Cooking the Books: The Price of a Home
Everybody is supposed to aspire to owning their home. It is true that, in the insecure world that capitalism is, owning where you live does give you a measure of security. But it’s pretty expensive and dependent on having regular employment for twenty to thirty years. And the house doesn’t become yours till you’ve completely paid off the loan you took out to buy it; up till then it belongs to the bank or building society you got the loan and they can repossess it if you default. Having a mortgage round your neck also tends to make you less inclined to go on strike; which of course was one of Mrs Thatcher’s calculations when she pursued the policy of turning workers from renters into owner-occupiers.
Renting is now increasing as stagnating wages and rising house prices make buying a house too expensive for more and more workers. Actually, it’s not the price of houses that is rising, but the price of the land on which they are built. Most of the cost of buying a home is for the land, as can be seen in the difference between what a building is insured for and the price at which it will sell.
Commenting on the financial results of the house-building firms Bovis, the Times (21 February) noted:
‘Ultimately, building houses is not rocket science and profits are not driven as much by the cost of supplies or labour as by a company’s skill at acquiring land at the right price.’
Hence the phenomenon of ‘land banking’ where property speculators buy up land and leave it unused while waiting for the most profitable time to develop it.
Land, as it is not the product of work, has no value in the Marxian sense. It has only a price, which is determined solely by demand. Some plots of land have a higher price than others because they are located where firms and people want to use it. Location is all-important. Henry George, the late 19th century land reformer, pointed out that as cities and towns grew the price of the land on which they were built went up to the benefit of those who owned it. The centre of London is still owned by aristocrats such as the Duke of Westminster whose ancestors got fabulously rich without having to lift a finger or invest a penny and still the money rolls in.
This is why pro-capitalist reformers like Henry George proposed a 100 percent tax on increases in land values. Others, equally pro-capitalist, proposed land nationalisation. Today’s reformers are less bold. They only propose tinkering to try to bring land prices down. The charity and reformist campaigning group Shelter is proposing:
‘greater powers for councils over land in their area. Land would be sold to developers with proposals that most closely meet community needs, rather than selling to the highest bidder alone. Shelter said lower land prices would mean developers did not need to keep house prices “artificially high”’ ( i paper, 2 March).
That’s assuming that developers are out only to make a normal profit from merely building houses whereas, as the Times article points out, they are also out to make money out of rising land prices. And, do Shelter expect cash-strapped local councils not to get the best deal they can for the land they own or control?
Housing is a good example of the irrational way that capitalism treats meeting a basic need. What in a society geared to meeting people’s needs would be a straightforward question of deciding how best to use land and then doing it is complicated under capitalism by such extraneous factors as profits, loan repayments and the price of land.