The ontology of London house prices

The questions that preoccupy Philosophy students often cause them to be teased by their peers. In my case, ontology was the big hilarity, as we studied the history of philosophers asking, “how do we know that this chair actually exists?“. My science-studying friends ribbed me for examining something that was (in their eyes) completely futile. I do not have the wit to explain to them that the same thought processes should lead us to examine whether other things could also be trusted to exist—scientific data, for example.

Discussion around house prices has flared again. Right Move have published data showing that house prices in London and its orbit have risen 2% in the past quarter, and 10% in the past month alone. (These figures seem so extraordinary I wonder if we need a freshman philosophy student to ask whether they actually exist!  Meanwhile, Right Move calls them ‘unsustainable‘)

We know that house prices do not really exist in the same way that our chairs exist. They are constructs of human interaction, a rough guess at the point of intersection on a supply-and-demand graph that no-one actually gets to see.

Yet political debates often begin from the premise that house-prices are mathematical facts: if not constants like e or π or the speed of light, then figures based on other fixed and reliable numbers. This leads people into mistaken if understandable comparisons between council housing and private housing stock. People become angry when council rents for inner London areas are much lower than private rents. People become angrier that council tennants are housed in Zones 1 or 2 (or 3… or 4) where middle-class taxpayers cannot afford to buy. A London councillor recently caused controversy by suggesting that council tenants in Kensington & Chelsea were living ‘trustafarian’ lifestyles… All based on the fact that these less well-off people had been housed in an otherwise wealthy area.

That’s an Apples and Oranges comparison. Private purchases, and the allocation of social housing are not the same thing at all. With a council house you’re not acquiring any equity, there’s much less certainty, and the houses are usually not as pleasant to live in as a privately owned property. We’ve been raised on the Location, Location, Location mantra but that attitude forgets the other benefits of home ownership, that council tenants are denied.

And since the entirety of Kensington & Chelsea is in desirable proximity to the centre of London, what is the council to do? Any house provided to a council tenant in that area cannot fail to be in a more desirable location compared to any house in, say, Brent or Bromley. Are all council tenants to be banished from Kensington & Chelsea? Where would such a policy stop? The buildings in any London borough will attract a purchase price higher than elsewhere in the country. If we adopt the principle that council houses must only be allocated in areas where the notional value of the house is lower than a private property, then all the council tenants in the country would live in Mid-Glamorgan.

I know that many people regard the fact that Mrs Thatcher sold off the council house stock as the hideous epitome of her free market ideology… But even as a left-winger I find it hard to criticise the move. Why not feed the aspiration of council tenants? They may even become Tory voters.

The sin in Thatcher’s policy was not the sale of council houses, but in neglecting to replace the liquidated housing stock. As a result we have a ridiculous shortage of social housing, which means councils are forced to participate in the private rental market. If, as I claim above, the allocation of a council houses is a different class of activity to private purchase or renting, then the fact that councils have to pay housing benefits to private landlords seems abhorrent. If councils actually built more houses, they could accommodate their tenants at lower cost. Supply in the private rental market should increase, as would the house purchase market. That would alleviate house prices a little.

So why don’t councils and governments do so? Its ontology, again. Most people assume that the equity in their houses is the equivalent to money in the bank. A form of savings. But that is not actually the case. It is a house, not money. The house value is notional until you attempt to realise it. If house prices are depressed, it may feel like you’ve lost cash, but you have not. Any cash you had, you ‘lost’ at the moment you paid for the house.

However, voters and taxpayers will have no truck with such ontological nuance. A policy that boldly and deliberately causes house prices to fall will find no favour at the ballot box.  So we’re stuck in this stupid cycle.

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