The collapse of the banks in 2008 and the cuts then implemented by the coalition government to bail them out is only one aspect of the crisis facing capitalism. Another is housing.
It should not be overlooked that the banking crisis was itself triggered by reckless mortgage lending in the USA housing market. These dodgy debts were then packaged up and sold to banks and other financial institutions across the world. Whatever the shortcomings of New Labour – and they were many – the banking crisis was not due, as the Tories would have us believe – to excessive spending on the NHS and social services.
Returns on those who invest in property to rent using mortgages from these same banks have been, so far, insulated from the financial crisis. These returns are estimated to have averaged 16.3% over the past eighteen years – a period that spans the banking crisis. They have been generated by inflated rents: in May these averaged £765 per month in England and Wales and are still rising. Such rents are becoming increasingly unaffordable by those who must work for a living. In response, the government paid out £35 billion in 2013-14 in housing benefit – money that goes directly to landlords and supports the banks that provide the mortgages. The increase in rents that supports this edifice has only been made possible by an almost total lack of regulation and control of private landlords and the absence of security of tenure for tenants.
Once upon a time, ordinary working families could turn to Council housing. This was undermined by ‘right-to-buy introduced by Thatcher and continued under Labour. By 2013 up to a third of all council houses purchased under ‘right-to-buy’ had been sold on to rich landlords. A shocking example is provided by the son of Ian Gow, the Tory minister who presided over implementing Thatcher’s policy. He is now a housing tycoon, owning more than forty ex-council houses in one London estate alone! What remains of the council house stock is now subject to lengthening waiting lists, hardening criteria, diminished security of tenure and now the bedroom tax.
With people on average salaries and wages unable to afford mortgages even at current interest rates depressed by so called quantitative easing, i.e. printing money to support the banks, the housing prospects for the working population in Croydon and elsewhere across the country look bleak. Even those of us currently enjoying good housing can have little confidence that the next generation, i.e. our kids, will be so fortunate. Jobs are becoming less secure, unions are shackled, and well paid jobs are only accessed by those who can bear the huge burden of debt from student loans – bankers and those whose parents are wealthy enough to pay them off. Only the wealthy elite can flourish in such a world, albeit behind gated communities.
The solution? Mere tinkering advocated by the Green Party and, modestly and belatedly, by Labour is no longer enough. Regulation of landlords and abolition of the bedroom tax would be welcome, but cannot address the mess we are in. Tory and Tory-Light (i.e. Labour) solutions such as assistance for first time buyers will simply add to the inflation of rents and make buying by the rest of us even less accessible. The only recovery under capitalism will involve, as Thomas Picketty argues in his well publicised book Capital in the Twenty First Century, greater inequality and eventually the impoverishment of the entire working class – i.e. everyone except the super-rich. But while Picketty appears to believe that capitalism can be reformed, the only viable path out of the mess we are in will involve the appropriation of the wealth of those who exploit us. In a word – communism.