A considered view of real estate, investments and beyond

You don’t need to own a home to benefit from capitalism Even after the 1930s housing boom, just one in three Britons owned their own home

The Economist

For some Conservatives, home ownership is a precondition for support for capitalism. But is that really the case? After all, you don’t need to own a farm or a factory to enjoy the benefits of their products.

You can do very well in a fairly-organised modern economy with nothing more than human capital or a pension, so long as housing gets better and more affordable over time, like almost every other manufactured product and indeed as housing does in many places around the world.

There is a whole profession of economic historians working on what enabled the progress of the past and why the Industrial Revolution happened where and when it did. They have made great strides recently with cross-disciplinary work and better data, moving beyond prices to look at broader features of society.

Economic historians such as Joel Mokyr and Deirdre McCloskey increasingly recognise the importance of certain aspects of culture for achieving economic progress. Mokyr argues that to support progress, people must believe that it is both possible and desirable.

People will support a system that gives them realistic opportunities and hope; when they believe society will become better and fairer. Failure to win that support is a devastating indictment of our current system.

The spectacular rise in average incomes since the start of the Industrial Revolution involved incredibly low rates of home ownership by recent standards. Even after the great house-building boom of the 1930s, only a third of Britons owned their own home. And yet there was more than enough support for the system to sustain innovation and growth. So much for people needing to be homeowners.

For those today whose living standards have dropped because incomes have been outstripped by rising housing costs and insecurity, real progress is hard to remember. Do not waste time looking at inequality based on income before housing costs. That shows a falsely rosy picture. The poorer deciles have mainly seen their real incomes after housing costs decline for half a generation.

What matters most, then, is not whether or not people own their homes, but simply the cost of housing.

It is easy for a homeowner with a cushy well-paid job in Cambridge to underestimate the leap of faith needed for a youngster from a former mill town to move a hundred miles to a shared bedroom in hope of a better future. And it is a fallacy of composition to assume that if they all just had sufficient courage or drive, they would. There isn’t room. For 40 years, we have failed to build anywhere near enough homes for them.

Two-fifths of the total net worth of this country is not based on capitalism. It is based on crony rentierism. That is the excess of total house prices over the cost of building the homes, caused by the steadily increasing shortage. That does not happen for cars, or ships, or aeroplanes, or in other places that have built enough homes to keep up.

This is a breathtakingly large distortion of our entire lives. It permeates everything. Unless we fight against that corrupt system, we are complicit in it.

If most voters owned a few acres to grow food, but production was needlessly capped and imports were banned, the have-nots would buy food at prices as unnecessarily elevated as housing costs are now. They would aspire to get on the “food ladder” by buying a small starter plot to farm. Hopefully the resulting damage and unfairness would be clear.

But that is exactly what the current planning system does for housing.

It was much easier to repeal the Corn Laws because landowners were a minority. When the oppressed are the minority, ending injustice can take centuries. Generations can pass before the moral problem is generally admitted.

Our 21st century Statute of Labourers is a very British hukou system that prices the young and the poor out of the best life chances. It is the biggest cause of inequality and injustice in our society. It shrinks opportunity, tears families apart, and hurts health.

This new oppression by rentiers is particularly insidious because the mechanisms are unclear to most non-economists, and homeowners prefer to stay wilfully blind. That is partly why it has lasted so long and become so extreme. The elephant in the room is someone else’s problem.

Of course, we should do everything to improve growth and pay in areas with lower wages. But that is no excuse for not helping the young and the poor right now by allowing plenty of homes where jobs and training are plentiful. That should also raise average wages in places they leave, because there will be fewer workers fighting for a limited number of low-paid jobs.

Trying to hold people back by refusing to allow homes where the jobs are, to prop up the house prices of older, wealthier homeowners, is deeply unjust.

The Economist

About John Myers

John Myers

John Myers is co-founder of London YIMBY, a grassroots campaign to end the housing crisis with the support of local people.

Articles by John Myers

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