British Eurosceptics, or at least not straight away. The experience of previous major defaults and hasty reorganisations suggests that it is extremely difficult to hold down inflation. It is also unlikely that the high-taxing socialist Mr Tsipras will introduce the capitalist policies and reforms that will attract inward investment and grow the economy.

At this late hour, in the final act of the Greek drama, enter David Cameron, like a man who arrives at a pub when the other customers and staff are administering the kiss of life to a regular who has collapsed on the floor next to the bar after consuming way too much ouzo.

Mr Cameron clears his throat and asks if someone wouldn’t mind awfully getting him and his British friends a pint. There is silence, until someone points out that they have their hands full at the moment.

In a similarly fraught atmosphere, Mr Cameron was given a few minutes to read out his proposals for reform to EU leaders last week as they grappled with Greece and the migrant crisis in the Mediterranean. His demands – on benefits and the promise of a post-dated cheque guaranteeing who knows what from the other countries after the referendum – are pathetically small.

There remains one fascinating other possibility, however, which may get the escapologist Mr Cameron off the hook in that style of his to which we have all become so accustomed. If Greece does leave and the effects are explosive, then it might – just might – finally persuade the Euro elite that their approach is bust, and that what is needed instead is a way for Europeans to trade and be friends without the architecture of an integrationist, incompetent, failed super-state.

State or private? Painful school choice that still fuels inequality in Britain

Will Hutton in The Guardian

 

Locals and Harrow boys meet outside Lord’s at the 1937 Eton v Harrow cricket match. Photograph: Jimmy Sime/Getty Images
 

I remember vividly one harrowing night at the end of the school summer term 23 years ago. My nine-year-old daughter was inconsolable. All her friends were leaving her very good state school to be placed by their parents in various private schools in the Oxford area. She cried at her loss. My wife cried. Her younger sister cried, because her sister and mother were crying. The house was drenched in tears. We were living the continuing divisive disaster that is the British education system, the most socially engineered to advantage privilege in the world.

At the playground swings a few days earlier, I had overheard a group of mothers explaining to one another why they were going private. The state schools weren’t challenging enough for exceptional children like their own and the comprehensive was only just recovering from a reorganisation. They just weren’t prepared to take the risk. Best of all, their daughters could continue their friendships and mix with other children like them.

I remember thinking that the local comprehensive didn’t deserve such criticism; it got an exceptional proportion of its students to university. But it was part of the national conversation that there was little good in state education, dominated, as it was, by trade unions, trendy teaching methods, an ideology that all should have prizes and a general lack of commitment to excellence. Two years later, Chris Woodhead was appointed chief inspector of schools. The language and attitudes of those mothers at the swings suddenly became the lingua franca of the man charged with improving our schools.

His death last week was the trigger for another outpouring of brave-Chris-the-man-who-said-it-like-it-should-be-said pieces, admiring his honesty in declaring that there were 15,000 teachers who should be sacked, his excoriation of soft teaching methods and praise of his insistence that kids needed to acquire both skills and knowledge for knowledge’s sake. His target was the “blob”, the educational establishment identified by former education secretary Michael Gove, who defend “collectivist” public education and the mediocrity of the status quo. The consensus was that we need yet more of that energy now to mount the ongoing fight against the liberal/left blob still defending the indefensible.

Except there has been a quiet revolution taking place in our state schools, especially primary schools, which would be hard to imagine if the blob really was as effective in sustaining mediocrity as its critics say. The inconvenient truth is that the state school system is in the round good and improving. Sir Michael Wilshaw, who enraged so many educationalists by insisting when he took the job as chief inspector of schools that he would tolerate no excuses for failure, now declares that after 7,000 school inspections over the last year, 82% of primary schools and 71% of secondary schools are good or outstanding.

Governance is better; leadership is better; incentives are better; teachers are better motivated; trade unions support higher standards; academies are working; even initiatives such as Teach First are making a measurable difference. Indeed, a recent Sutton Trust report found that there are now 11,000 ex-Oxbridge teachers in the state sector, having doubled since 2003. Young men and women, as I know from my college in Oxford, want to make a difference to society rather than teach the already privileged. In some parts of the country, there has been something of a revolution. London now outperforms the rest of the country in GCSE and A-level results, a legacy of the last Labour government melding a Woodheadian commitment to academic rigour with more collectivist money and encouraging and rewarding better leadership. A generation of education reform has worked.

Yet I have no doubt that there are groups of middle-class mothers at playgrounds still shaking their heads at the well-publicised problems of the state system – despite its improvement. They need state schools to be crap to justify what would otherwise be an obvious attempt to advantage their own children over others and embrace the social apartheid of private education. The centre-right press ensures that every failing is magnified, every success under-reported. Wilshaw, complain centre-right commentators, has gone rogue. Doesn’t he know that state school teachers are unionised second-raters who don’t understand the importance of literacy and numeracy and who put up with disruptive classes? Ofsted should be abolished and the state school system dismantled into a system of free schools removed from all forms of suffocating public influence. Indeed, with the government pledged to create another 500 on top of 400 already created, the free school movement is well entrenched.

Which, as it grows, will become a disaster. The derided blob has always had one aim: to offer the best education for all. It probably did over-emphasise comprehensiveness over excellence in the 1970s and 80s, but those days are long gone. Today’s left/right blend of commitment to universality, less bad funding, rigour and leadership has worked. The danger is that the government is going to kill that alchemy and by rolling back universality, publicness and, crucially, the funding so crucial to recent success, further worsen the dreadful inequalities besetting education and wider society. But from their point of view, who cares? The casualties of this process don’t vote Tory anyway. Their constituency is the opters-out, private and public; 48% of Tory MPs are privately educated.

Opting out is the process that fuels inequality, still the hallmark of our education system. The Sutton Trust found that despite the recent improvement, children from the richer fifth of neighbourhoods are nine times more likely to go to a good university than the fifth from the poorest. Inequality defines life chances. Part of the explanation is private schools: part that socioeconomic background is crucial to family stability; and part that free schools and academies are disproportionately represented in richer areas. If we want a society in which the mass flourishes, then fragmenting our system into one built on autonomy, opting out and individualism – cementing inequalities – is precisely the wrong direction of travel.

Anthony Seldon, outgoing headmaster of Wellington College, complains of the narcissism of so many parents – videoing, rather than watching, school plays and rarely turning up for parents’ evenings. But that is where the values of libertarian conservatism leads. Looking back, my wife and I felt that parents like us should stand by the universal system; our daughter did well and many of her friends at the time, whose parents believed in their exceptionalism, have had unhappy lives. It would have been so much better if those children had been allowed to stick together in a system that spelled out their togetherness while teaching them with rigour. The English tragedy is that we will never get there.