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Aug 06 2010

An Englishman’s Home is his Castle

Corfe Castle*

Back to rant for the blog post, this time on housing.

A house is like a millstone around your neck, once you’re in it the reluctance to do anything that might cause you to move out is massive.

I’ve been somewhat itinerant since leaving university after my degree, I lived in Durham, in Cambridge and then in Poynton and now in Chester. It goes with the job, I’m sufficiently specialised that I need to travel to find work. For families containing two academics this leads to an even greater “two-body” problem; not every town or village needs a research scientist of my ilk. The downside of this is a degree of rootlessness and a lack of a handy family network. I’m not sure how common this rootlessness is across the population as a whole, it’s true for many of the people I know.

It was when I was house hunting in 2000 that I got some hint of the credit crunch, I’d gone off to see the financial advisor upstairs from my estate agent to ask about offset mortgages (having been mildly burnt on payment protection insurance, I was trying to work out the hitch on offset mortgages). We had a bit of a chat; after some reassurance on what I was trying to get he pointed out that I was ultra-cautious and if I wanted he  could get me a x4 joint salary mortgage. I’d done the sums on this, and frankly it was scary but clearly a lot of people were doing this.

People often have a go at estate agents but personally I think it’s the other punters that really fuck you up. Estate agents at least have to make some pretence of professionalism whilst the punter is free to do as they see fit and since they’re unlikely to have bought and sold more than a couple of houses they can either by malice or ignorance make your life miserable. The bank and the solicitor’s ability to find another little fee to slice off you on the way irritated me too. “Searches” caused me particular ire – it’s not like they actually went and “searched”, they got someone else to do an indexed retrieval, it’s not like they went rummaging anywhere for something lost. Searching for documents these days takes bugger all time and effort. It’s perhaps for this reason that I thought HIPS were a good idea, because I was pretty unimpressed by the system currently in place.

House price inflation is apparently the only good sort of inflation: no one is pleased if cars, carrots, or computers get more expensive every year but for houses it’s different. For those of us on the housing ladder this inflation is no problem, for those not on the ladder it is the sight of the bottom rung being wound up beyond reach. Compared to the 1950’s houses are about x4 more expensive in real terms today, they’re about twice as expensive in real terms as when we bought our first house, about 12 years ago.

The real point of this post was a mild bit of ranting about care for the elderly and the sale of houses. Houses appear to be sacrosanct, you can be sitting on a house worth half a million pounds but rather than sell that to pay for your care the expectation is that the State should provide. Personally I’m hoping for my parents to piss away the inheritance in their twilight years and leave nothing to me – this includes the house. This attitude to housing and inheritance seems to affect every strata of society:

Owners of country estates apparently expect the public to pick up the cost of maintenance. And in the news this week, council houses – I must admit I didn’t realise that council house tenancies were for life and potentially beyond. This strikes me as a nightmare for those responsible for the councils responsible for social housing provision, particularly given the ‘right-to-buy’ legislation. An obligation to provide housing for all is a good thing, the mechanism that via council houses, housing associations and housing benefit doesn’t look like a great way to do it. Actually, housing associations do look like a good idea to me. If you were a company with this obligation you’d want to make bulk arrangements with landlords, and you’d be fantastically nervous about handing over valuable assets for decades. 

The move towards mass ownership of housing is relatively recent – mainly post-war in the UK (see page 12 here), and around Europe home ownership rates are broadly comparable, there are a couple of anomalies. I guess the reason for this is that home ownership fulfils a deep need for security, and literature and recent history reveal plenty of evil landlords.

I suppose the general point I’m making here is that we all want to pass on an inheritance, this is a very natural feeling but the effect of this desire impacts those that are still living and don’t benefit from an inheritance. I actually quite like Billy-Gotta-Jobs proposal on taxing all houses as capital gains on death, as a way of cooling house price inflation.

Update: as supergoonybird points out in the comments, BillyGottaJob’s proposal is actually for capital gains tax on *all* house sales – not just on death. This is a radical idea – but certainly one that strikes in the right place.

*Corfe castle because it’s close to where I was born and lived until I was 18. Image from here.

9 comments

  1. Julia

    I think I saw a statistic saying that if the price of bread had risen as much as the price of housing since the Second World War, then we'd be paying £45 a loaf (can't remember where that was though).

