Discussion
Current homeowners get a cushion for their net worth even as homes get more affordable.
The loser is the investment sector, City boys who buy and sell mortgage debt. And you know, fuck those guys.
Keen finishes by teasing one more policy that he thinks will tie this all together: the intriguingly named Modern Debt Jubilee, a way to "to reduce private debt, but in a way that doesn’t cause an economic collapse," which he says he'll cover in his next post. Can't wait!
30/
From 1960-1979, house prices started to nudge ahead of inflation, averaging gains that were 1.75% higher than consumer prices. But it wasn't until 1980 that the annual above-inflation price increase of houses grew to 3%. Steve Keen's "Remedies for Ridiculous House Prices" explains what happened to make housing so eye-wateringly expensive (and how to make it affordable again):
https://profstevekeen.substack.com/p/remedies-for-ridiculous-house-prices
2/
McKeen unpacks just how dramatic this change is: since the Thatcher years, house prices have doubled every 23 years. Before 1960, the house prices rose so slowly that they would have taken *280 years* to double (which is to say, the fate of most houses was to turn to rubble, not to double).
3/
So what did Thatcher do to make homes so eye-wateringly expensive? The high-level explanation is that the UK - like much of the world - transformed its housing stock: not a way provide the basic human right to shelter, but rather, an *asset*:
https://pluralistic.net/2021/06/14/euthanasia-of-the-rentier/#georgeism
Transforming a human necessity into an asset is a *terrible* idea. Governments work to increase the price of assets owned by actors in their economy.
4/
But increasing the price of housing only benefits the minority who own houses, while everyone else - everyone who needs a roof over their head - suffers. For a comparison, imagine if our governments instituted a policy of making some *other* necessity as expensive as possible, say, *food* or *water*. Transforming shelter into an asset class was always going to end badly.
5/
McKeen is an econ prof, and the point of this piece isn't merely to observe this remarkable shift in the economics of having a home, but also to trace the policy choices that led us to this moment, and to propose policies that could change things so that everyone can have a home.
So what did Margaret Thatcher do to destroy the chances of everyday Britons to have a home? Well, this is Margaret Thatcher, so if you guessed the answer was "deregulation," you'd be right.
6/
Prior to Thatcher's deregulation, home loans in the UK mostly originated with "building societies," a specialized lender whose operations are fundamentally different from the operations of a bank.
Here's the difference: when a building society makes a home loan, it withdraws money from a regular bank account at a regular bank, much like your savings account.
7/
This is a small personal instance of Bonfire in the Fediverse.
