Housing reform is necessary. That, as a statement, is perhaps one of the few things undisputed between the major parties in Westminster. Not enough affordable homes are accessible, leaving many within a rent trap, never quite managing to make it onto the housing ladder. Yet under the surface issue of getting the next generation onto the housing ladder lies an issue of greater concern. If left unchecked, the imbalance within the housing market, coupled with long-time economic woe for lenders, could be Britain’s next ticking time bomb and have disastrous socio-political consequences.
The catalyst of this socio-political crisis that is beginning to brew is economic. Following the 2008 Financial Crash, economic growth in the UK has struggled to get back onto its feet. Productivity remains stagnant and lags behind other G7 nations. Attempting to stimulate economic growth, the central bank has, throughout the decade, maintained low interest rates to persuade people to spend rather than save. The rationale is straightforward enough. More gets produced if money is being spent, and not sitting in current accounts accruing interest. Yet, so far, such a strategy is yet to bear fruit.
There is, however, a further, longer-term issue with the central bank’s policy on interest rates which is of greater concern. Ever since the UK government brought in inflation targeting in 1992, an economic policy where the central bank targets a certain inflation rate, interest rates have trended consistently downwards. Whilst great for home-owners with mortgages, for young people looking to save it is increasingly difficult to build up the finances required for the deposit to a house.
What does this have to do with an impending socio-political catastrophe? Simply put, right now there is no way for young people to reach the housing ladder, being perpetually stuck within the renting market. This, by itself, is not damaging to the socio-political situation within the UK. Other developed European countries across the continent have renting cultures and, if anything, dismantling the constructed expectation to house-own would likely be an improvement to British culture.
However, it is not certain that the impending economic change will achieve such a culture shift, and the consequences of retaining a house owning culture within a renting society are worrying.
Even ignoring, momentarily, the short-term recorrection of the market that would occur when demand for houses is outstripped by supply as a largely property-owning baby boomer generation passes away, unattainably expensive houses for the generations following will still remain. Instead, the most worrying concern is the impact it could have on an already expanding inequality within the UK.
This is because the gap between those who have and those who have not will become unbridgeable. With an inability to save for that deposit, those with parents who already own houses may find that inheritance is the only way onto the property ladder. Owning a house will become a sign of significant family wealth and concentrate privilege to an ever-decreasing minority, whilst those stuck with the financial pressures of paying rent will fall further and further behind.
And, as history points out repeatedly, such unsustainable inequality leads to increased political extremism and conflict. It would be naïve of us to assume that we would not be subjected to the same increase in political extremism that defined the French Revolution, the formation of the Soviet Union, and 1930s Germany. Indeed, in the 19th century there was a fear that Britain would follow a similar path to the examples listed above, as events such as the Peterloo Massacre and the Hyde Park Riots threatened to be the UK’s own Storming of the Bastille, as protestors demonstrated against the inequality within Victorian Britain.
Disraeli and Gladstone can be largely applauded for quelling such extremist politics with their reformative platforms. So what ,then, do we do about our modern conundrum? Well, were we to copy from the economist’s textbook, there would be one of two options: change the government’s fiscal policy or change its monetary policy. Either the government could go down a monetary route, scrapping inflation targeting and artificially raising interest rates. Or it could go down the fiscal route of greater spending, through the building of more affordable homes.
Yet, whilst the causes of this crisis may be down to our economic history, we must take a more socio-political approach in attempting to prevent such a crisis.
In contrast to the Victorian reformists Disraeli and Gladstone, who both passed Reform Acts focused on expanding suffrage within the UK, political reform should be prioritised in an act of preparation for, rather than reaction to, this crisis. Focus should, instead, be placed in two directions. Firstly, upon making central government contracts more transparent and meritocratic, the result of this being greater political pressure for a larger percentage of housing developments to be affordable. Secondly, the remit of local governments should be altered, increasing control over the rewarding of contracts, whilst simultaneously completing the shift towards housing associations owning social housing. Such a move would give councils and metropolitan areas greater control of how much housing is built, whilst protecting them from the unaffordable and uneconomical costs which come from development.
The housing crisis, although economically caused, must rely on contemporary political solutions to prevent socio-political catastrophe. We cannot be lulled into either thinking the UK is immune from the multiple historical examples of political extremism that accompany greater inequality, or that implementing the same economic policies repeatedly will provide a different result. Without expansive political reforms to housing, transferring power towards local governments, and increasing transparency in government, the UK will only step closer towards socio-political disaster.
Matthew Lambert, Summer Writer