Safe as houses?

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Safe as houses?

Homes are for living in – so why are they so insecure? Dinyar Godrej writes about the problems of buying and selling property.

We have to feel sorry for people who worry about paying their monthly mortgage to buy their house!

We want to say it is our house, but the walls only create problems. We have to pay for it all our lives and longer. We worry all the time that the house will be taken away by the bank if we cannot pay in a crisis. And will the house keep its price? Does anyone else have money to buy houses? Will we have to live in the street?


A 2008 photo of the US housing crisis: this girl’s family’s belongings on the sidewalk, after their eviction from their home in Waco, Texas. She has four brothers and sisters. Larry Downing / Reuters

We have to feel more sorry for people who are trying to buy a house. People who earn an average salary, but have to rent instead as they cannot afford to buy.

It is difficult to save enough money. Landlords know this and they increase the rent. Where has the idea of “Home Sweet Home” gone?

It sounds crazy, but buying houses is now more for making money than for having a place to live. Even our government supports this idea. And so does Big Money. And quality of life becomes irrelevant.

This is happening now for the middle class in many ‘developed’ countries; people with less money have even more problems. But before the 1980s, it took 10 to 15 years to pay off a mortgage to buy a house. Now it takes about 30 years. House prices were high but it was OK. Buying a house used to mean security, but now it means that you are a slave to debt forever.

But in the 1980s, capitalism went crazy. Before this, making a profit went together with creating jobs and helping society. But in the 1980s, people started to buy more simply to make more profit. Neoliberalism was the name given to this ideology, and governments supported this power. Governments moved the markets to benefit the big businesses (the so-called free market). They increased privatization and deregulation and they rejected everything communal or social. They took away safety nets; they said the poor were just lazy, and they should blame themselves for not having money. This belief in greed was led by Reagan and Thatcher, and financial institutions like the IMF and the World Bank. And it has created many serious problems around the world but many important people still support it.

People started to look at houses in a different way: instead of being places to live, poorer people were told they were ‘capital assets’ and they were encouraged to buy the social housing they were living in. The government promised that people could own their homes, so they didn’t need to provide public housing anymore. In Britain, this idea continued when New Labour were in power from 1997 to 2010, pretending to create a classless society of homeowners. Impossible!

Because more people wanted to buy houses, the price of property increased, it became more difficult to pay a mortgage and quality of life went down. Normal people only had a small amount of money left every month after paying the mortgage. More people became very poor.

Property prices increased far more than inflation and wages, so housing was the best form of investment. The price of property had little relation to other things – the property bubble. Financial institutions had invented an option of investing in housing simply by clicking a mouse.

These were the MBSs (mortgage-backed securities) that created the housing crisis in the US. With a successful housing market, banks began running out of new people to buy houses at the beginning of the new century - everyone who the banks trusted already had a mortgage. So the banks looked again at the people they had previously rejected, people with poor credit ratings called the ‘sub-prime’, and started to offer them risky loans and ask no questions about how they could repay them. They knew many of these people would not be able to pay back the loans, so the lenders sold the risky loans to other people who really wanted to invest in housing. After these MBSs were on the markets, they were quickly turned into other types of finance and sold again and again.

And what about the ‘homeowners’? After a few years, the fixed interest they had to pay on the mortgage finished, and the new interest rate was often twice as much. This was because of the ‘economic bubble’ they were part of, without knowing it. At the same time the finance system was packed full with$3 trillion of MBSs. When people couldn’t pay their mortgages anymore and the banks took back their houses, the value of the loans fell, and the MBSs started to fall too. This affected all of the economy, including jobs and investment. When the US crisis started, most of the rich countries followed. In the end, the crisis affected all the Majority World countries that could not rely on their own resources to keep control over their economies.

This was the worst depression since the 1930s. And everyone was shocked by the way the governments reacted. They gave a huge amount of public money to helping the same institutions that had played with the money.

Today, six years later, the approach to housing is similar: to try everything possible to keep high property prices. And now the super-rich have become much much richer but most people have much less money, both personal (less income or no pay rises and less job insecurity) and public (cuts in public spending).

In the US, the Federal Reserve, the government bank, has promised to buy $45 billion of MBSs per month to support the housing market. So the demand for housing has increased, but the number of people who buy homes to live in decreased by 175,000 in 2012. The cheaper, new homes, intended for single families, are bought by landlords to rent out. The number of homes for rent increased 1.32 million. Rich people from other countries are also buying property either to rent, sell again, or as holiday homes in popular places like Florida.


