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.

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Labour's establishment suspects a Momentum conspiracy - they're right

Bernie Sanders-style organisers are determined to rewire the party's machine.  

If you wanted to understand the basic dynamics of this year’s Labour leadership contest, Brighton and Hove District Labour Party is a good microcosm. On Saturday 9 July, a day before Angela Eagle was to announce her leadership bid, hundreds of members flooded into its AGM. Despite the room having a capacity of over 250, the meeting had to be held in three batches, with members forming an orderly queue. The result of the massive turnout was clear in political terms – pro-Corbyn candidates won every position on the local executive committee. 

Many in the room hailed the turnout and the result. But others claimed that some in the crowd had engaged in abuse and harassment.The national party decided that, rather than first investigate individuals, it would suspend Brighton and Hove. Add this to the national ban on local meetings and events during the leadership election, and it is easy to see why Labour seems to have an uneasy relationship with mass politics. To put it a less neutral way, the party machine is in a state of open warfare against Corbyn and his supporters.

Brighton and Hove illustrates how local activists have continued to organise – in an even more innovative and effective way than before. On Thursday 21 July, the week following the CLP’s suspension, the local Momentum group organised a mass meeting. More than 200 people showed up, with the mood defiant and pumped up.  Rather than listen to speeches, the room then became a road test for a new "campaign meetup", a more modestly titled version of the "barnstorms" used by the Bernie Sanders campaign. Activists broke up into small groups to discuss the strategy of the campaign and then even smaller groups to organise action on a very local level. By the end of the night, 20 phonebanking sessions had been planned at a branch level over the following week. 

In the past, organising inside the Labour Party was seen as a slightly cloak and dagger affair. When the Labour Party bureaucracy expelled leftwing activists in past decades, many on went further underground, organising in semi-secrecy. Now, Momentum is doing the exact opposite. 

The emphasis of the Corbyn campaign is on making its strategy, volunteer hubs and events listings as open and accessible as possible. Interactive maps will allow local activists to advertise hundreds of events, and then contact people in their area. When they gather to phonebank in they will be using a custom-built web app which will enable tens of thousands of callers to ring hundreds of thousands of numbers, from wherever they are.

As Momentum has learned to its cost, there is a trade-off between a campaign’s openness and its ability to stage manage events. But in the new politics of the Labour party, in which both the numbers of interested people and the capacity to connect with them directly are increasing exponentially, there is simply no contest. In order to win the next general election, Labour will have to master these tactics on a much bigger scale. The leadership election is the road test. 

Even many moderates seem to accept that the days of simply triangulating towards the centre and getting cozy with the Murdoch press are over. Labour needs to reach people and communities directly with an ambitious digital strategy and an army of self-organising activists. It is this kind of mass politics that delivered a "no" vote in Greece’s referendum on the terms of the Eurozone bailout last summer – defying pretty much the whole of the media, business and political establishment. 

The problem for Corbyn's challenger, Owen Smith, is that many of his backers have an open problem with this type of mass politics. Rather than investigate allegations of abuse, they have supported the suspension of CLPs. Rather than seeing the heightened emotions that come with mass mobilisations as side-effects which needs to be controlled, they have sought to joins unconnected acts of harassment, in order to smear Jeremy Corbyn. The MP Ben Bradshaw has even seemed to accuse Momentum of organising a conspiracy to physically attack Labour MPs.

The real conspiracy is much bigger than that. Hundreds of thousands of people are arriving, enthusiastic and determined, into the Labour party. These people, and their ability to convince the communities of which they are a part, threaten Britain’s political equilibrium, both the Conservatives and the Labour establishment. When the greatest hope for Labour becomes your greatest nightmare, you have good call to feel alarmed.