There is a strange new housing phenomenon that is manifesting itself in the small Sussex town where I live. A woman with three young children is moving into a hut in the garden of her parents, around the corner from where I live.
I’m assuming that the plan is eventually to swap homes with her parents. In fact, it may be an important model for multi-generation living – if (and it’s a big IF at this time of year) – they can keep it warm enough.
The hut presumably makes use of the planning freedoms we now have – which even I have made use of – that we can build virtually anything in our own gardens as long as it is no higher than two metres tall.
Now it is clear that even the middle classes have difficulty affording anything in the current market (the woman described above is a graduate too).
And in case anyone thinks by this that I am only concerned about the middle classes – when most of us won’t be able to afford to live in the neighbourhoods where we grew up (a reasonable objection for the author of Broke: who killed the middle classes) – I am simply pointing out how tough it is for everyone now.
I am also mourning those middle class values that so many of us were brought up with – thrift and hard work paying off – and which the architects of the Great British Homes Bonanza claimed to be embracing.
The real question is why house prices have accelerated so disastrously.
This is one area of policy where my opinion seems to contradict the views of almost everyone know – certainly at Radix. It isn’t nuclear energy or any of the usual topics.
No. It is my opposition to the old canard that the only way to bring down the prices is to increase the supply of homes.
It isn’t true. We need to be clear about why house prices have risen so fast, and the best way to do that is to look again at the graph showing the rate of rising prices – starting with the abolition of the ‘corset’, which used to regulate how much money was going into the housing market.
There was another jump in 1987 – after Nigel Lawson announced the end of mortgage interest tax relief. There were more ratchets up of the market, like the introduction of buy-to-let mortgages – or, as in Tokyo in the 1980s – the first steps towards ‘grandparent’ mortgages, which will finally be paid off in two generations’ time.
In short, this is a classic case of inflation – of too much money chasing to few goods.
Of course, it can’t act help that they are also building so few homes. But – when the market is open to every investor in the world and when Far Eastern investors have regular group visits to London and go home clutching the title deeds to two or three new flats each, which they normally leave empty – how could we ever build enough?
In other words, there in a nutshell is the real reason why house prices have been sucking up so much of our available money – and with it, our freedom of choice. More about whose fault this is and what it means in Broke, my book about the plight of the middle classes.