Homeownership isn't a good aim of policy

A nation of homeowners isn't better than a nation of renters – and it may even be worse.

Over the weekend, Adam Posen, a former member of the Bank of England's Monetary Policy Committee, made a point beloved of economists but all-too-rare in circles of public debate: there's not actually any reason to think home ownership is a good thing. Posen writes (in the Financial Times, although it's reposted outside the paywall by his employers the Peterson Institute):

Policies to increase home ownership do not necessarily improve the supply or distribution of housing, as the UK experience demonstrates, and often works against it. The OECD’s Better Life Index shows that no relationship exists between a country’s home-ownership levels and its average housing satisfaction and quality. And there is no iron law that higher-income economies must have higher rates of home ownership: Mexico, Nepal and Russia all have home-ownership rates of more than 80 per cent, while the French, German and Japanese rates are 30-40 percentage points lower. The US and the UK rates sit between them at about 65 to 70 per cent.

As housing policy, home ownership is pretty bloody terrible. Matt Yglesias, commenting on Posen's post, points out that it's essentially encouraging massive investments in what is, at heart, a consumer good. (Land is a commodity, but the house on top is a durable good). That then leads to the political debate around housing turning into a debate around how best to preserve the value of that consumer good. Imagine, Yglesias writes, a world in which most people had a car worth hundreds of thousands of pounds:

If we banned the construction of new cars and trucks, then America's existing stock of cars and trucks would become more valuable, but this would be a way of impoverishing the country, not enriching it.

To make the same point more succinctly, I always like coming back to Dan Davies of Crooked Timber:

 

 

Housing policy requires cheap houses, but the politics of lots of people owning houses leads to a pressure for continued increase in the sale price of homes.

(That's made worse still by the peculiarities of the UK housing market, specifically the typical way buy-to-let financing works. The landlord buys a house, the rent pays the mortgage, and then they profit from the appreciation on the property. That means it's not enough even for house prices to be stable; they need continued, reliable increases)

Indirectly, then, policies to support homeownership render effective housing policy impossible. But they also have damaging direct effects.

Treating homeownership as an untrammelled good serves to disguise the trade-off inherent in buying a house. Renting has a place in the housing mix: it allows people to live in a house without being tied to it, lets them pass on the financial risk of repairs, lets them avoid the need for loans or capital, and lets them downsize fair By increasing the relative cost of renting, the choice between owning a house and renting one becomes a no-brainer: if you can afford a house, you should buy one.

That leads to the sort of problems highlighted by David Blanchflower and Andrew Oswald earlier this year: homeownership is correlated with unemployment. Buying a house ties you to a particular area, and a particular labour market; it increases the hurdle required to move to find work. Similarly, buying a house locks you into a particular mortgage payment, making it a lot harder to take a pay cut (while retraining, say), which can amplify the effects of sectoral shifts.

Homeownership as a policy to be pursued has a steadily increasing set of downsides, and a steadily decreasing set of upsides. Whether that means change will actually come is a different question, though.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

The murder of fearless journalist Pavel Sheremet must be solved - but Ukraine needs more

Sheremet was blown up as he drove to host a morning radio programme

On 20th of July Kiev was shaken by the news of the assassination of the respected Belarusian journalist Pavel Sheremet. Outside the ex-Soviet republics he was hardly known. Yet the murder is one that the West should reflect on, as it could do much to aggravate the Ukrainian-Russian conflict. 

Sheremet was one of the most significant and high profile investigative journalists of his generation. His career as an archetypal  examiner of the post-Soviet regimes in Belarus, Ukraine and Russia bought him fame and notoriety in the region. From 1997 onwards Sheremet became a name for fearless and non-partisan interrogation, both in print and as also as TV presenter. He paid the price early on when he was incarcerated by the Belarus government, then stripped of his Belarusian nationality and deported. Such is the way of things in the region.

Taking up residence in Kiev, Sheremet became immersed in interrogating the political life of Ukraine. He wrote for the Ukrayinska Pravda publication and also helped to develop a journalism school. Under these auspices he was a participant of a congress, "The dialogue between Ukraine and Russia", in April 2014. He reported on beginnings of the Euromaidan uprising. He warned of the rise of the concept  of "Novorossia" and suggested that Ukraine needed to reset its current status and stand up to Russian pressure. After the Russian occupation of Crimea his blame for the Ukrainian government was ferocious. He alleged that that they "left their soldiers face to face the [Russian] aggressor and had given up the Crimean peninsula with no attempt to defend it." These, he said "are going to be the most disgraceful pages of Ukrainian history."

Sheremet was blown up at 7.45am on 20 July as he drove to host a morning radio programme.

Ukraine is a dangerous place for journalists. Fifty of them have been murdered since Ukraine achieved independence. However, this murder is different from the others. Firstly, both the Ukrainian President and the Interior minister immediately sought assistance from FBI and EU investigators. For once it seems that the Ukrainian government is serious about solving this crime. Secondly, this IED type assassination had all the trappings of a professional operation. To blow a car up in rush hour Kiev needs a surveillance team and sophisticated explosive expertise. 

Where to lay the blame? Pavel Sheremet had plenty of enemies, including those in power in Belarus, Russia and the militias in Ukraine (his last blog warned of a possible coup by the militias). But Ukraine needs assistance beyond investigators from the FBI and the EU. It needs more financial help to support credible investigative journalism.   

The murder of Pavel Sheremet was an attack on the already fragile Ukrainian civil society, a country on the doorstep of the EU. The fear is that the latest murder might well be the beginning of worse to come.

Mohammad Zahoor is the publisher of Ukrainian newspaper The Kyiv Post.