Above Photo: From Occupy.com.
Housing prices in London have risen by 50% in the last five years. If the U.K. property bubble goes boom, it will be proportionally bigger than the U.S. housing bust at the onset of the financial crisis in 2007.
How did we get here? For starters, U.K. banks in 2015 lent over £1 trillion ($1.4 trillion) for housing, accounting for 70% of newly made loans. The result is that when this bubble pops, it could catalyze another global financial meltdown. While there are many other possible triggers, the next financial crash is more likely than not.
To recall, the 2007 bubble, inflated by the aggressive pushing of sub-prime mortgages, triggered the global credit crunch. In response, governments across the world bailed out the private banks, initiating a Great Recession. The thin U.K. recovery in the years since has relied on the financial sector, which in turn leaned largely on the housing market. This may explain some of the government’s eagerness to subsidize homeownership.
But the housing crisis is also causing ever-increasing human misery. Therefore, to resolve the inequality and financial crisis feedback loop, it is imperative to reclaim housing from a financial sector and neoliberal policies run amok.
Another Crash, Another Opportunity
One voice raising alarm about Britain’s housing bubble is Crispin Odey, manager of the multi-billion pound hedge fund Odey European. Odey’s prediction is noteworthy. As I reported for Occupy.com in 2013, he was one of the bankers who profited from the Great Recession by short-selling collapsing bank shares and deepening their crash.
Translation: Odey’s profits increased the bill picked up by British society. As he said back then: “When the crash happened, we started really making money.”
It remains a trillion-dollar (and more) question whether U.K. society will recoup its losses since 2008. An equally expensive question is whether society asserts itself enough to prevent a repeat crash. What is becoming clear – and perhaps an indication of the answer – is that housing and inequality underpin capitalism’s current crisis. There is now greater public awareness about the way sub-prime mortgage loans were sold to the most disadvantaged in society, who were then forced to pay massive, extortionate interest rates that bankrupted them.
But what is often missing from the narrative shaped by the corporate-controlled media is how this exploitative, unjust scenario arose in the first place. And to understand that, we must trace the story back to the 1980s.
Economics for the 1%
The neoliberalism first preached by Margaret Thatcher and Ronald Reagan produced a phenomenal transfer of wealth from the majority (middle and working classes) to the super-rich. The attack on unions meant real wages stagnated, while banks’ ability to create countless billions of dollars and pounds through a steady issuance of loans caused housing prices to skyrocket.
This also translated into rising rents. Financial deregulation meant capitalist high-rollers could create complex financial products based on mortgages, while escalating poverty meant that the majority needed to go into private debt to secure expensive homes and pay for the cost of living.
A key feature of this transition, naturally, was the way the 1% redefined homes as little more than financial assets. Thatcher led the charge; her government began by selling off social housing, which was a good investment for those who bought, but bad for society which saw further home and rent prices rise. Since Thatcher’s era, social housing in Britain has been largely replaced by private renting. Needless to say, homeownership has fallen further since the 2008 crash, and things appear to be only getting worse.
Britain’s Great Housing Crisis
Today, these factors help explain why in Britain, homelessness has risen by a third since 2010. There are over 1.4 million households on waiting lists for social housing in England alone – a rise of a third in two decades – including nearly 85,000 children who currently live in temporary accommodation.
London, of course, is the epicenter of this crisis. Research published last year points to how they city has undergone a process of “social cleansing,” whereby the majority are driven out by government cuts to welfare, and foreign investors use the empty properties as stock, with skyrocketing rents and an erosion of social housing as a result.
Not only that, austerity policies are making a bad situation worse. Since 2008, the richest 1% have controlled an ever-growing slice of the global pie, profiting from corporate welfare measures including bank bailouts, quantitative easing, lower tax burdens and the increased privatization of services. Reciprocally, these same policies have pushed more of the majority into poverty and personal debt.
The same story is true for British housing. For instance, neoliberal QE policies pump billions of pounds of “hot money” into speculation, which drives up housing prices especially. Once more, it’s a win for the haves at the expense of the have-nots. And it’s perhaps little surprise that U.K. government policies constantly favor the property-rich 1%, since nearly one-third of MPs are landlords. The U.K. Parliament is now in the final stage of passing legislation that, if approved, will swing the balance of power even more towards the property-owning 1%.
The Housing Bill
The Housing Bill is a long and convoluted piece of legislation that ends the right to social housing for life. It compels councils to sell empty properties and give that money to the Treasury. Households with combined salaries exceeding £30,000 ($43,000), and £40,000 in London, will see massive rent hikes. The government will also now build supposedly “affordable” starter homes costing £450,000 with a 20% discount. The Bill has passed most of the way through Parliamentary, thus far with little scrutiny by the corporate media.
“The Housing Bill is the final death-nail for social housing, the final phase off an attack started in the 80s,” explained Lita Wallis, a member of Eviction Resistance, which runs skill shares that teach local people the law and successful tactics to prevent evictions. It is part of the Radical Housing Network that has grown rapidly in the last three years, combining over 40 local struggles to achieve victories that reassert housing as a human right.
Every week, Eviction Resistance receives more requests for help, and across the U.K. evictions are already at record levels. The Housing Bill could see these figures skyrocket further. Speaking after a recent protest called by Lambeth Housing Action, in which around 1,500 people marched to Downing Street, Wallis said that if the Bill passes, the best way to block it will be when the authorities try to enforce it.
“We can learn a lot through the community organization that successfully resisted the 1990s Poll Tax,” she said. “We need to arm people with information on how to resist evictions and continue to grow the local community struggles. Citizen empowerment and civil disobedience are the strongest tools to stop these unjust laws.”