UK house prices fell 1.5% in December 2022, according to Halifax, to an average £281,272, down from £285,425 in November. It marked the fourth consecutive month of decline, signalling the first real brake on the exponential rise in property values that followed the financial crash of 2008, and reflects the deepening crisis of British capitalism. But it will do nothing to alleviate the housing crisis for the working class. CAT WIENER reports.
Safe as houses?
Further falls in prices over the next two years are predicted to range from 5% to 9%, although Lloyds Bank suggests a worst-case scenario of 18%. This has set alarm bells ringing for many homeowners who had assumed they were sitting on an asset that could only rise in value. But with the price of a home still up 19% on March 2020, the majority of even better-paid younger workers will remain unable to buy their own home; incomes devastated by inflation of 10.5% make it even harder to save for a deposit, and nine successive interest rate increases – with further increments due this year – make mortgages repayments an average £3,000pa higher than last year, a figure predicted to rise to £5,100pa by the end of 2024. The financial regulator says more than 750,000 UK households are at risk of defaulting over the next two years (see FRFI 291, ‘Property snakes and ladders as mortgages rise’).
Under capitalism, houses only get built if they make a profit, no matter how great the housing need. No wonder the government has scrapped a mandatory target of 300,000 new homes a year. The ratings agency Standard & Poor’s says it takes two and a half years for a rise in interest rates to feed through to housing investment; it expects a 10% decrease in investment in housing by the end of that period. But Britain’s housebuilders are ahead of the game, with three of the biggest – Barratt, Taylor Wimpey and Persimmon – announcing that they are cutting back on buying and developing land. Barratt has scrapped proposals for 3,293 sites. It’s expected that the number of new homes built will fall by around 25% in 2023 to a level matched only by the first year after the 2008 financial crisis. We should not be surprised. While strictly regulating supply to keep their profits high, housebuilders have amassed huge ‘land banks’, land with planning permission whose value has risen exponentially year on year, driving house prices sky-high. In Britain, land currently represents around 67% of a property’s total value. Between 2007 and 2021, the top nine housebuilders in Britain increased their profits tenfold, from £267m to £2.8bn. House prices grew 45%. But now they can see the writing on the wall.
The land goldrush falters
We have shown, following Marx, that the price of land is determined by both the rent that can be charged on it, and interest rates.* Nine years of historically low interest rates, coupled with high rent, made land a hugely profitable depository for surplus value. Savills, the estate agent of the ruling class, says that ‘The development land market has enjoyed an exceptionally strong last two years with a 13.8% growth in greenfield values since September 2020’. Land values are currently high; development land, particularly in desirable locations in and around major cities, is priced between £25,000 and £50,000 an acre; with planning permission, land in the southeast of England can cost up to £1m per acre. According to Statista.com website, an acre of development land in west London was valued at £7.75m in 2022 – up from £3.25m the previous year. However, Savills says that, nationally, land values are only just back to their 2007 high and are expected to begin to fall: ‘We anticipate [developers] will now be… restricting what they are prepared to pay for land and putting downward pressure on values’. Statista expects growth in land prices to decrease to 1.5% by 2026 – representing a major fall in investors’ rate of profit.
But these are of course averages, and – given the continued desperate need for housing, and the expectation that interest rates will not go above 4.5% (still relatively low), coupled with a stagnant economy offering few alternative outlets for profitable investment – the demand for land around major cities is unlikely to abate. In an article titled ‘London’s housing crisis: is public sector land the answer?’, Savills drools over the more than 2,500 hectares of land owned by local boroughs, Transport for London and the Ministry of Defence – much of it ‘within 1km of a tube station’. It says acquiring such sites will allow the provision of ‘high-density new homes in well-located areas’ aimed at ‘mid mainstream demand’. The government – partly as a sop to its green-belt stockbroker electorate, partly because it is aware of the political consequences of failing to tackle the housing needs of better-off sections of the working class – is channelling millions of pounds into small-scale ‘brownfield’ urban development projects that will largely consist of so-called ‘affordable’ options such as Shared Ownership.
No respite for the working class under capitalism
With home ownership increasingly unaffordable for all but the wealthy, and the continued decline of social housing, the numbers forced into the private rented sector are soaring with more and more people chasing ever-fewer homes. The housing property website Zoopla calculates that across the country there are 40% fewer homes available to rent, yet demand is 46% above the five-year average. This has driven rents to a ten-year high, 12% above the 2021 level, and far more around major cities: up 17% in London, 15.6% in Manchester and 14% in Glasgow.
Small-scale landlords are being forced out of the rental market by rising mortgage costs and greater regulation; their place is being taken by vast corporate landlords whose ‘Build to Rent’ projects are funded by pension schemes and hedge funds. They include major property developers like the US asset management company Blackrock and private equity specialists PineBridge Benson Elliot, as well as Britain’s Legal & General, attracted to prime urban sites with guaranteed long-term rental yields. But while this sector is growing rapidly, it still makes up less than 5% of the private rented sector, and its glossy apartment blocks are aimed squarely at higher-income renters.
Meanwhile poorer sections of the working class face increasing squalor, overcrowding and precarity. Rent increases have hit them disproportionately, with a quarter of those living in the poorest 10% of regions seeing their rent double in the last decade, compared to 13% of those living in the most affluent areas. In December 2022, the housing charity Shelter found that nearly a million private renters faced the threat of eviction. 504,000 had received or been threatened with an eviction notice in the past month – an 80% increase on the same period the previous year. 482,000 were in rent arrears. Space available per renter has decreased by 16% over the last 20 years. 2019 government promises to scrap Section 21 ‘no fault’ evictions and make private landlords subject to the Decent Homes standard have still not materialised.
Capitalism cannot adequately house the mass of the working class. Whether house prices rise or fall, it is clear that the basic demand of safe, affordable, decent homes for all cannot be met by a system that treats housing as a commodity. For that we need socialism.
*Whose land is it anyway? Housing, the capitalist crisis and the working class, Larkin Publications 2018, £2.95
