From an article in yesterday's Evening Standard about flat-sharing in London:
Oliver Nice, 26, who works in film as a director of photography, has been looking for a five-person flatshare for almost two months. He said: "It has been ridiculously difficult. Properties would go off the market before you had a chance to look round. A couple of times we were shown round different properties. I'm going to be living with my girlfriend and three friends in a four-bed house in Stoke Newington. I own a one-bed flat in Ealing but I can't afford to live there because of the mortgage.
The article appears to be based on a press release by easyroommate, who have their own spin to put on it; they claim that "London has a flat sharing population of of nearly 653,000" which is nearly a tenth of the population of London (which might or might not be true).
From This Is Money (the Daily Mail's finance spin-off):
A quarter of all mortgaged homeowners find it almost impossible to move house or take out a new deal. Figures from trade body the Council of Mortgage Lenders (CML) show that more than one in twelve borrowers — some 827,000 — are in negative equity, i.e. meaning they owe more on their mortgage than their house is worth. Yet a further 1.7 million, roughly 17 pc of mortgage holders, have less than 10 pc equity in their properties, according to Money Mail research.
Many of these people took out mortgages with just a small deposit before the credit crunch, and are now trapped because their house price has fallen. Henry Pryor, an independent estate agent, says: ‘These people are prisoners in their own home and may be stuck on an expensive mortgage deal.’
Why do they insist on referring to such people as 'homeowners'? These people don't own homes at all, do they? They are more or less slaves indentured servants of the banks, who own them and their houses. So much for social mobility.
Friday 26 August 2011
The Home-Owner-Ist Death Spiral
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18 comments:
I'd user the phrase indentured servants instead of slave.
AC1
Why, for that matter, are these people "prisoners in their own home"?
Unless, perhaps, it's because Henry Pryor and his unlovely chums can't sell 'em another house.
It's not going to be pretty when interest rates rise.
> It's not going to be pretty when interest rates rise.
The BoE are going to try and inflate out of it. I'm not sure if they care how many people this throws out of work.
AC1
I doubt there are many London flat-"owners" in negative equity. Mr Nice could probably sell his flat for at least the outstanding mortgage. His problems finding a five-person flatshare are a separate issue: how many are there in total, then how many with available space?
If I was living in a four-bed flat I would not want a couple moving in to one of the rooms. How many four-bed flats are there in London? Not many: most residences in London are one- and two-bed flats or three-bed houses. Mr Nice needs to curb his expectations if he wants cheap digs.
I am one of the people "priced out" of the mortgage market because I bought on a debt ratio that was stupid. I regret that but I live with it. I am not really "trapped" as such.
Lots of people made stupid mistakes in the housing bubble. And?
Dear "formertory". I BUY houses for people, I don't SELL them. Despite this important difference (which seems lost on you) the 1979 Estate Agent Act defines me as "an Estate Agent'.
Hope this helps.
Of course if social housing was only given to workers who live in London as opposed to pro single mums etc and less people had their rent subsidised, then a lot less (none?) people would have to flat share.
I personally would lose - I have a lodger but London would be a fairer place.
The pro single mums of course could find an empty council flat up north.
The problem isn't just home ownerism.
The problem is also the idea that workers should pay for other people to live in housing they can't afford.
Also how can it be 25% of people in less than 10pc equity? Did they all buy houses from 2004 onwards or did some of the do equity release?
AC1, fair play, i have amended.
FT, i refer you to AC1's second comment.
BE, agreed to most of that, except the last comment, I've no axe to grind with people who got sucked into the Ponzi scheme at the wrong moment, it's the people who started the Ponzi scheme and kept it going who annoy the hell out of me.
Anon, as I've said many a time before, I oppose Housing Benefit, as it's a subsidy to land rental values, i.e. the diametric opposite of LVT. And I support the idea of councils charging 'market rent' for social housing for the same reason as I support LVT.
If HB were scrapped, then 'market rents' in council housing would, by definition, fall to a level where people would be able to afford it, even without HB.
"If HB were scrapped, then 'market rents' in council housing would, by definition, fall to a level where people would be able to afford it, even without HB."
