Tuesday, 3 January 2012

There Is No Affordable Housing

In the USA there has been a catastrophe in the housing markets of most parts of the Union. This has been attracted little attention in either the UK or in Europe because of the various embarrassments entailed. One is the role of many major British and European financial organisations in the debacle.

The massive bungling of the US agencies and authorities may have needed little help to bring about the disaster but our own leading financial bodies did everything they could to make it worse.

The fall in price levels coupled with unemployment and other loss of income has meant millions of foreclosures. Those still in their homes are looking at serious equity loss and may be trapped. Communities have been wrecked and whole areas demolished. The trading in mortgages and titles to property mean that many do not know who owns either their mortgage or the freeholds, many have been lost.

There are an increasing number of American homes now where Grandma is in the loft and the young adult children have returned to wrangle over the title to the remote controls. Their parents who once hoped for an early and prosperous retirement may now never retire or be able to sell their house.

In the UK some of the frantic financial operations have been designed to keep the property market afloat to avoid the same happening here. This has been helped by the inflow of dodgy money with dodgy people buying into London and area as a way of either keeping some assets or laundering money.

Consequently property prices and rentals seem to defy the realities of the gathering problems. On the BBC News was an item about a small terraced house in London where the rental was £2000 a week for a family on below average income. This was funded by Housing Benefit and was said to be typical of London pricing.

If the housing benefit scheme is not just supporting but enriching many of those whose untaxed funds come from the Illegal Economy it is a fair question for ordinary taxpayers to ask quite how this has come about and why.

Also, in the news is discussion about how “Care in the Community” had meant large numbers of the very elderly with little care and stuck in homes they cannot afford to run and with nowhere to go. John Redwood has asked the awkward question of whether such care is designed to protect the inheritances of the relatively better off rather than be paid for by drawing on the capital value of the homes.

Channel Four recently had a feature on the million unoccupied homes and who they might be brought into use. They did not mention the difficult issue of how it has come about that the titles and freeholds of many of these homes seem to have gone off shore and cannot be identified. This brings us back to the financial companies and the industrial scale of tax avoidance in which they are engaged.

As for the leasehold and rental sectors there is developing chaos in both these fields. It is becoming increasingly expensive and difficult for those needing homes who are in the middle and lower incomes. There is a real squeeze here that means that few who have to rent will ever be able to afford to buy.

Again because so much “investment” has been urged on in these fields in the recent past the money flows into this market on the assumption of easy capital gains have pushed the figures too high for comfort. There have been a lot of people badly caught out and there may well be a lot more to come.

Trying to keep a full account of the scale of the mess is impossible in a short post of this kind. Because the UK property market has become so badly overblown then the scale of any collapse could be very nasty. We only have to look across the Atlantic and at Ireland to see what could happen.

In the meantime there is ranting on about the government embarking on a huge programme of building “affordable” social housing. This is music to the ears of the developers and their financial backers. The trouble is that “affordable” probably means a major increase in subsidised housing supported by housing benefit or tax breaks of one kind or another.

This is the sort of thing that got us into the mess in the first place.

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