Yes, and this is ultimately why you see any programme the government engages in to make homes more “affordable” being predicated on raising prices generally (Help to Buy, HAP) or making certain categories of home more expensive (Shared Equity).
This is a consequence of how dysfunctional our housing market has been. In a functional market you would purchase a home confident that it would be roughly the same price ten years hence. In our market you purchase a home with the promise that it will have increased in value in that time far beyond both inflation and wage growth. Many people (and the Minister himself with a three bed terraced house is likely in this camp) purchased the famous “starter home” to “get on the ladder” and sell it for a larger property. Levereging that asset growth is thus important for a lot of people, who purely out of demographics are more likely to support FF/FG. If you take that away you take away their planed route to a home large enough to support their growing families.
The problem is that this kind of growth in housing assets is precisely what has locked younger people (which increasingly means anyone under 35-40) out of the housing market. Many of these people are natural FF/FG voters, but they are turning away as Government fail to deliver what is a basic human need for a home.
Government need to square the circle. They cannot just do the economically rational thing and increase supply precipitously as this would harm their political interests. They equally cannot now continue to ignore the problem.
The solution of “shared equity” is somewhat genius at doing this. It is pure nonsense economically as it is a demand led scheme in an environment of immense damend over supply and so can only drive price growth up. The “price caps” in particular areas will mean that delivery of homes incentivised by it in constrained markets won’t be of 3/4 bed houses, but will drive up towards the cap the price of the very type of “starter homes” that cannot fall in value for FF and FG voters – 2 up and 2 down terraces, duplexes, apartments. This will house people for sure, and changing family structures and increased urbanisation do mean that we need more of this type of housing. However, shared equity means that it will not be the market working to provide this type of housing to those who prefer it. Instead it will manipulate the market to provide this type of housing and present it as the only option for buyers with no other choices. Many will be “bag holders”, hoping that the asset price continues increasing so that they can move on when their families become too large. The price caps in shared equity mean that this will not actually happen.
That doesn’t matter though, as by the time this occurs the current crop of politicians will have moved on and the dynamics are too complex anyway for them to take much of the blame. More importantly, these people are now home owners. Their interests are now aligned, however perversely, with the interests of those who want to see residential house prices increase.
The real cynical genius of it though is in how it will tie the hands of any incoming Government. If Government has a significant stake through shared-equity in any significant portion of the residential housing market then that places a government who want to increase supply in a bind. If you go about your plan to deliver a significant number of new homes, you will drive down the value of those residential assets that you now have a stake in.
I wouldn’t like to be the Finance minister who has to explain that such a policy will significantly diminish the asset side of the Government’s balance sheet. A shared equity scheme means that it is not just the interests of a cadre of property owning voters that a new government (who may not care as much about them) needs to consider when increasing supply, or doing anything that will drive house prices down. They now must also consider the effect on the state’s finances in a way that can be represented easily on a spreadsheet.
The exit strategy is to allow REITS to take over property supply, form a monopoly and then everyone will pay extortionate rents to rent from them forever.
It seems house prices may start to slow across countries, the spectator in the uk was arguing on twitter this is why 50 year mortgages are being introduced because house prices are going to fall, and the amount spent on interest rate will be insane so banks want to find new ways to make money off people.
6 comments
From 2021: https://www.irishtimes.com/opinion/david-mcwilliams-we-are-at-the-end-of-a-slow-moving-housing-ponzi-scheme-1.4557258
Am I on r/Ireland, or am I on r/ conspiracy?
Yes, and this is ultimately why you see any programme the government engages in to make homes more “affordable” being predicated on raising prices generally (Help to Buy, HAP) or making certain categories of home more expensive (Shared Equity).
This is a consequence of how dysfunctional our housing market has been. In a functional market you would purchase a home confident that it would be roughly the same price ten years hence. In our market you purchase a home with the promise that it will have increased in value in that time far beyond both inflation and wage growth. Many people (and the Minister himself with a three bed terraced house is likely in this camp) purchased the famous “starter home” to “get on the ladder” and sell it for a larger property. Levereging that asset growth is thus important for a lot of people, who purely out of demographics are more likely to support FF/FG. If you take that away you take away their planed route to a home large enough to support their growing families.
The problem is that this kind of growth in housing assets is precisely what has locked younger people (which increasingly means anyone under 35-40) out of the housing market. Many of these people are natural FF/FG voters, but they are turning away as Government fail to deliver what is a basic human need for a home.
Government need to square the circle. They cannot just do the economically rational thing and increase supply precipitously as this would harm their political interests. They equally cannot now continue to ignore the problem.
The solution of “shared equity” is somewhat genius at doing this. It is pure nonsense economically as it is a demand led scheme in an environment of immense damend over supply and so can only drive price growth up. The “price caps” in particular areas will mean that delivery of homes incentivised by it in constrained markets won’t be of 3/4 bed houses, but will drive up towards the cap the price of the very type of “starter homes” that cannot fall in value for FF and FG voters – 2 up and 2 down terraces, duplexes, apartments. This will house people for sure, and changing family structures and increased urbanisation do mean that we need more of this type of housing. However, shared equity means that it will not be the market working to provide this type of housing to those who prefer it. Instead it will manipulate the market to provide this type of housing and present it as the only option for buyers with no other choices. Many will be “bag holders”, hoping that the asset price continues increasing so that they can move on when their families become too large. The price caps in shared equity mean that this will not actually happen.
That doesn’t matter though, as by the time this occurs the current crop of politicians will have moved on and the dynamics are too complex anyway for them to take much of the blame. More importantly, these people are now home owners. Their interests are now aligned, however perversely, with the interests of those who want to see residential house prices increase.
The real cynical genius of it though is in how it will tie the hands of any incoming Government. If Government has a significant stake through shared-equity in any significant portion of the residential housing market then that places a government who want to increase supply in a bind. If you go about your plan to deliver a significant number of new homes, you will drive down the value of those residential assets that you now have a stake in.
I wouldn’t like to be the Finance minister who has to explain that such a policy will significantly diminish the asset side of the Government’s balance sheet. A shared equity scheme means that it is not just the interests of a cadre of property owning voters that a new government (who may not care as much about them) needs to consider when increasing supply, or doing anything that will drive house prices down. They now must also consider the effect on the state’s finances in a way that can be represented easily on a spreadsheet.
The exit strategy is to allow REITS to take over property supply, form a monopoly and then everyone will pay extortionate rents to rent from them forever.
It seems house prices may start to slow across countries, the spectator in the uk was arguing on twitter this is why 50 year mortgages are being introduced because house prices are going to fall, and the amount spent on interest rate will be insane so banks want to find new ways to make money off people.
Sounds about right.