    It's an argument I've had with my parents many times – they're currently trying to persuade me and Paul to buy. When my parents bought their first house, they were a little younger than us. Dad worked, and earned about £15k. Mum gave up her job. They were able to buy a house for £10k. They bought their current house 23 years ago, for £60k. It's now worth at least £250k.

    So, their first house cost two-thirds of their total income. Their last house probably cost about double their total income (Dad was a deputy headteacher by then). Is there anywhere now, where the average professional can buy a house that only costs double their income?

    Paul and I rent a large one-bedroom flat with parking space and a garden. On the whole it is a pretty charmed life. I would like to own a house because a) I'm fed up of magnolia coloured walls, b) I want to be able to fix major problems like broken boilers or leaks in the roof without having to wait for the nearly bankrupt landlord to agree, c) I want to plant out Jurassic Park and let it grow to its full potential.

    I loathe the people who want to buy houses to make money off selling them again, and as you've said, it's these people who are raising the bottom rung of the ladder out of my reach.

  2. SomeBeans

    @Julia – We bought our first house in Cambridge, to be honest we were slightly bounced into it. We'd moved from renting a little flat backing on to the railway line at the north side of the city to a modern two bedroom mid-terrace which we quite liked. About 6 months after we moved in the landlord said he wanted to sell, we both hated moving and I had a 2 year postdoc contract so buying was just about cost neutral with renting in terms of monthly payments. (The landlord's actual plan was to move back in, he'd just got married and was preparing to separate after only 6 months!)

    I don't think it's so much that people buy a house as an investment; it's just that's what happens and suddenly you have an apparent wealth far beyond what you expected. The psychological impact of this wealth is quite large.

    As it stands I wouldn't consider a job in London because we couldn't afford to live there! Or at least we'd be very stretched and end up with a place much less pleasant than we have in Chester.

  3. KJHaxton

    It was chancel insurance that made me hit the roof when we bought about a year ago. I never plan to set foot in the village church yet I'm required to have some insurance to pay 'my share' of repairs should something go wrong. That on top of the fees and whatnots was almost the last straw.

    We bought, in the end, for the same reasons Julia's said she'd want to buy – the ability to modify the environment to our own tastes. We were extremely lucky to buy last summer just as house prices reached the first low. We were more lucky to find a mortgage with 5% deposit, and more to find a house at less than 3x combined income. The sums some banks were offering us in April 2009 were terrifying – often 4 times combined income – and with the attitude that this was the expected price we'd pay for a house. But now we've bought and put in windows, and decorated, and made a garden, and realised that we probably don't want to live in this area for too long. We've got two academic jobs in the same department – the chances of finding that again are very slim. So the house and the jobs will keep us where we are for now. I'm not sure which has the bigger psychological impact!

  4. SomeBeans

    @kjhaxton – my dad used to have to pay Prince Charles to cross the verge between the road and the front of his house!

  5. Anne Wareham

    We're committed – as people who put down long tap roots and for who the idea of moving would be dreadful – and the garden is our life in many ways. (writing, photography)

    But I do often reflect on just how much of our time, money and effort this place demands for providing us with comfort and shelter. Bit absurd.

  6. supergoonybird

    I think BillyGottaJob is suggesting CGT on the sale of all houses, not upon inheritance which is already taxed for many (largely because of the vastly inflated price of property which is pretty much where we came in …).

  7. SomeBeans

    @AnneWareham – you had me looking back at pictures of our own little gardens that The Inelegant Gardener made (I dug, and hammered, and sawed) – I sort of miss them. Furthermore removal companies aren't houseplant friendly either!

    @supergoonybird you're quite right – added an update. BillyGottaJob's proposal is for CGT on all house sales not just on depth. As I think they'd say in "Yes, Prime Minister": This is a brave idea. The aim to get house price inflation in some reasonable order seems like a good one though.

  8. Billy Gotta-Job

    Yes, an idea so brave it merges into the reckless. It has no political legs whatsoever, which is just another way of saying the the interests of relatively richer people always trump those of poorer people.

    Yet in its way it's no more radical than Cameron's idea. I just happens to be fiercely redistributive and we can't be having that, can we?

  9. SomeBeans

    @BillyGottaJob – yes, in my own wishy-washy liberal way I was attempting to draw these things together. Measures impacting the 70% of the population who are homeowners will be politically difficult.

    I thought Neil O'Brien's article in the FT was perhaps a politically more practical approach.

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