Begin again: inhabitants try to save their things after fire destroyed their homes in this slum in eastern Kolkata, India. Parth Sanyal / Reuters

In Britain, the government is also probably creating a new housing bubble as it is trying to help people who are buying their first house. The Bank of England is giving a lot of money to banks to encourage them to lend more. But new houses are not being built. They are building 120,000 houses less than the number of new houses needed – so the increased house prices will stay very high. And social housing continues to get worse. And the difference between the generations in owning a home is now bigger: older people are far more likely to own a home than young people. And rent has increased by around 50 per cent over the last eight years.

In Australia house prices have increased by 130 per cent since 1996. The increase is much more than wage increases. And the government there has now given tax breaks worth billions each year to big investors without making it easier to afford a house, or cheaper to rent a house. Many people were envious of the Australian economy during the crisis, but now more people are suffering housing stress than ever before.

The many housing crises in some of the richest countries of the world show how bad it is: too much money in one place, making money just for itself and not for any productive purpose, and no moral conscience at all. The trillions of dollars that support the property bubbles are a social time bomb. Researchers from Citigroup, the US financial services company, know who are in control: ‘The earth is controlled by the entrepreneur-plutocrats.’ And the goal of these plutocrats is for everyone else to become poor: then workers would be cheaper.

This is what the city of the future will look like: small areas with a huge amount of money, linked by huge very poor slums. Many cities look like this already.

In Mumbai, with 20.5 million population and not much physical space (the city is an island), middle-class families live into a one-room flat, the huge numbers of working class live in tiny rented boxes in enormous slums, the really poor lie on the street under the open sky, and the rich have guards with guns to protect their front doors. Antilla is the 27-storey home of Mukesh Ambani, India’s richest man, on a street where land prices are $25,000 a square metre. It is the most expensive home in the world and it cost over $1 billion, maybe even $2 billion. It could have had 60 floors if the ceilings were lower. It has three helipads, six floors of parking, nine lifts and an army of 600 servants. This is wealth with no limit: gyms, ballrooms and a cinema.

In Dubai, there is money from all parts of the world in many fantastic homes like islands made in the shape of a palm tree. Swimming pools here are cooled by electricity in the hot summer; there is an indoor ski slope. Dubai’s palaces have been built by South Asian labourers working 12-hours a day in the very hot sun. They live in crowded huts in the desert with no air conditioning. If they fight for rights, they are sent back to their country immediately. They are not allowed to enter the beautiful shopping centres and restaurants they build. Hundreds of them die each year because of bad safety.

In Central African Republic, 95.9 per cent of the urban population lives in slums. How is this possible? They cannot even buy bricks to build walls because they are so poor. Other capitals in Africa, like Nairobi and Lagos, there are small areas of tall buildings for the rich.

All over the world, housing means terrible greed or endless insecurity. There is nothing simple about a roof over one’s head. The inequality of our age is reflected in housing.

This fight by the very rich to buy and consume more and more is the fight to become immortal and stop everyone else from having anything. It will not succeed. We need to change our view of housing and simply see it as a place to live. And this change of view will only happen if we can stop buying and speculating, and share everything more fairly.

In Aristotle’s time there was an idea that people should see property as a basic need – if not, it could become a battle where most people lose. Many traditional African societies see land as something to share for the benefit of the community. In rural African societies, land is or was often controlled by a group, not individual people. Benjamin Franklin, one of the founding fathers of the US, would probably not recognize the housing market of his country today. He argued for all property to be public, administered for the public to benefit, except for a small part to support an individual’s needs.

Imagine a world where the price of housing reflected its real cost, not the inflated price of the marketplace. This would be a great impulse of energy and ideas to help social wellbeing and, possibly, the economy.

Could it happen? Yes, if we prevented ‘bubbles’, which means stopping the elite from buying up and keeping most of the housing. If governments saw social housing as a positive thing, which would allow citizens to play more part in society. If private rents were controlled to an acceptable level. If people were allowed to build their own modest homes to save money where there was free land. In other words, if homes could be removed as far as possible from the manipulations of the marketplace. Then we could get on with living in homes and we would not use up all our energy in fighting to possess them.

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