Cooking the Books: Property Poverty

‘Property poverty’, read a headline in the Oxford Mail (30 April): ‘Soaring rents leave workers no chance to buy their own home.’ The article explained that workers were unable to save money for a deposit to begin buying a house or flat because ‘soaring housing costs mean Oxford workers are spending increasingly high proportions of their wages on renting a place in the city.’

Capitalism is in fact based on ‘property poverty’ for the vast majority, but not necessarily of a ‘property’ to live in, but property in the means of production, property in assets that yield an unearned income. Workers will never be able to afford to buy enough such property so as to be able to live off the income without having to sell their ability to work on the jobs market.

In that sense, the wage and salary working class is a property-less class even if some do, after years of hard work as an employee, eventually come – by finally paying off the mortgage – to own the house or flat where they live. But even this seems to be becoming ‘unaffordable’ for increasing numbers of better paid workers. Not that owning your own home makes you a capitalist any more than owning your own car does.  Neither are income-yielding assets.

‘Affordable housing’ was a term much bandied about during the election campaign. It’s one of those things nobody can be against: who would not be in favour of lower house prices and rents? But the term also has a precise, legal definition: any rent which is less than 80 percent of the market rate (still unaffordable for many of course).

Property companies building houses and blocks of flats for profit are not going to invest in building any for people who can’t afford to pay a rent that will bring them the going rate of profit. Left to themselves, in the present state of the market they would build only luxury flats. To try to get round this, planning law allows councils to make it a condition for getting planning permission that the property company agrees to provide some ‘affordable’ housing as well. Councils can’t impose this and so have to negotiate it, with the property companies being in the stronger bargaining position as if a council asks for too much ‘affordable housing’ they can simply walk away. In effect, they are being asked to pay for planning permission, a modern, institutionalised, legal equivalent of the backhander that notoriously used to be paid to councillors and council officials.

The Labour Party’s election promise to make housing ‘affordable’ was to bring in rent controls. The proposal was modest enough: no increase in the rent above the rate of increase of inflation for three years (and then the landlord could ask for what the market would bear). It was met by howls of protest by those investing in housing for profit.

‘The Association of Rental Letting Agents (ARLA) said that three-quarters of its members feared the plans would “see landlords exit the market and reduce supply” … The British Property Federation has warned that the rent control plans “could deter much needed investment in the housing sector”’ (Daily Telegraph, 27 April).

But it’s true. Rent controls, by keeping rents below what the market would bear, would mean that there would be less profit to be made out of building or letting housing for rent. Inevitably, given the nature of capitalism as a profit-driven system, this would mean less investment in housing building. Less profit = less production. It’s simple, if stupid.