I very much doubt it. Who can afford to feed and clothe himself, and pay rent on the basic dole?
There is no reason why HB shouldn't be fixed at slightly less than the rent payable for similar council-owned accommodation, instead of being based on "market rents". The main problem with HB is not that it is an anti-LVT, but that it represents positive feedback. Market rents are determined by the ability of people to pay, which is determined by the amount of HB they get, which is determined by market rents, which are determined by ....etc - onwards and ever upwards.
@Henry Ptyor: apologies; I clearly mis-spelled your name. Word of your great fame not having reached these parts, I didn't realise you buy houses. Do you source mortgages for your purchasers, too?
@MW / AC1: Government borrowing has always been inflated away; at least here in the Workers' Paradise since 1945. It would be unreasonable to expect a change of tack now.
But with 70% of remortgages being on short term trackers because (whatever the media say about continuance of low interest rates) the borrowers can't afford longer term arrangements, a 50bp rise will precipitate trouble. And it will come, when CamerOsb finally feel the need to try to rein in inflation slowly, so as to be seen to be doing something.
Oh and yes, I remember. It's the BoE that makes the decisions. All on its ownsome. Oh yes indeedy :-)
B, for a start, we could scrap HB for 'private' tenants, that's the easy bit. Tweaking rents in social housing so that Anon's council house mums all move Oop North and workers move Darn Sarth is a lengthier process.
FT, I wonder whether the 'P' in 'Ptyor' is silent or not?
Inflation is not the worst evil in the world, it's a question of degree. As a 'saver' I hate low interest rates and inflation, but as a taxpayer, I thoroughly approve. There again, as a tenant/saver, I heartily disapprove of the fact that inflation is a stealth tax on my 'savings' and a stealth-subsidy to over-borrowed homeowners and banks. you win some, you lose some.
Exactly. As someone approaching retirement (pause for hollow laughter) who made a good deal of effort to make the transformation from debtor to saver, eschewing the finer things of life (the bijou French cottage, the LR Discovery on the driveway) to do it, I rather resent the idea that a particularly mendacious class of politician can make a mockery of my best efforts in mere days and weeks.
You're probably right about Henry, too. Best completely silent, I feel.
Crikey. I just took a look at his "I love me" webpage. "The BBC's favourite property expert".
Is that a recommendation?
"B, for a start, we could scrap HB for 'private' tenants, that's the easy bit. "
Why? I don't know why you are so convinced that local authorities automatically make better landlords than private individuals.
B: "I don't know why you are so convinced that local authorities automatically make better landlords than private individuals."
I've no strong opinion either way on that one, all I know is that social housing costs the taxpayer more or less nothing and it tends to push down rents (with or without HB) whereas HB for private landlords is hugely expensive for the taxpayer and tends to push up rents.
Mark, I refer you to my previous comment but one concerning the positive feedback nature of HB. Without this, HB for private tenants need not be any more expensive than for council tenants.
After all, before council housing was invented, the vast majority of the poor lived in private rented accomodation at rents presumably dictated by their ability to pay and the landlords must have been making some profit, or they wouldn't have been in the business.
B, the feedback effect is quite correct, but the same applies (to some extent) to council housing. If dole is £70 a week and food and clothing costs you £50, then market rents for the not-so-nice council housing would fall to £20 a week, surely?
Well, yes, so Ricardo would have it. However, there comes a point where it is uneconomical to rent out property, and if the landlord who is renting out eneconomically is a local authority, then that is effectively housing benefit under another name. It would be interesting to find out what proportion of their income the poor paid in rent in the C19th. I used to have a Temperance poster (vintage bansturbation!) with that sort of information on.
B, yes, £1,000 a year is pretty much the absolute lowest level at which it would be profitable to rent out a room (ignoring the land rental element) because that's what repairs, insurance, notional interest cost on bricks and mortar etc costs for a studio flat or a room in a shared house.
If it turns out that it is uneconomical to rent out for such low prices, then the best thing to do is increase dole (or Citizen's Income or state pension, whatever) by £10 a week (or £20 a week or whatever it takes).
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