Saturday, 28 February 2015
Social Housing & London Property Prices
Mrs Thatcher made them an offer many couldn't refuse. Who wouldn't want to be a property owner, having their own house rather than being beholden to the local authorities to house you? And so in the 1980s the stock of social housing was at a stroke decimated as lots of people took up the opportunity for buying their Council House at a 30% discounted rate from its market value.
We'll pass over the misery of the quixotic rise and fall of interest rates and the point at which the sale value of their house was actually lower than the value of their mortgage, the dread phrase 'negative equity'. What if these new property owners had no inkling that they were exposed to the rise and fall of investments in the world of accumulation and speculation? That they'd had no education whatsoever for this sudden elevation to rentier capitalism that they'd been invited into.
London, due to its prohibitive property prices and rental costs is a de facto City-State. If you're not already a Londoner with one foot on the property ladder, you've got no chance of becoming one unless you have a big cache of cash. Labour's "Mansion tax", a tax on property's valued at over one million pounds, would fall largely on London compared with the rest of the country.
I was born and bred a Londoner. By sheer luck of when I was born, it was still just possible to get on the London property ladder. When I was in my final year of University and knowing I would be returning to my home city to live and work, I started scoping areas I might like to live in. In the Easter holidays of my final year, I looked at property prices in an area called Tufnell Park in North London. It was an overflow area for Kentish Town which had all been bought up, since it in turn was an overflow area for Camden Town which was a hugely desirable area and whose property prices had rocketed up. (Now all of London is an overflow area for some other borough in the city). Even as I walked the streets of N19, there was a huge amount of activity converting houses into flats so that developers doubled their money on their investment in purchasing the house. When I graduated 5 months later, the average price of flats in the area had already increased by fifty thousand pounds from when I'd first looked. I was already priced out.
In the end, me and my fiancee bought an ex-council flat in Kilburn. The original council tenant had bought it for seventy thousand pounds and quickly sold it on to us for one hundred and ten thousand. a nice quick forty grand profit. None of which the Council would see to be able to reinvest in replacement social housing. We lived there for five years until the birth of our twins meant we had to move to a bigger place. We sold for one hundred and sixty-seven thousand. Today, some 15 years later, my wife informed me our old flat there had sold for over half a million pounds.
Now imagine if the local council had been able to retain a share in all its properties like that one, so that each time they were sold on, the council would receive some money. Then there would be far less of a housing crisis in London and more available social housing through reinvesting the money. But no, local government was stripped of its assets for ideological reasons as Mrs Thatcher went to war with them.
It's ironic that for such a rich city, London has become a city of the Left. The Conservative held seats are pretty much banished to the leafy suburbs, with the exception of the two most central and desirable areas. Labour are predicted to make further inroads into London in the upcoming election. Maybe because it's London for all its wealth has a conscience about those who have been excluded through exorbitant property prices and the lack of viable social housing.