When Housing Fails

Currently (in 2016) rarely a day goes by without the continued coverage of the U.K. housing crisis and the ongoing failure of politics to address the problem. As the ongoing boom continues essentially unabated from the early 1990s, the chronic lack of housing combined with regressive property taxation has resulted in a systematic failure to provide accommodation where and when required. In this, the ineffective nature of capitalist resource distribution sees it natural course run. The continued profitability of low risk, high profit mortgage backed products is supported through both the reduction in supply and the granting of few, low risk high value, profitable mortgages.

Perhaps the most significant feature that has allowed the situation to continue has been central government policy which has supported this. Essentially the levers of government have been used to ensure an evening increasing property wealth regardless of the potential dangers. However this has been done with the complicity of the electorate which has elected governments to deliver prosperity built upon rising asset prices and debt accessed purchasing wealth combined with low interest rates and controlled inflation.

The situation perhaps is this, the housing supply cannot be allowed to increase significantly through either building or reuse as to do so will deflate prices. This risk placing government backed debit within negative equity and also many house holds within negativity equity.

This risk of a devaluation is enhanced as property ownership is concentrated and risks is more focused. If such a property devaluation occurred a significant contagion of rapid selling buy to let property may accelerate any devaluation significantly.

However while the danger and risk of a devaluation are massive it has to be considered in the light of the ongoing housing crisis. There is a clear lack of cheap, high quality housing, the only course of action is to increase supply. Yes, there is a risk that an increase in supply will result in devaluation of property but the alternative is to increase homelessness and that is in my opinion unacceptable.

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