Tuesday, 8 May 2012

We need to turn the focus onto Housing.

I was at an event last week organised by the University of Ulster - it was a small conference on housing in Northern Ireland. I was there to do a very quick Q&A panel session but got there nice and early and managed to catch a presentation on the effects on housing the financial collapse has had. The chap presenting was Richard Ramsey, the Chief Economist for NI at Ulster Bank. It was, shall we say, alarming though not entirely surprising to find that in most of the slides of statistics Richard presented, NI was pretty much at the extreme end of every graph, table or line chart.

What was evidently clear from the presentation was that everyone over the age of 10 should have seen this collapse coming. There's no point going into the whole hindsight debate now, but what we should be doing - and it's my belief that we're not - is making sure we don't play the game the same way again.

For all the differences in political ideology, nearly all sides agree that underpinning (or rather central to) the whole collapse was housing. This wasn't caused by people taking out credit cards and buying too many luxuries, it wasn't caused by people buying cars that were too expensive for them, it was caused by people buying houses. Of course, there's nothing fundamentally wrong with buying a house but when an economy rests on house buying, then it is only house buying that can destroy it so totally.

So, when we look back at the crisis, we talk about tighter banking regulation, we ponder whether retail and investment banking should be separated, we talk about stricter lending criteria across the board and we (well, not me) bemoan public spending levels. But, have we changed our view on housing? No. Undoubtedly people are not trying to obtain high risk mortgages any more (not that banks are offering), and the numbers of what you could classify as normal applications for mortgages are down. But that's not a change in attitudes to housing, it's just a delay while people respond to the immediate financial constraints.

When the economy eventually recovers, there's no evidence to suggest we will do things any differently. People still want to buy a house (they just can't at the moment) and society is still reinforcing that this is the best form of securing your future. I don't have a problem with people having big houses that they have worked hard to afford. I have a problem with people who don't own a home being considered somewhat inferior to those who do.

Since Thatcher's grand sell off of public housing, there has been an almost accepted truth in this country that owning a house is the most important measure of worth in society. Our culture almost revolves around it. If we haven't done something to significantly change that culture then come the economic turnaround, that desire of ownership combined with a market that likes to respond to demand (whether rational or not) will set us straight back on the course to economic disaster again.

4 comments:

  1. I liked reading this, and I agree with the general view you have on this - particularly the last paragraph.

    I would, however, just add that in my opinion, the problem is not that owning a house is considered so important in itself (after all, when your house becomes freehold you've managed to achieve the goal of having a property for you and your family that ensures some security for you and efforts to achieve this are commendable) but actually that owning a house, where once an example of someone's financial stability and security, is becoming detrimental to an individual's financial well-being because they're taking on loans and risks that they can't afford. Fiscal responsibility on the household level has taken a huge knock as home owning has become a fashionable thing to do to prove your own worth - that's the real shame, because that's where the damage is really done, I think.

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  2. Thanks for your comments, Victoria. I don't really have anything to add to what you've already said (because it's right) but there are undoubtedly many effects from the overall accepted aim of house ownership - some will be a matter of opinion rather than fact based on individual ideology but what is clear is there has been no significant shift in attitudes around home ownership and the small shifts we have seen are, I suspect, temporary.

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